For the republics of the former Socialist Federal Republic of Yugoslavia (SFRY) as for many other transition economies, an important step in introducing a more market-oriented system was the restructuring of their budget systems. This paper reviews and evaluates the process of budget system reform during the transition period extending from the time they emerged from the collapse of the SFRY in 1989 until the end of 2002. For at least a decade of this period, the Fiscal Affairs Department of the IMF has been providing technical assistance (TA) to these countries to facilitate such reforms. Based on the material generated by this effort, the authors offer a review of the progress made and an assessment of the reform elements still to be completed. Given that the former Yugoslav republics all commenced the reform process with the same institutions, this paper offers a unique opportunity to analyze the critical elements in successful budget system reform. An attempt is made to explain the varying degrees of success experienced by different countries, and a reform agenda is suggested to guide future TA.

This paper stresses the role of budget system reform in economies in transition as an essential basis for the implementation of effective fiscal policies. However, introducing such structural reforms in often unstable economic environments has not proved easy. Using Russia as a case study, the magnitude of the problems faced is documented, and the strategy of reform eventually adopted is critically reviewed. In conclusion, some lessons are drawn for other transitional countries undertaking similar reforms, and the future agenda for completing these reforms in Russia is indicated.

For the republics of the former Socialist Federal Republic of Yugoslavia (SFRY) as for many other transition economies, an important step in introducing a more market-oriented system was the restructuring of their budget systems. This paper reviews and evaluates the process of budget system reform during the transition period extending from the time they emerged from the collapse of the SFRY in 1989 until the end of 2002. For at least a decade of this period, the Fiscal Affairs Department of the IMF has been providing technical assistance (TA) to these countries to facilitate such reforms. Based on the material generated by this effort, the authors offer a review of the progress made and an assessment of the reform elements still to be completed. Given that the former Yugoslav republics all commenced the reform process with the same institutions, this paper offers a unique opportunity to analyze the critical elements in successful budget system reform. An attempt is made to explain the varying degrees of success experienced by different countries, and a reform agenda is suggested to guide future TA.

In reviewing the means to strengthen public expenditure management (PEM) systems, there has been increased emphasis on the micro basis of broader budget system reforms, especially reforms of the internal financial management systems in government agencies. Specifically in transition economies, there has been increasing recognition that OECD-type budget systems need to be broadly based on a firm platform of financial management in government institutions. At the same time, many transitional countries have generally acknowledged that this aspect of their PEM systems is problematic and needs to be rectified; hence, international agencies have been actively promoting reforms in these areas. In particular, three areas have been emphasized: human resource management, procurement, and internal audit. This paper explores the problems faced by transitional economies in each of these areas and reviews the generally recommended solutions to these problems.

This paper reviews the role of accounting in budget system reform from the perspective of emerging economies who wish to adopt the OECD's performance budgeting reforms. While many OECD countries, pursuing the reforms associated with the New Public Management, have moved their accounting systems from a cash to an accrual basis, this paper argues that given the costs involved, such a move is perhaps only worthwhile in the context of adopting much wider public sector management reforms. Moreover, while recognizing that accrual accounting does support public expenditure management best practices, it is also argued that many of the objectives of performance-oriented budgeting can be attained by less than full accrual accounting, and that unless certain preconditions are met it is safer for countries to remain with, and improve, their cash-based accounting systems. For those countries with sound enough cash-based systems the paper describes a possible phased approach to the introduction of accruals, as well as the parallel stages of adopting the new international GFSM 2001 reporting requirements.

References p. 104-109.

The past ten years have been witness to one of the largest experiments in economic history, namely the transition of centrally planned economies to market-based economies. While policy reform in transitional countries has encompassed virtually every sector of the economy, modernization of public sector budgeting practices and fiscal management techniques have been widely recognized as critical to the success of the economic transition experiment. However, the breadth and pace of fiscal management reform in countries in transition (CITs) has largely fallen short of expectations; a decade into the economic transition, none of the transitional economies has fully adopted modern budgeting and fiscal management techniques similar to those in western countries. A less efficient and less controllable public sector has made the task of macroeconomic management more difficult and overall has retarded economic recovery and growth in transitional countries. This paper investigates the main reasons for why fiscal management reform has failed to take hold during the first decade of the economic transition and discusses what challenges remain ahead in budget policy reform. While the timing of the transformation of the budgeting process from essentially a pure accounting mechanism during the communist era to a true fiscal management tool has not been identical in all CITs, the evolution of the reform process can be broken down into three distinct periods. During the first period, the early transition, most transitional economies saw some important economic reforms but a lack of budgeting and fiscal management reforms. Budget officials either felt comfortable with the status quo and felt little pressure to change the budget system inherited from the socialist regime or actively sought to preserve the budget institutions inherited from the previous regime. In the second transition period, CITs put in place a set of fiscal policy and fiscal management reforms, practically always in response to a macroeconomic crisis, which in some ways was brought about by the initial lack of fiscal management reform. However, as discussed below, this wave of reforms during the second transitional period was generally of an emergency nature and failed to establish a sound framework for fiscal discipline and accountable and efficient expenditure policies. As a result, renewed fiscal crisis spurred more structural fiscal reform efforts during the third, ongoing period of transition.