PACIFIC FINANCIAL TECHNICAL ASSISTANCE CENTRE (PFTAC)

Supporting Macro-Financial Stability and Sustainable & Inclusive Growth in the Pacific

ANNUAL REPORT 2019

PFTAC is an IMF initiative

A MESSAGE FROM THE PFTAC STEERING COMMITTEE CHAIRMAN

Mr. Loi M. Bakani, CMG capacity challenges. The volume of CD delivered by PFTAC was 16 percent up Governor, Bank of Papua New Guinea since 2009 over the previous year that had otherwise been the busiest PFTAC Chairman 2019 to date, with budget utilization up 15 percent. This was achieved despite the turnover of four of the team of seven th The reporting period was historic given the 25 resident experts, with both Statistics advisors departing for anniversary of PFTAC as the first role model Washington positions with gaps before arrival of of regional Capacity Development (CD) successors, the arrival in June 2018 of a new PFM advisor centers that the IMF has now replicated after a gap of four months, and the smooth transition of globally more than 15 times. In addition to Revenue advisors with a month-long handover. Delivery growth was mostly attributed to scaling-up of the Revenue celebrating this major milestone, the year was program given additional resources pledged by Australia the busiest in terms of CD delivery, budget to support revenue mobilization generally, and PACER utilization, and most importantly, member Plus adjustments. country progress towards sustainable outcomes that contribute to inclusive growth. Financing for PFTAC operations benefited from a € 6 million contribution agreement from the European Union and the noted It is my pleasure to host members and observers at the additional Revenue support. Member country contributions have 2019 PFTAC Steering Committee convened in Port been encouraging, subject to the remaining three members Moresby, Papua New Guinea on March 27 and 28, 2019. formalizing their commitments to shared regional support. As we I am delighted to proudly host this event at one of the approach the halfway point in the current fifth operational and prime venues of the highly successful series of Asia financing phase, a remaining funding gap must be closed with Pacific Economic Cooperation (APEC) meetings in 2018, some urgency to safeguard the scope and volume of the future that culminated in the leaders’ meeting in November. PFTAC program. Looking back over the period May 1, 2018 to date, the highlight of the PFTAC calendar was the High-Level To conclude, I thank PFTAC for its recent help to Papua New Dialogue on Capacity Development and Growth held in Guinea, including in capacity building for bank supervision; Nadi, December 6 and 7, 2018 Fiji and attended by 200 training and TA to strengthen medium-term macroeconomic Pacific and regional senior policy makers and an array of models and forecasting capacity of BPNG and the Treasury; development partners, thought leaders, and civil society. foundational work that led to the Medium-Term Revenue The important contribution of PFTAC over the past 25 Strategy (MTRS) efforts now under way, and a forthcoming years was clearly articulated, noting a continuing, but PEFA assessment of the national state of Public Financial adapting role required going forward to help the Pacific Management. address its new and future economic development and

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FOREWORD FROM THE PFTAC COORDINATOR

