Digital, public debt, and social support: lessons from the IMF World Bank meetings
Many developing country governments spend more on debt servicing than social investments. Speakers and panelists at the recent IMF/World Bank Annual Meetings in Marrakesh cautioned about trade offs between social support and debt servicing, advocating for:
- Reduced public debt for future resilience and social support through improved fiscal space
- Provision of needed social support to reduce poverty, stem migration, and enable future sustainable growth.
We described how digital Public Financial Management (PFM) can help reduce public debt and public debt consequences in a previous entry. When we look at social service delivery specifically, we see that digital PFM supports a wide range of critical areas, including:
- crisis support
- education
- job creation
- equity
- healthcare.
This means that digital PFM is a key enabler of the Sustainable Development Goals (SDGs) related to citizen wellbeing:
- No poverty (SDG 1)
- Zero hunger (SDG 2)
- Good health and well-being (SDG 3)
- Quality education (SDG 4)
- Gender equality (SDG 5)
- Reduced inequalities (SDG 10).
But how does digital PFM specifically help?
Leveraging PFM Digital Transformation for Enhanced Inclusion
Effective Public Financials Management (PFM) practices optimize social spending allocation and efficiency, ensuring investment is targeted where it can have the biggest impact. Utilizing digital PFM tools further enhances efficiency and, importantly, enables informed decision making across government budget cycles through systems of intelligence including big data analytics and intelligent Government Resource Planning (GRP).
Digital transformation promotes PFM effectiveness, aligns PFM reform to strategic goals and improves equity outcomes. Given the ongoing digital divide across genders and age groups in many regions around the globe, digital transformation is key to making much-needed progress towards the SDGs:
Overcoming this digital divide relies on digital government services combined with digital infrastructure and government regulatory changes. This digital foundation helps drive financial inclusion. Each government initiative provides increasing equity returns:
- government efficiency and reduced cost through digital = doing more with less
- savings and access to credit, especially for women, through digital transactions = increased growth, business formalization, citizen resilience, revenue mobilization
- transparency and accountability = improved trust, credit ratings, business investment, and revenue mobilization.
In other words, noted speakers, we need to enable a digital PFM virtuous circle:
What Role Does Digital PFM Play in Improving Equity?
Digital PFM across the budget cycle enables equity by:
- Integrating budget planning with national development strategies, including equity for marginalized and vulnerable groups
- Developing program budgeting that reflects objectives across Ministries, Departments and Agencies (MDAs), integrated with results-based budgeting to track outcomes, and early warning monitoring
- Integrating financial, non-financial operational, unstructured, activity stream, and external data for evidence-based decisions
- Digital delivery of services, social support, and payments that reduces time burdens on citizens and businesses, increasing government Economic Value-Add.
Digital PFM and Building Human Capacity
Speakers also noted that these digital foundations increase the ability to educate citizens, building stronger labour markets in countries across the world:
Digital foundations, including regulatory reforms, enable job creation. Jobs of the future won’t all look as they have in the past, and so it is critical to encourage business formalization and balance traditional employment styles with the future potential of the gig economy.
PFM digital for social investments value proposition
A key takeaway from the IMF/World Bank discussions is that evidence-driven social public investments improve social cohesion and peace, reduce migration and fragility.
Good and comprehensive “big data” from multiple sources, centred on core systems of record, like Financial Management Information Systems (FMIS), plays a big role because it empowers data literate public sector decision-makers.
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