International Practice in Public Finance

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Public administration refers to two meanings: first, it is concerned with the implementation of government policy; second, it is an academic discipline that studies this implementation and prepares civil servants for working in the public service.  So public administration is “centrally concerned with the organization of government policies and programmes as well as the behavior of officials (usually non-elected) formally responsible for their conduct. Thus public financial management has an imperative role in public administration.

The global financial system is the worldwide framework of legal agreements, institutions, and both formal and informal economic actors that together facilitate international flows of financial capital for purposes of investment and trade financing. The system has evolved substantially since its emergence in the late 19th century during the first modern wave of economic globalization, marked by the establishment of central banks, multilateral treaties, and intergovernmental organizations aimed at improving the transparency, regulation, and effectiveness of international markets. From the late 1800s to early 1900s, the world experienced rapid growth in human migration, transportation, and communication. Coupled with weak passport requirements, innovations in transportation such as steamships and railway growth accelerated world migration while enhancements in communication technology accelerated the sharing of information. These developments facilitated unprecedented growth in international trade and investment which drove early financial globalization. As the United Kingdom entered World War I in August 1914, the foreign exchange markets became stressed as the money market in London tightened. As investors met increasing difficulty in their remittances to London, the pound remained illiquid and the markets grew paralyzed. Political pressure following stock market turmoil in 1929 prompted the United States to enact protective tariffs on agricultural and manufacturing imports. This spurred a chain reaction as trading partners successively introduced similar tariffs. World trade virtually halted by 1933, worsening the effects of the worldwide Great Depression. In 1934, the United States reversed its trade protectionism and began negotiating reciprocal trade agreements and tariff reductions. From 1934 to 1947, the U.S. entered into 29 such agreements. The legislation\’s neutrality favored no particular countries and had the effect of equalizing tariffs from trade agreements and reducing tariffs worldwide.

The Bretton Woods system emerged in 1944 as the outcome of efforts to revamp the international monetary system after World War II and address issues underpinning the Great Depression and the unsustainability of the international gold standard in the 1930s. The system\’s improved exchange rate stability facilitated record growth in worldwide trade and investment. It ultimately succumbed to overwhelming market pressures in the 1970s as central banks who needed to hold more U.S. dollars in reserve relied on the United States\’ consistent dollar deficits. Investors realized the currency was overvalued and speculative investments drove the value of the United States\’ gold reserves downward to such a degree that the exchange of dollars for gold was suspended in 1971. Investors began selling U.S. dollars in anticipation of adjustments in other nations\’ currency values, giving rise to large capital influxes that pressured central banks to choose among inflation, questionably effective capital controls, and flexible exchange rates. A culmination of currency devaluations and oil crises led other countries to allow their exchange rates to fluctuate, marking the de facto demise of the Bretton Woods system.

The world economy became increasingly financially integrated throughout the 1980s and 1990s as nations liberalized capital accounts and deregulated financial sectors. With greater exposure to volatile capital flows, a series of financial crises in Europe, Asia, and Latin America had contagious effects on other countries. In the 2000s, financial institutions became increasingly large with a more sophisticated range of investment activities. During 2007 and 2008, the United States experienced a financial crisis characteristic of earlier systemic crises, which quickly propagated among other nations. It became known as the global financial crisis and is recognized as the catalyst for the worldwide Great Recession. Following revelations of Greece\’s falsified fiscal data in 2009, financial markets began to adjust to the realization that Greece was no longer in compliance with the European Economic and Monetary Union. The crisis spread to other European nations experiencing sovereign debt problems and became known as the Eurozone crisis. A country\’s decision to operate with an open economy and globalize its financial capital carries monetary implications captured by the balance of payments, which can indicate the degree to which a nation is living within its means and can reveal the composition of a nation\’s wealth as well as its economic competitiveness. Globalized financial capital also carries exposure to systemic risks unique to international, such as political deterioration, regulatory changes, foreign exchange controls, and legal uncertainties for foreign investments and property rights.

Numerous groups and individuals participate in the global financial system. Economic factors such as general consumers and international businesses undertake functions such as consumption, production, and investment. Governments and intergovernmental organizations also participate as economic actors, undertaking roles as investors and as purveyors of international trade, economic development, and crisis management. Regulatory bodies such as governments and multilateral institutions establish financial regulations and legal procedures, while independent self-regulatory associations attempt to coordinate standard practices and facilitate industry supervision. Professional associations, policy think tanks, and research institutes undertake an observational role by collecting and analyzing data, publishing reports and policy recommendations, and facilitating public discourse on global financial affairs.
(Source: Wikipedia)

Public Finance International

Public finance international is a forum providing the news and comment on global public financial management, financial reporting, governance, global economy trends and development policy and practice in different sectors. Web link:

References to study

A guide to public financial management literature

Principles for good governance in public finance

Practice In Pakistan


The Pakistan institute of Development Economic was established at Karachi in 1957 and in 1964 accorded the status of an autonomous research organization by Government of Pakistan to provide theoretical and empirical research in Pakistan related economic issues. PIDE is located at the Quaid e Azam university campus in Islamabad. PIDE web link is:

Organ gram of PIDE is as follows:


PIFRA stands for Project to Improve Financial Reporting and Auditing (PIFRA) in Pakistan. The main objective of this project is to computerize the whole accounting and auditing system of Pakistan. The idea behind computerizing the whole system is to generate timely, accurate and reliable financial statements; to monitor fiscal deficit; to forecast flow of cash; to manage public debt and to achieve effective financial controls.

The accounting system of Pakistan was inherited from the century old accounting system of the Indian govt. The old accounting system lacks timeliness, accuracy and most importantly transparency. Accounts of any organization, large or small, are the most important tool for curbing the corruption by keeping an eye on ins and outs of the money and more importantly they give the overall inner picture of the organization to the stakeholders which helps them take better financial decisions.

While talking about the country as an organization the importance of the accounts becomes much more vital. The stakeholders are everyone, be that any foreign aid entity, any govt. department, govt. employees, provincial or district govt., any bank, any foreign govt. etc. You name it and they are there. So the importance of these accounts increases manifolds.

PIFRA is engaged to increase accuracy, completeness, reliability and the timeliness of intra year and year end government financial reports in Pakistan.

PIFRA Components:

  • FABS (Financial Accounting & Budgeting System
  • Government Auditing
  • Training
  • Change Management (HRM)

In order to achieve the targets of PIFRA, New Accounting Model (NAM) was introduced to replace the old accounting practices. This system is mainly bases on the modified cash basis accounting. The bases of the Modified Cash basis accounting are:

  • Double Entry Bookkeeping system
  • Recording of Commitments
  • Fixed Assets Recording

WEB link:

Institute of Public Policy

The beacon house national university established the institute of public policy in 2006 as an independent private sector think tank for the research on economic, social, political and foreign policy issues.  Key activities includes presenting independent and objective analysis of the economy reference to the major economic and social issues, providing strategic analysis of the concept and doctrines in selected areas of public policy and research in the areas that are important for the regional cooperation and conducting and participating in the seminars etc

Web link:

References to study

Reform in public sector financial management

Funding policy to public sector (HEC)

Public sector training

Private sector education in Pakistan

Accountability in public sector in Pakistan