David Kloeden Five new staff joined PFTAC in the period, first Celeste Kubasta I am very pleased to present this annual report as PFM advisor in June 2018; Shane Prasad in August 2018 in covering the accomplishments of PFTAC in its 25th the new role as economic analyst; Georg Eysselein and Marcus Scheiblecker as revenue and RSS advisors in October 2018; and year of operations, a major milestone for both the Luis Temes as new GFS advisor from April 2019. Three locally Pacific and the regional Capacity Development selected interns spent time at PFTAC, two during the July 2018 (CD) model of the International Monetary Fund. It break and another in February 2019. was a pleasure to join with so many past and The PTAC team and our colleagues from the IMF Suva Resident present contributors to the success of PFTAC at our Representative office spent most of the year in temporary office anniversary event in Nadi in December 2018. facilities while our home for most of the past 25 years on the seventh floor of the Reserve Bank of Fiji building was renovated. Thirty months have now elapsed since the start of Phase V as We return to an updated and refreshed work environment in April we now approach the mid-point of the operational and 2019. financing cycle and begin preparing for a mid-term external evaluation. The period May 2018 to April 2019 is our second You will notice significant changes in this report from the past as full fiscal year of this phase, with each year producing a record we adopt a style recently piloted by the IMF Central Africa CD level of CD delivery. Although an even higher level of execution center that is now being rolled out across all centers including is planned for FY2020, this is expected to plateau at an optimal PFTAC. This report is a draft version issued in advance of the level of our delivery ability and more importantly the absorptive March 2019 Steering Committee and is based on projected results capacity of our membership. Much of the recent growth is and resource utilization through the end of April 2019. Minor attributed to a heavier fiscal effort, predominantly through the changes and adjustments will inevitably eventuate and will be Revenue program that is benefiting from additional Australian accordingly reflected in a final version that is expected to be financing to expand in support of revenue mobilization issued electronically by late May and a little later in hardcopy. generally, and more specifically, to help those PACER Plus Many thanks to the staff at PFTAC and our Washington signatory countries to institute reforms to offset expected colleagues plus everyone who contributes to our mandate for a declining trade tax collections very busy but productive and rewarding year. This has only been possible with both the financial and substantive support of our We bid farewell to three of the team, namely Richard Wild and donors and member countries who have made such good use of Barend de la Beer respectively the real sector and government finance statistics advisors, both recruited to the IMF Statistics PFTAC’s capacity development efforts over the years that are Department, and Stan Shrosbree after four years as revenue encapsulated in the Fijian example shown in the short video advisor. The gratitude that Stan earned from tax practitioners presented at the anniversary event: across the Pacific was warmly displayed at the 2018 PITAA https://www.pftac.org/content/dam/PFTAC/Videos/PFTAC25ye meeting. He remains heavily engaged in delivering the ars.mp4 expanded revenue program from his Auckland base.

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LIST OF ACRONYMS AND ABBREVIATIONS

ABS Australian Bureau of Statistics ADB Asian Development Bank AFSPC Association of Financial Supervisors of Pacific Islands Countries APD IMF Asia and Pacific Department APEC Asia Pacific Economic Cooperation BCG Budgeting Central Government BOP Balance of Payment BPNG Bank of Papua New Guinea CARTAC Caribbean Regional Technical Assistance Centre CBSI Central Bank of the Solomon Islands CD Capacity Development CIS Compliance Improvement Strategy COA Chart of Accounts DFAT Australian Department of Foreign Affairs and Trade DRM Domestic Resource Mobilization ESS External Sector Statistics EU European Union FAD IMF Fiscal Affairs Department FEMM Forum Economic Ministers Meeting FMIS Financial Management Information System FSM Federated States of Micronesia FP Financial Programming FSS Financial Sector Supervision FTE Full Time Equivalent FY Financial year GDP Gross Domestic Product GG General Government GFS Government Financial Statistics GFSM Government Finance Statistics Manual HIES Household Income and Expenditure Survey HLD High Level Dialogue HQ (IMF) Headquarters ICD IMF Institute for Capacity Development IFRS International Financial Reporting Standards IMF International Monetary Fund IPSAS International Public-Sector Accounting Standards ISORA International Survey on Revenue Administrations IT Information Technology ITA Income Tax Act LEG IMF Legal Department LOU Letter of Understanding

