KUWAIT: The IMF Middle East Center for Economics and Finance (CEP) in Kuwait, jointly with the Arab Fund for Economic and Social Development (AFESD), held a high-level symposium on "Public Sector Reforms for Better Governance" on Monday, November 18, 2019. The event was hosted at the AFESD's Headquarters. The panel discussion was chaired and moderated by His Excellency Dr Yousef Al-Ebraheem, Economic Advisor at Al-Diwan Al-Amiri. It included as speakers Vitor Gaspar.
Director of the 1MF's Fiscal Affairs Department, who discussed public sector reforms to strengthen governance based on global country experiences; and Ms. GhadaKhalaf, Project Manager of the Government of Kuwait's Restructuring Project, who focused on government reforms to help achieve Kuwait's Vision 2035, as part of a project led jointly by the Supreme Council for Planning and Development, and the Kuwait Foundation for the Advancement of Sciences.

His Excellency Dr Yousef Al-Ebraheern indicated that the symposium aimed at stimulating an open debate on the evolving economic challenges faced by policymakers in Kuwait and the wider Arab community. He discussed the importance of public sector reforms for better governance in the Arab world, and overviewed the core measures needed to strengthen fiscal institutions, especially those that are conducive to public sector efficiency, transparency and accountability.

In his presentation, Dr Gaspar started from Ambrogio Lorenzetti's Allegory of Good and Bad Government, which decorates the walls of PalwaoPubblico on the main square of the city of Siena. It provides a powerful representation of the political philosophy of governance. One particular detail of this masterpiece is most telling. The ruler, who dominates the central painting, has his hand tied by a cord that is connected, through the citizens, to the scales of justice.

In today's language: good government goes together with institutional constraints and controls by active and engaged civil society. Weak control of corruption is one of the symptoms of bad governance. The governance can be imagined as the plumbing system where the resources collected from the economy flow in and out. Corruption causes leakages in this plumbing system hence undermining the effectiveness of public policies and most importantly the credibility of citizens towards its government.

The IMF's recent analysis finds evidence that fiscal transparency and a lower administrative burden correlate with corruption. The highlights the crucial importance of enhancing fiscal transparency, which is one of the ways to bind governments via accountability. In this context Dr Gaspar stressed that the transparency in public finances is central to ensuring that public fiancés are responsive to the citizens and deliver full accountability.

The use of public sector balance sheets is one of the methods to increase transparency and accountability. That is why the IMF has started advocating for public sector balance sheets. Looking beyond financial flows, like fiscal deficits, to fully account for what the state owns and owes makes possible informed citizen-state dialogue. It also improves the quality of information in such areas as the inter-temporal effects of policy choices and vulnerability top fiscal risks, which enhances the quality of government actions.

More transparent governments are typically rewarded with better sovereign credit ratings and lower cost of public financing. The public sector balance sheet is particularly important for resource-rich countries. Natural resource reserves can dominate the assets of public sector in commodity producers, such as Norway, Kazakhtan or Guyana.
The sheer size of these assets demands especially strong institutional and governance arrangements. However, resource-rich countries on average have the weaker institutions. Building tax capacity is crucial for achieving transparency and accountability. Tax capacity is central to building state capacity, which is a key pre-requisite for economic growth and development. A modern tax system provides opportunity to build institutions and capacity to enforce it.