FreeBalance Lessons Learned in Supporting Small Island State Governments

Effective PFM Reform in Difficult Circumstances is Possible
Small Island States are at a nexus of climate and economic vulnerability. Natural disasters economic shocks to dominant industries like tourism and fishing stress public finances. Revenue is volatile. Numerous unexpected expenditures are often required. This is particularly important because Public Financial Management (PFM) systems and institutional capacity is low in most Small Island States.

Background: our Country experience in Antigua and Barbuda, Guyana, Haiti, Jamaica, Sri Lanka, Suriname, Timor-Leste, and Trinidad and Tobago covers the breadth of public finance needs

  • Yes, Guyana and Suriname are considered Small Island States
  • And, Small Island States share some characteristics of land-locked countries like Kosovo, and large territories like Nunavut in Northern Canada

Challenges for Small Island States include:

  • Reliance on single industry (some on extractives, some on tourism, some on fishing)

Source: World Travel and Tourism Council

Source: charted by Statista

Source: United Nations

Source: United Nations

Why it’s important for good governance

Misconceptions from conventional thinking:

  • Realistic PFM reform is very difficult to develop in these countries
  • Commercial-Off-The-Shelf (COTS) Financial Management Information Systems are unable to adapt effectively to the context
  • Agile approaches to public finance improvements are difficult in government, particularly in Small Island States

How can Small Island States achieve critical reform significant challenges?

  • Develop country-specific reform
  • Focus on critical things done well
  • Leverage assessments to motivate change
  • Build on progress to motivate future reform
  • Design government capacity building programs and certifications to make government the prefered professional employers with attractive career paths

How does FreeBalance help Small Island States to sequence public finance reform?

Context: reform priorities differ among Small Island States. Yet, we have seen some sequencing patterns –

  1. Foundational: Close big public finance gaps, build public service capacity, analyze country context for sequencing blueprints
  2. Typically Sooner than Later: expenditure control, international cash-based standards, and Treasury Single Account (TSA) support; accounting and reporting improvements, modern software
  3. Typically Later than Sooner: liquidity management, budget planning, program budgeting integration, payroll, audit, tax administration
  4. Typically Second or Third Generation: Medium-Term Expenditure Frameworks (MTEF), State-Owned Enterprise (SOE) integration, procurement, performance management, fiscal transparency, human resources, assets

Good practices recommend that Small Island State context determines sequencing priorities. Some countries need more advanced PFM processes sooner

  • Resource-dependent countries should tackle resource mobilization and transparency sooner, and possibly impose fiscal rules for spending to more effectively leverage taxation and royalties for economic diversification
  • Countries with low elevation should tackle public investment planning for climate adaptation

What is different about FreeBalance compared to other vendors in the public finance space?

  • FreeBalance is a practice leader in Public Financial Management (PFM) reform and a developer of COTS software giving us a unique and integrated perspective when helping Small Island States
  • FreeBalance COTS, the FreeBalance Accountability Suite, is a Government Resource Planning (GRP) software designed for government, much easier to adapt, and less expensive to support than COTS software designed for businesses, Enterprise Resource Planning (ERP) that includes some public sector functionality
  • FreeBalance technology, the FreeBalance Accountability Platform, accelerating the development of custom public finance software where needed, compared to generic technology platforms
  • FreeBalance provides implementation services and COTS software, commiting the company to governments, rather than the traditional system integration model where consultancies deal directly with clients and COTS vendors operate at arms length outside the project governance structure (We also leverage the in country experience to improve our products, including building in any code customizations into modules)
  • FreeBalance provides PFM experts to governments rather that consultants familiar with COTS software but have little understanding of public finance complexity and trends FreeBalance leverages a “Glocal” model by hiring locally in countries, augmented by international mentors to reduce government costs while better understanding social and cultural contexts
  • FreeBalance enables country-led reform – appropriate good practices based on country context (we believe that effective sustainable development requires country ownership)

The bottom line is that effective PFM reform is possible in Small Island States when focused on the country context and when leveraging adaptable software and relevant advisory services

  • These are  also part of the recipe for PFM reform success in other difficult circumstances including: land-locked, post-conflict, recently independent, low population density, single industry dominance, aid-dependent


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