4 | Annual Report 2018 | AFRITAC Central

LTX Long-term expert or resident advisor MCM IMF Monetary and Capital Markets Department MFAT New Zealand Ministry of Foreign Affairs and Trade MFED Ministry of Finance and Economic Development MFEM Ministry of Finance and Economic Management MOVE Model of the Vanuatu Economy MPCC Macroeconomic Policy Coordination Committee MTRS Medium Term Revenue Strategy MTSES Medium Term Supervision Enhancement Strategy NA National Accounts NSO National Statistical Office OCO Oceania Customs Organization PACER Pacific Agreement on Closer Economic Relations PASAI Pacific Association of Supreme Audit Institutions PAYE Pay as You Earn PEFA Public Expenditure and Financial Accountability PFM Public Financial Management PFTAC Pacific Financial Technical Assistance Centre PIC Pacific Island Country PIF Pacific Islands Forum PIFS PIF Secretariat PIMA Public Investment Management Assessment PITAA Pacific Islands Tax Administrators Association PNG Papua New Guinea PRIF Pacific Regional Infrastructure Facility PSDS Public Sector Debt Statistics PSSC Pacific Statistics Steering Committee RAP Resource Allocation Plan RBM Results-Based Management RBS Risk Based Supervision RMI Republic of the Marshall Islands RCDC Regional Capacity Development Centre RSS Real Sector Statistics RTAC Regional Technical Assistance Centre SC PFTAC Steering Committee SDG Sustainable Development Goal SERF Samoa Economic and Revenue Forecasting model SOE State-Owned Enterprise SPC Secretariat of the Pacific Community STA IMF Statistics Department STI Singapore Regional Training Institute STX Short-term Experts TA Technical Assistance TAA Tax Administration Act TADAT Tax Administration Diagnostic Assessment Tool TEI Tuvalu Economic Indicators TYPSS Ten Year Pacific Statistics Strategy UNDP United Nations Development Program UNESCAP United Nations Economic and Social Commission for Asia and the Pacific USP University of the South Pacific VAT Value Added Tax

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TABLE OF CONTENTS

1 10 19 A Message from the PFTAC Steering Committee SECTION I SECTION II Chairman Overview Results (May 2018 – April 2019) 12 A Overview of the Pacific Financial Technical 21 A Summary and Overview Assistance Centre 3 (PFTAC) 27 B Revenue Administration Foreword from the PFTAC

Coordinator 15 B PFTAC Programs and Areas 42 C Public Financial Management

of Operation 46 D Macroeconomic 17 C PFTAC Member Countries Programming and Analysis 4 and Partners 47 E Macroeconomic Statistics List of Acronyms and Abbreviations

53 F Financial Sector Supervision

6 Table of Contents

6 | Annual Report 2019 | PFTAC

65 105 CHARTS 12 Chart 1. 368 Scored SECTION III SECTION IV Milestones due by April 2019 Work Program PFTAC Staff by Program (May 2019 – April 2020) 22 Chart 2. Implementation

Progress of PFTAC’s Logical 66 A Summary and Overview Framework at April 30, 2019 73 B Revenue Administration 25 Chart 3. FY2019 Total Technical 78 C Public Financial Management Assistance Days by Country 108 83 D Macroeconomic Programming 26 Chart 4. FY2019 Total 2,110 and Analysis ANNEX Mission Days by Program

87 E Macroeconomic Statistics 27 Chart 5. FY2019 Expert Days 109 Annex 1. Macroeconomic Delivery and Backstopping TA Developments of PFTAC Member 94 F Financial Sector Supervision Countries 28 Chart 6. FY2019 Projected Program Outturn-Percent of Budget Expended

67 Chart 7. FY2020 Workplan (2,495 Days) vs FY2019

Outturn (2,110 Days)

67 Chart 8. Distribution of FY2020 Mission Days (2,495 Days) by Program

68 Chart 9. FY2020: 188 Planned Missions/ Activities

68 Chart 10. FY2020: 2,495 Planned TA Field Days

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BOXES

23 Box 1. Main Results of PFTAC 45 Box 8. Workshop to 51 Box 13. Pacific Statistics Technical Assistance Centre Strengthen Financial Standing Committee (May 2018 to April 2019) Reporting IPSAS Cash or (PSSC) Meeting Accruals Based 24 Box 2. Celebrating 25 Accounting Years of PFTAC 47 Box 9. Customized 30 Box 3. Regional VAT Workshop- Training Gets High Marks Fiji

