Public finance management is a fundamental function of the government to implement its policies, having impact on the economic stance of the country and on its ability to maintain cohesion. Efficiently using public resources and allocating them to policy choices requires strong systems being in place to support public finance management. It requires continuous adjustments to improve efficiency and effective delivery of services, and reforms to change systems. It includes maintaining a stable fiscal stance over the long run while continuously improving on the services offered to the citizens and economic agents in the country.
Since public finance is the key factor to fiscal stability and sustainability, continuous improvements in Public Finance Management (PFM) is a top priority for the Ministry of Finance. PFM reforms in Maldives is designed to respond to the challenges found in the systems and to improve efficiency and effectiveness of public spending. The goals of the PFM reform include strengthening fiscal discipline, ensuring debt sustainability and the efficient, transparent and modern management of public finances.
These PFM reform goals are pursued by the Government with the support of international partners namely the World Bank and USAID.
World Bank-Maldives: PFM Systems Strengthening Project
Maldives PFM Systems Strengthening Project was launched in 2014, and the it aims at improving budget credibility, fiscal transparency, planning and budgeting, debt and cash management, financial reporting, procurement, and State‐Owned Enterprise (SOE) monitoring and oversight.
The main activities of the project include:
Enhancing the Medium-term Fiscal Framework The objective is to improve the quality of fiscal policy anchored into a medium-term fiscal perspective and improve credibility and predictability. Despite recent improvements in budget credibility and outturn, the budget remains very constrained by high and rigid current expenditures as well as by increasing debt service and health costs. Fiscal space can only be created over the medium term provided the continuation of fiscal discipline.
Strengthening Debt and Cash Management The objectives are to: improve the capacity to manage the cost and risk of public debt and guarantees; develop the domestic government securities market; and improve cash management to support improved budget execution
Strengthening Management of Capital Budget The objective of this component is to enhance the preparation of the capital budget and implementing selection criteria for New Policy Initiatives (NPI). The project will also support Ministry of Finance and other key stakeholders to build a screening tool for NPIs.
Strengthening of the Public Accounting system (PAS) and Asset Management Government adopted SAP Solution in 2009 as PAS, and ever since the Ministry of Finance is continuously enhancing and rolling out its adjacent modules to fill the gap in Integrated Financial Management System (IFMS). The project aims to support the strengthening of PAS by establishing highly trained and dedicated team within the Ministry of Finance & Treasury. With the help of the project a unit under the name “Public Finance Development Service (PFDS)” has formulated and SAP Functional and technical Associates have been recruited to carry out the development works of the PAS. In parallel, the project will also assist Ministry of Finance to value and record public assets in the SAP. The project will also support the Ministry in preparing policy for asset valuation.
Payroll Management and Control The objective of this component is to support National Pay Commission (NPC) and the Civil Service Commission to review and evaluate the current pay classification structures of public sector, and implement standardized and consolidated pay classification structure.
State-Owned Enterprise (SOE) governance and oversight SOEs play an important role in the economy and in the public investment program. They are increasingly exposed financially and represent a growing contingent liability for the Government. Privatization and Corporatization Board (PCB) aims to provide strategic guidance and oversight to these SOEs in cooperation with Public Enterprise Monitoring (PEM) of the Ministry of Finance and Treasury. The project aims to develop a mechanism to monitor the SOEs more systematically and strengthen the capacity at PEM and PCB.
Procurement reforms Along with growth of modern technology, the project aims to assist the Government to move towards the Electronic Government Procurement (e-GP) system by strengthen the policy and regulatory framework. Project will also assist to integrate e-GP system with Integrated Financial Management System (IFMIS). Furthermore, the project will also support the pilot testing of green procurement.
Accounting, reporting and internal audit The project aims to support the establishment of an accounting reform action plan which will aim at full implementation of the IPSAS modified accrual accounting for the issuance of whole-of-government financial statements, in line with recent diagnostics and recommendations in this area as well as plan for subsequent key steps in terms of comprehensiveness of accounting data, better recording of financial and physical assets and liabilities and define a credible timeline for the progressive move towards accrual accounting. This component will also focus on capacity building at Internal Audit of Ministry of Finance.
External Audit of the Public Sector The Auditor General’s Office (AGO) has shown interest in support to improve its alignment with international standards for supreme audit institutions (ISSAI) and with international good practice. The project aims to assist AGO to conduct performance audit, with introduction of pilot citizen participatory audit.
USAID Maldives: Public Financial Management (PFM) Activity Program
The PFM Maldives Activity is a 5-year project funded by the United States Agency for International Development (USAID) from February 2020, through February 2025. The Project will work collaboratively with the Government of the Maldives to develop capacity to achieve the objectives of: 1) Establishment and implementation of a transparent and accountable budgetary system that leads to improved national budget allocations and management;2) Identification and implementation of efficient public investments in services and facilities; and 3) Mobilizing sufficient public revenue, commensurate with public investments and services.
PFM Maldives will work with the Ministry of Finance, the Ministry of National Planning, Housing and Infrastructure , the Maldives Internal Revenue Authority, the Auditor General’s Office, and other agencies, through strategic technical assistance and targeted project interventions aimed at improving their ability to make appropriate and cost-effective budget decisions.
The main activities of the project include:
Establish and implement a transparent and accountable budgetary system that leads to improved national budget allocations and management Support the Ministry of Finance with a comprehensive roll-out of performance-based budgeting (PBB) to all ministries. Develop and roll out a planning and budgeting process that guides expenditure prioritization at the national level and reflects the development needs of atoll communities. Strengthen the credibility and oversight of Maldives’ national budget.
Identify/implement efficient public investments Build capacity to use technically sound methods and procedures to identify the most efficient public investments. Apply international best practice for project appraisal and project pipeline development. Design a PPP Analysis Unit and develop regulatory guidance and legislative framework .Help GOM promote public procurement transparency and competitiveness.
Mobilize sufficient public revenue, commensurate with the determined level of public investments and services Build Fiscal Affairs Department capacity for fiscal policy analysis and reform. Mainstream gender and inclusion concerns into tax policy analysis. Conduct taxpayer perception survey and build capacity for repeating survey locally. Increase public engagement around non-tax revenue.
Cross cutting: establish a fiscal risk management system Delivery of fiscal risk tools and fiscal risk mitigation strategy, and risk management is integrated into budget planning and into capital project appraisal. Provide dedicated assistance for improving and implementing measures to improve the risk profile, management and policy relating to public debt and SOEs.