Analysis of the Case Studies
On the contrary, most low-income countries have not reached the stage of development where this kind of functional delegation can be undertaken without loss of fiscal control. In those country settings, a different kind of phenomenon has been observed in which public finance functions appear fragmented into different CFAs. Such a structure could be due, for example, to specific actions taken by the head of state to divide the financial power attributed to the minister of finance among several ministers in order to avoid the accumulation of excessive authority in the hands of one person, and to preserve the discretionary powers of the president over spending and revenue collection. Other reasons could simply be found in institutional weaknesses, lack of coordination between the finance ministries and the other CFAs, or even rent-seeking behaviours and political preferences. Although such phenomena are not unknown in advanced countries,3 there seem to be quite commonplace in low-income countries with weaker institutional capacities. In the Republic of Yemen, for example, the mission team was unable to obtain a clear answer to the question of which minister is responsible for fiscal policy—in practice, this role seems to be divided on a more or less ad hoc basis between the finance minister, the minister of planning and the governor of the central bank. Responsibility for macroeconomic forecasting in the Republic of Yemen is also divided between several different entities, with resulting inefficiencies and uncertainties described in the case study. The result is that fragmentation impedes efficient coordination among government agencies. Another example is given in the Cameroon report: in 2002, the authorities complied with a condition of the Bank and IMF, as part of the enhanced Heavily Indebted Poor Countries (HIPC) initiative, to merge the ministries of finance and planning but, as soon as the completion point was reached, the ministries were split again. A further example of the possible fragmentation of finance functions in lowincome countries is provided by the case study of Tonga: Creation in 2009 of a separate Ministry of Revenue and Customs incorporating the staff from the [finance ministry’s] Revenue Services Department, which ended the reporting relationship to the Minister of Finance, has further eroded the tax policy capacity of [the finance ministry] and led to uncertainties about its future responsibilities for certain areas of tax policy.
The case of Mongolia is also relevant here. The parliament plays a dominant role in policy making, and exerts a strong influence on the machinery of government, so as to prevent any one agency from becoming too powerful. As part of its strategy to limit the authority of the finance ministry, the parliament has worked to ensure that finance functions of government are divided among several agencies. The macroeconomic forecasting function was transferred from the finance ministry to a new agency for national economic development, and the two entities were involved in a debate about the allocation of responsibilities for crucially important policy areas such as the public investment program, the
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