31 Box 4. Revenue Reforms in 48 Box 10. Peer to Peer Tonga Learning from Tonga to Tuvalu 31 Box 5. Modernization of Vanuatu’s Department of 49 Box 11. Revitalized Samoa Customs & Inland Revenue Macroeconomic Policy Coordination Committee 32 Box 6. Recent Tax Law Work in the Pacific 50 Box 12. Inaugural South Pacific Central Banking 44 Box 7. PEFA in Samoa Research for Policy Conference

8 | Annual Report 2019 | PFTAC

TABLES

23 Table 1. PFTAC TA Delivery 31 Table 7. PFTAC FY2019 75 Table 14. FY2020 Work by STX/LTX Days and Projected Outturn (in Program Summary: Revenue Missions: FY17, FY18, FY19 percent) by Program Administration (Proj.), FY20 (Plan.) 35 Table 8. Proposed FY2020 80 Table 15. FY2020 Work Program 26 Table 2. Execution of Work Budget (in US Dollars) Summary: Public Financial Program During Fiscal Year Management 2019 (In Person-Days) 36 Table 9. Status of Financial Contributions for Phase V (as of 84 Table 16. FY2020 Work 28 Table 3. Implementation of March 1, 2019) Program Summary: the FY2019 Work Program Macroeconomic (in Number of Activities) 46 Table 10. PEFA & PIMA Programming and Assessments and PFM Analysis 29 Table 4. FY2019 Roadmaps in Pacific Island Workshops/ Seminars Countries 89 Table 17. FY2020 Work Program Summary: 30 Table 5. PFTAC FY2019 67 Table 11. FY2020 Planned Macroeconomic Statistics Budget (in US Dollars) by Workshops/ Seminars (Government Finance Statistics) Program 68 Table 12. PFTAC Proposed 92 Table 18. FY2020 Work Program 30 Table 6. PFTAC FY2019 FY2020 Budget (in US Summary: Macroeconomic Projected Outturn (in US Dollars) Statistics (Real Sector Statistics) Dollars) by Program 69 Table 13. PFTAC FY2020 95 Table 19. FY2020 Work Budget by Program (in US Program Summary: Financial Dollars) Sector Supervision

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SECTION I

OVERVIEW

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PFTAC 25th Anniversary, Nadi Fiji, December 2018

I I OVERVIEW OF THE PACIFIC FINANCIAL TECHNICAL ASSISTANCE

CENTRE (PFTAC)

INSITITUTIONAL FRAMEWORK PFTAC was established in 1993 to promote macro-financial stability in Pacific Island countries (PICs) through a focused program of technical assistance (TA) and training, otherwise termed, Capacity Development (CD). The goal of PFTAC is to strengthen the institutional capacity of Pacific countries to design and implement sound macroeconomic and financial policies. Macroeconomic and financial stability, in turn, are essential underpinnings for sustainable economic growth and the achievement of Sustainable Development Goals (SDGs).

PFTAC assists 16 PICs that comprise 13 PFTAC Steering Committee, Suva, Fiji, March 2018 members of the IMF, including Federated States of Micronesia (FSM), Fiji, Kiribati, The framework for PFTAC’s operations, member countries. The objectives Nauru, Palau, Papua New Guinea as well as for its accountability, is largely defined in the Phase V Program (PNG), Republic of the Marshall Islands determined by the program established Document (PD) provide a basic medium- (RMI), Samoa, Solomon Islands, Timor- at the beginning of each funding cycle. term framework for guiding PFTAC’s Leste, Tonga, Tuvalu and Vanuatu, plus PFTAC staff work closely with IMF activities. However, PFTAC priorities and the Cook Islands, Niue and Tokelau. headquarters staff both in planning and activities must be sufficiently flexible and implementing the work program. PFTAC nimble to respond to evolving objectives PFTAC’s operations are funded by provides accountability to its members set by regional leaders, as well as the contributions from three sources. In the through Quarterly Reports, which report activities of other development partners. Phase V funding cycle, running from on activities, finances, and performance The annual work program is agreed at November 2016 to April 2022, funding is in relation to those objectives; the Annual the beginning of the financial year as part provided by PFTAC’s traditional Report; and through its annual Steering of the integrated IMF Resource donors—the Asian Development Bank Committee meetings. The program Allocation Plan (RAP), but changes (ADB), Australia, the European Union provides for an external independent eventuate during the year to (EU), Korea, and New Zealand—and, for evaluation of PFTAC midway through accommodate emerging CD requests the first time, by its member countries. each phase which falls due in the coming following agreement between the Asia Member countries also contribute year. Pacific Department (APD) and relevant through in-kind support for training TA Department. The PFTAC RAP is activities in the region, and development CAPACITY DEVELOPMENT prepared under leadership of APD, in partners also contribute through co- STRATEGY close collaboration with PFTAC staff and funding of workshops. The IMF CD provided by PFTAC reflects the functional TA departments supporting contribution finances the center specifically defined program priorities, the delivery of TA and training in the coordinator, local support employees, but adaptable within resource and region. and office overheads. competency constraints to evolving regional priorities and the needs of

