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Managing and Controlling Extrabudgetary Funds

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  • Dimitar Radev
  • Richard Allen
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    Abstract

    This paper addresses issues relating to the establishment and financial management of extrabudgetary funds (EBFs), a large group of government entities that on average accounts for 40 to 45 percent of central government expenditure-two-thirds of which represents social security funds-in countries at various stages of development. If improperly designed and managed, EBFs can undermine effective fiscal control. However, they also bring potential benefits in the form of greater autonomy of decision-making in countries with well-established governance and financial management systems that have applied the "agency model" of devolved public management and fiscal control. The paper develops a typology of EBFs and argues that EBFs are frequently created because of failures in the budget system and political economy factors that need to be recognized and, where possible, corrected. The paper recommends that data on EBFs be consolidated within a unified system of fiscal reporting and proposes an analytical framework that governments might use to evaluate the effectiveness and utility of their EBFs.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/286.

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    Length: 29
    Date of creation: 01 Dec 2006
    Date of revision:
    Handle: RePEc:imf:imfwpa:06/286

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    Related research

    Keywords: Public finance; Government expenditures; Government accounting; Fiscal management; financial management; budget process; public financial management; budget system; taxation; fiscal policy; fiscal discipline; extrabudgetary funds; central government expenditures; annual budget; budget support; fiscal transparency; general budget; public expenditure; public financial management system; budget documents; fiscal reporting; government finance; revenue collection; fiscal policies; internal control; financial management systems; financial management system; external audit; government expenditure; government finance statistics; budget requirements; budget systems; financial management arrangements; tax administration; budgetary allocations; budgetary process; budget preparation; budget system law; fiscal control; fiscal analysis; fiscal data; fiscal reports; national budget; fiscal risks; budget preparation process; tax collection; budget management; fiscal position; treasury single account; financial management ? planning; budget allocations; fiscal consolidation; public financial management systems; budget classification; budget expenditures; government policies; budgetary rules; state budget; fiscal performance; fiscal affairs; fiscal affairs department; central government expenditure; fiscal analyses; budget law; tax policy; central government budget; budget practices; government guarantee; budget legislation; budget deficit; budgetary position; budget authority; accounting standards; budget organizations; budget execution; budget balance; regular budget process; current budget; fiscal targets; fiscal policy formulation; fiscal objectives; financial management information systems; medium-term budget framework; annual budget cycle; annual budget process; fiscal consequences; fiscal flexibility; medium-term expenditure frameworks; budget formulation; balance sheet of assets; expenditure programs; public budget; medium-term budget; budget rules; budget framework; fiscal problems; government budget; tax revenues; fiscal transactions; general government expenditures; budget approval; fiscal surpluses; budget documentation; tax burden; budget discipline; financial management information; aggregate demand; budget cycle; budgetary accounts; government guarantees; budgetary appropriations;

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    References

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    1. James M. Buchanan, 1963. "The Economics of Earmarked Taxes," Journal of Political Economy, University of Chicago Press, vol. 71, pages 457.
    2. Sanjeev Gupta & Catherine A. Pattillo & Smita Wagh, 2006. "Are Donor Countries Giving More or Less Aid?," IMF Working Papers 06/1, International Monetary Fund.
    3. Ken Gwilliam & Ajay Kumar, 2003. "How Effective Are Second-Generation Road Funds? A Preliminary Appraisal," World Bank Research Observer, World Bank Group, vol. 18(1), pages 113-128.
    4. Sanjeev Gupta & Catherine Pattillo & Smita Wagh, 2006. "Are Donor Countries Giving More or Less Aid?," Review of Development Economics, Wiley Blackwell, vol. 10(3), pages 535-552, 08.
    5. Gwilliam, Ken & Shalizi, Zmarak, 1999. "Road Funds, User Charges and Taxes," World Bank Research Observer, World Bank Group, vol. 14(2), pages 159-85, August.
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    Cited by:
    1. Mihaela Grubisic & Mustafa Nusinovic & Gorana Roje, 2009. "Towards Efficient Public Sector Asset Management," Financial Theory and Practice, Institute of Public Finance, vol. 33(3), pages 329-362.

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