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Financial management key in achieving middle income status

Friday November 20 2020
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By KALISA SUNDAY

As Rwanda works towards becoming a middle-income country by 2035 and to high-income status by 2050; improving Public Financial Management (PFM) will be fundamental to achieving the desired results across all the three transformational pillars of — economic transformation; social transformation and transformational governance.

The new PFM Sector Strategic Plan (PFM SSP 2018 – 2024) sets out an arrangement for consolidating, strengthening and transforming different areas of the PFM system.

It also incorporates implementation of an internationally recognised financial reporting framework in the public sector such as accrual basis International Public Sector Accounting Standards (IPSAS).

A strong PFM system can ensure higher and more predictable budget allocations, reduced fragmentation in revenue streams and funding flows, timely budget execution, and better financial accountability and transparency.

Effective implementation of IPSAS possesses enormous benefits including: Enhanced accountability and transparency in financial reporting — as opposed to cashbased system of accounting which is often considered to be limited in scope and associated with some loopholes.

This great initiative may risk remaining a notion if all relevant stakeholders do not work together to ensure effective implementation.

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This is an important attribute to challenges revealed by scholars why several African governments remained unsuccessful.

The challenges are inadequate skill set from the finance and technical department; lack of adequate data and information; high cost and unstable timelines; insufficient political will; deprived IT infra-structure; poor communication plan, resistance to change and inadequate collaboration.

The journey of transitioning to accrual basis IPSAS therefore requires that governments examine the likely challenges so that they prepare themselves thoroughly to overcome them, starting from the most significant moving down to the least.

For this transition to effectively succeed and to avoid the risk of such initiatives remaining mere notions, governments must not see accrual based IPSAS as an end in itself, but rather consider the four dimensions of policies, people, systems and processes, as each will have a direct impact on its effective implementation.

There is remarkable progress, having executed several activities this far; enabled by the IPSAS implementation blueprint which provides a well-structured guidance towards adoption and effective implementation of IPSAS across government agencies.

The steps taken are identification of gaps and areas that require enhancement/improvement. However, there is still a lot that must be done to ensure effective implementation.

It is of utmost importance that all stakeholders understand and are aware of what the ministry spearheading this initiative is trying to do, for successful implementation.

As it appears that everyone especially public sector institutions and staff will be involved either directly or indirectly, prompt buy-in and support is encouraged by all stakeholders from the start till the end.

Kalisa Sunday is director, professional development services – ICPAR