Public Finance Management

Reforms in public financial management system in the Kyrgyz Republic

Public financial management (PFM) is an essential part of the development process. The broad objectives of public financial management are to achieve overall fiscal discipline, allocation of resources to priority needs, and efficient and effective allocation of public services. Public financial management includes all phases of the budget cycle, including the preparation of the budget, internal control and audit, procurement, monitoring and reporting arrangements, and external audit.

Sound PFM supports aggregate control, prioritization, accountability and efficiency in the management of public resources and delivery of services, which are critical to the achievement of public policy objectives. In addition, sound public financial management systems are fundamental to the appropriate use and effectiveness of donor assistance since aid is increasingly provided through modalities that rely on well-functioning systems for budget development, execution and control.

In recent years, the donors has greatly expanded the attention they pay to PFM in client countries, and PFM has become one of the most prominent issues in the broader donor harmonization initiative. In the Kyrgyz Republic, a number of donors, including the World Bank, DFID, SIDA, USAID, UNDP, EU, and the Swiss Government are actively participating in assisting the Government of the Kyrgyz Republic to take forward processes related to PFM reforms. At the PFM round table beginning of February 2006, donors which are involved in assisting MEF in undertaking the PFM reform agreed to focus their support and policy conditions to the priorities set by the government.

Government of the Kyrgyz Republic expresses strong voice on harmonizing donor support in content and process of the PFM reforms. PEFA assessment, Public Expenditure Reviews, and GSAC has already paved a platform toward a more strengthened approach to PFM reforms in Kyrgyz Republic that is applied by the Ministry of Economy and Finance (MEF). Principles the “strengthened approach” to PFM reform are: (i) development of a country led PFM reform strategy and action plan, (ii) a coordinated International Financial Institution-Development Partner, multi-year program of PFM work that supports and is aligned with the Government’s PFM reform strategy and, (iii) development a framework for measuring PFM reform progress and outcomes through the shared information pool based on common indicators.

Under the leadership of the MEF management a technical task force for PFM reform was created to lead the PFM reform. To better prioritize and sequence the PFM reform, MEF follows the “platform approach” for its PFM reform. As a first step, the PFM Reform Action Plan (developed out along with donors) was endorsed by the Presidential Decree in June 2006, and the Expert Group in the MEF was created to promote and monitor implementation of the Action Plan. The Action Plan comprises important activities leading to changes in budget planning, execution and reporting as well as improvement in capacity building. Recent activities implemented within this Action Plan includes introduction of the new budget classification and new presentation formats for 2007 state budget as well as fiscal decentralization activities.

A joint PFM donor position was created in order to facilitate effective interaction between donors and the Government in conducting reforms in PFM area. This joint PFM specialist is based in the MEF and is in constant contact with MEF staff and donors projects.