GREECE RECENT DEVELOPMENTS IN PUBLIC FINANCIAL MANAGEMENT Hellenic Republic Ministry of Finance General Accounting Office (GAO)
Greece at the outbreak of the crisis 2 Fiscal Balance & Current account Balance (%GDP) 0-2 2002 2003 2004 2005 2006 2007 2008 2009 2010-4 -6-8 -10-12 -14-16 GG Balance (%GDP) Current account balance (%GDP) Source: Eurostat and Bank of Greece, SDDS monthly data
Greece at the outbreak of the crisis 3 GDP (million euro) GG Debt (% GDP) 260.000 150,0 240.000 140,0 220.000 130,0 200.000 120,0 180.000 160.000 110,0 140.000 100,0 120.000 90,0 100.000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 80,0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: Eurostat Source: Eurostat
The Economic Adjustment Programmes 4 Early 2010: lost access to international capital markets May 2010: Economic Adjustment Programme (loans) with EU and IMF March 2012: Second Economic Adjustment Programme (loans) with EU and IMF August 2015: Financial Assistance Facility Agreement with the EU Broad objectives Fiscal consolidation Structural reforms
5 Economic Adjustment Programmes Public Financial Management Reforms Areas of reforms Budgeting Cash management Payments Fiscal reporting Accounting Institutional reforms Objectives Improve budget preparation, execution, monitoring Improve budget transparency Increase accountability Strengthen fiscal discipline Financial reports Fiscal Reporting MTFS Budget Budget Execution - Payments
General Government in Greece State + 1660 entities 6 Central Government (State +540 entities) State (28) (Central administration) Presidency Parliament Ministries (19) Decentralized Administrations (7) Local Government (1,094 entities) Municipalities (325) Regions (13) LGs Legal Entities (756) Social Security Funds (26 entities) Pension Funds (24) Health Fund Unemployment Fund Legal entities 440) Hospitals (100)
Budgeting (1) 7 State Budget Social Budget LGs subsector Budget Budget for the rest of the GG entities SSFs Hospitals & Primary Health Care System
Budgeting (2) 8 Ministry of Finance (MoF): focus on General Government instead of State Binding fiscal targets for the General Government Enhanced monitoring and management capacity of MoF Availability of needed information for fiscal projections potential fiscal risks making policy decisions
Budgeting (3) 9 From annual to multiannual fiscal planning: MTFS - Medium Term Fiscal Strategy Expand the horizon to 4 years (budget year + 3 years ahead) Targets for fiscal balance set for General Government (GG) Targets and expenditure ceilings incorporated into the annual Budget Fiscal projections for all sub-sectors Baseline scenario and scenario incorporating policy changes First MTFS in 2011: 2012 2015 Latest MTFS in 2017: 2018 2021
Budgeting (4) 10 Τop-down budgeting General Government Fiscal Targets From analytical budget lines to major categories State Sub-sectors of expenditure (max 9) Revenue targets Expenditure ceilings Balance Targets Fiscal discipline built in the process of budget drafting and executing Breakdown within ceilings Breakdown within targets
Budgeting (5) 11 Commitment Registries Detailed registries of obligations in all GG entities No obligation assumed in excess of appropriations Accurate monitoring of outstanding commitments, accounts payable and arrears Data on payables and arrears collected in the General Accounting Office (GAO) on a monthly and quarterly basis
Budgeting (6) 12 Budget execution monitoring Monthly monitoring by GAO against targets Sanctions if divergence from targets exceeds 10% Local Governments Observatory Constitutional restriction to the extent of MoF intervention in LGs Sanctions & corrective actions
Fiscal reporting 13 State Budget Bulletin Publication twice a month General Government Monthly Bulletin On a monthly basis Other Bulletins and reports
Cash management 14 Objectives: address cash constrains enhance efficiency improve accuracy of cash-flow projections improvement in cash flow projections consolidation of all GG accounts into a Treasury Single Account (TSA) repo transactions between the State and the GG entities
Accounting (1) 15 2010: Double-entry accounting from cash to modified cash basis Facilitation of reporting Improved annual financial statements of the State Statement of Financial Position (Balance Sheet) Income Statement (Profit and Loss Statement) Cash Flow Statement Statement of Changes in Equity
Accounting (2) 16 Ongoing reforms: New GG Chart of accounts New accounting rules & budget classifications Single chart of accounts for all GG subsectors Unified accounting rules for all GG subsectors Different types of classifications Target: transition from cash and modified cash to accrual accounting
Payment processes 17 Until 2014: Line Ministry MoF/GAO ex-ante audit (legality & regularity) HCA ex-ante audit (>15.000) MoF/GAO payment voucher Local tax offices Payment 2014: Line Ministry MoF/GAO ex-ante audit (legality & regularity) HCA ex-ante audit (>30.000) MoF/GAO Electronic payment via Bank of Greece 2017: Line Ministry entire process 2019: Abolition of ex-ante HCA audits for the rest of GG
Institutional reforms (1) 18 Budget Bureau in each spending Ministry: General Directorates of Financial Services Entity LM1 Financial services X Entity1 MoF LM MoF LM1 Financial Services Y GDFSs in Ministries LM2 Financial Services X Entity4 Entity3 Entity2 Financial Services in GG entities LM: Line Ministry
Institutional reforms (2) 19 2010: Parliamentary Budget Office Information to Parliament via an independent institution Strengthen institutional controls on government s fiscal policy Monitoring of the budget
Institutional reforms (3) 20 2014: Hellenic Fiscal Council Independent Authority Monitoring - Assessment of: macroeconomic and fiscal projections compliance to fiscal rules budget & MTFS targets & outcomes Publishes biannual fiscal reports
21 Summing up what has been accomplished Binding fiscal rules Strict top-down budgeting Monitoring of MoF to GG Simplification in payments Improved fiscal reporting More efficient cash management Comprehensive financial statements Institutional reforms
Summing up what remains to be done 22 Accounting for all GG entities single Chart of Accounts unified accounting rules transition to accrual accounting Cash management centralized management of all GG entities reserves Performance budgeting Assessment of efficiency Spending reviews on regular basis
Outcomes 23 Are the objectives met? 6 4 2 0-2 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 3,9 0,7-0,6-4 -6-8 -10-12 -14-16 -18-15,1-10,1-15,1 GG Balance (%GDP) GG Primary Balance (%GDP) Current account balance (%GDP) Source: Hellenic Statistical Authority and Bank of Greece
Outcomes 24 but 2008-2015 250.000 GDP Economy in 240.000 230.000 220.000 210.000 200.000 190.000 180.000 170.000 160.000 150.000 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: Eurostat recession GDP decreased continuously Cumulative decrease of 27.4%
Outcomes 25 but 30 Unemployment rate (% of active population) 27,5 25 20 15 10 7,8 5 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 EA-19 Greece Source: Eurostat, Unemployment as percentage of active population
Outcomes 26 but 38 People at risk of poverty or social exclusion (% of population) 36 34 32 30 28 26 24 22 20 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Total - EA19 Total - Greece Source: Eurostat (Percentage of population that are either at risk of poverty, or severely materially deprived or living in a household with a very low work intensity)
Targets for the fiscal rules 27 Stable Primary Surpluses Sustainable Public Debt Detailed framework currently under discussion among the Greek government, EU institutions and the IMF
Next steps 28 Continue the reforms And the most important... The budget will be called in the coming years to play its redistributive role, using all the available tools, in order to enhance growth and correct problems and inequalities that have been created in Greek society over the last seven years.
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