PACIFIC MANAGEMENT TA - Pacific Financial Technical Assistance

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FISCAL MANAGEMENT MODEL
Savenaca Narube
Team Leader
PEM TA
Aims and purposes of the FMM
Aim
 To assist the Ministries of Finance maintain fiscal stability
Purposes
 Predict long term implications of fiscal policies on the
budget;
 Explore the mix of policies that will provide the desired
impact on the budget;
 Explain the likely effects of policy decisions; and
 Policy and budgeting tool.
Preliminaries
 Not an economic model: e.g. GDP and inflation
are projected outside the model.
 It’s a budget projection model—simple,
spreadsheet based
 Projection period: 10/15 years
 Projections
 Three years ahead: MTBF
 Beyond three years: Simple assumptions
Examples of long run assumptions
Economic
 Real GDP--long run growth rate
 Nominal GDP--Inflate real GDP by inflation
 CPI—1o year average
Tax revenues
 Growth rate or % of nominal GDP/trend
 Departure tax—visitor arrivals
Examples of long run assumptions
Expenditure
 Wages and salaries—Fully or partly indexed to
CPI
 Maintenance—Indexed to CPI
 Contingency —% of current expenditure
 Purchase of goods and service—Indexed to CPI
 Subsidies and transfers—Fixed (Policy)
 Capital expenditure—Fixed (Baseline)
Structure of the FMM
ASSUMPTION
TAB
OUTPUT
TAB
FINANCIAL
TEMPLATE
DEBT & NEW
LOAN TAB
WHAT
IF TAB
Examples of scenario scanning
Change in assumptions
 Change in the rate of growth of real GDP
 Change in the CPI growth rate
Change in policy
 Change in the rate of consumption tax
 Change in the rate of indexation of wages and
salaries
Drawdown of a new loan in a certain future year
Outputs
 Tracks key fiscal indicators over the long
term
 Compares the baseline and the impact of
policy option
 Generate budget graphs/tables
Other issues
 Updating—automatically linked to MTBF
and debt statistics
 Degree of consolidation to suit countries
 Sustainability
 Manual
 PEM TA support
 Easy to use
DEMONSTRATION
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