Public finance in the digital era

On the 21st of March, Public Digital will help convene a series of sessions on digital and public spending with ODI, a leading global affairs think tank. This day-long conference – with four sessions on topics related to various aspects of public finance, and digitalisation – will be a first-of-its-kind event to improve understanding of how digital development practitioners can support public finance reform.

The event will bring together a range of government leaders, public finance experts, and digital development practitioners to interrogate how governments can, and indeed must, realise the potential of digitalisation amid tight fiscal constraints. For a full list of all those attending, please visit the ODI website here.

Is public financial management struggling in the digital era?

Digital government service delivery is inundated by questions of how public administration can most efficiently use – and in best cases, save – public resources through more deliberate policy choices and the use of digital tools like financial management information systems (IFMIS).

And yet, while the prevalence of ideas like ‘government as a platform’ and the use of open-source in government have improved approaches on digital delivery in many sectors, like health, the digitalisation of public finance in particular has sometimes struggled to bring together different specialisms from public finance, digital government, and service delivery into a more holistic focus.

Despite the efforts of the IMF’s Fiscal Affairs Department, the World Bank’s GovTech Program, and others to investigate the digitalisation of PFM in a more comprehensive way, the crossover of digital public finance issues and international development has largely remained focused on issues like digital payments or digital transformation financing. In particular, despite a lot of good work being done, the overwhelming focus of both the IMF and World Bank has remained on digital payments.

Stepping in to fill the gap on digital and PFM

As a result of these trends, there has, to date, not been enough regularised learning on how PFM as a discipline shapes and is shaped by digitalisation, nor is there any regular forum, convening, or community of practice dedicated to these issues. This is all the more significant when we consider that since the COVID-19 pandemic, digital transformation is now high on the agenda for many countries as a driver of social inclusion and economic mobility.

As a leader on development and public finance, ODI – with support from the Gates Foundation – stepped in last year to begin shaping the very first reform agenda for public finance practitioners. They released some early commentary on digital and PFM, and began working to set up a cadence of more regular research, multi-stakeholder cooperation, and intergovernmental dialogue around digital and PFM.

In early 2022, ODI issued an explicit call for support on research and convening around digital and public spending, with an eye towards reform. Recognising from our past experience the importance of finance ministries in fixing digital funding in countries, Public Digital responded to ODI’s request. Working together, the focus of our engagement has zeroed in on the existing discipline of public financial management (PFM) – the way governments manage public resources – as a starting point for centering public finance reform on the digital transformation agenda.

An ‘emerging paradigm’ for digital public finance

Beyond just PFM, the aim of this collaborative project with ODI is really to centre the digitalisation of public finance at the heart of countries’ digital transformation agendas, and as a pivotal focus in the ongoing debates around new architectural approaches, such as digital public goods and building blocks. Only when practitioners recognise the importance of digital in public finance reform will digital transformation initiatives be truly sustainable.

To date, the Public Digital team has been working with ODI on a new series of papers around the digital transformation of public financial management, due to be published in the coming weeks. The first of our forthcoming papers looks at the potential of digital ways of thinking and working to improve PFM. The second paper builds on the first by considering the challenges governments are likely to encounter in their journey towards making public finance digital.

Informed by these two discussion papers, the upcoming conference on 21st March offers huge potential for increasing multi-stakeholder cooperation around digital and public spending, with real power to influence PFM practitioners and others inside and outside of government. You can find out more information about the day’s sessions here.

Stay tuned for the upcoming launch of ODI’s new Learning Hub, supported by Public Digital, which aims to build on this event and regularise learning, convening, and country engagement around digital PFM. And, in the meantime, check out the ODI website for more information.

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