Reforming%20and%20Rebuilding%20the%20Ministry%20of%20Finance

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Reforming and Rebuilding the Ministry of Finance

• Michael Carnahan
• 16 September 2004

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Outline

• Afghan context
• MoF context
• Core business
• Building consensus
• Issues in transition

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Afghan Context

• How was expenditure financed
• Covert Financing
• Deficit Financing
• Questionable Mandate
• Divided Cabinet
• De jure centralised
• De facto federal/decentralised

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Afghan MOF context

• Mental models
• Maximise extraction of rent
• Control
• Human and Physical Capital Depletion
• Centre
• Provinces

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Determining Core Business

• Estimate available resources
• Plan expenditure
• Collect revenue
• Execute expenditure
• Report on actuals
• Assess effectiveness
• Manage policy change

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Building a consensus

• Demystifying core business
• It is conceptually simple
• Getting the time to build the consensus
• Urgent crowds out the important
• Lack of understanding amongst the international
  community of MoF role
• MOF as facilitator, not as controller

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What not to do

• MoF gets a lot of attention and resources
• IFIs
• Major donors
• Temptation/pressure to over-extend
• Civil service reform
• Privatisation
• Procurement
• Asset management
• Meddling

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Basic Structure

• Deputy Ministers responsible for
• Revenue
• Expenditure
• Administration

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Outstanding Issues

• Location of revenue policy
• Macroeconomic forecasting
• Relevance given the specific revenue forecasting
  issues in Afghanistan
• Accounting Department
• logical location
• practicalities

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Issues in Managing Transition

• Stick to core business
• Senior staff
• Using technical assistance
• Physical Infrastructure
• Enabling Environment

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1. Core business

• Temptation is to do everything
• Demands from stakeholders are very strong
• Dissipation of focus
• What is realistic and sustainable

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2. Senior staff

• Deputy Ministers and senior managers
• No background in public finance
• Recruited on the basis of
• Integrity
• Leadership
• Management and Admin Experience
• Ability to learn and accept advice
• Allowed the technical assistance to be effective

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3. Using technical assistance

• Absorptive capacity?
• Demand or supply driven?
• Domestic ownership and implementation
• Accountability to who?
• Reporting lines - transparency
• Transition plan for TA

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TA (cont) - independent advisors

• Ministerial v technical advisors
• Interaction with IFIs
• QA role played by advisors
• Performance management of ministerial advisors

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4. Physical infrastructure

• Efficient allocation of resources
• 10m on TA
• No power for the TA to work in

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5. Enabling environment

• Creation of a safe work-space
• Minimise political interference
• Reward honesty and achievement
• Merit based
• Has attracted and supported senior staff
• Has underpinned all reforms in the Ministry