Annual Report 2019 | PFTAC SECTION I | 12

catalogues developed by FAD (PFM, Revenue Administration, and Tax Policy), STA, and MCM, as well as a bespoke catalogue for the Macroeconomics program that is backstopped by APD. PFTAC works towards only a fraction of the CD areas covered by the entire IMF catalogue that covers more than 600 defined outcomes. During FY2019, the PFTAC programs were working towards 12 high-level objectives cited throughout this report, drilling down to 42 outcomes. (PFM works on 6 core objectives towards 12 outcomes; the Revenue program works on 2 core objective areas towards 11 outcomes; the FSS program works on 2 core objective areas towards 6 outcomes; the Statistics program works on a single objective towards 10 outcomes; and the Macroeconomics program also has a single objective towards 3 outcomes). We actively tracked and reported on the progress of 528 milestones of which 365 were Opening ceremony, Steering Committee, Fiji, March 2018 expected to be achieved during the period or earlier. PFTAC PROGRAMS Seven resident PFTAC advisors deliver PFTAC is managed by a Coordinator, and manage five CD programs. There is and CD is provided by the team of major emphasis on fiscal issues given resident advisors with substantial the importance in the region to ensuring expertise in their respective sectors, and sustainable public finances, with two core supported by four administrative programs covering Public Financial employees and a recently recruited Management (PFM) and Revenue Policy economic analyst in our Suva office. The and Administration, both technically advisors are based in Fiji and travel overseen or ‘backstopped’ by the Fiscal extensively throughout the region, which Affairs Department (FAD). Two allows them to develop rapport with macroeconomic statistics advisors country authorities and familiarity with supported by the Statistics (STA) national and regional contexts and Department focus primarily on National needs. Accounts issues (plus modest external sector issues) and Government Finance On average, the resident advisors spend Statistics (GFS), accounting for a further about half of their time each year on PFTAC Resident Advisors, Steering Committee, quarter of PFTAC operations. Two mission to member countries and the Fiji, March 2018 additional programs with sole advisors balance at the PFTAC office, maintaining work on financial sector supervision an active dialogue with their counterparts (FSS) CD under the Monetary and following up on previous CD or preparing Capital Markets (MCM) Department, and for upcoming missions or activities. The finally the Macroeconomic Analysis and advisors also manage the short-term Programming program supports effective experts (STX) employed to assist with medium-term frameworks, tools, and delivery of the CD programs. The skill mix capacity that supports the work of the of the advisors reflects the priority needs other programs and the IMF’s of the member countries. The surveillance mandate. Coordinator and advisors are assisted in delivering the CD program, finances, RESULTS BASED MANAGEMENT reporting, travel arrangements, workshop Our Results Based Management (RBM) and conference logistics and other framework was developed to categorize Centre activities by four locally-engaged all IMF provided CD according to a small staff and a recently recruited economic number of high-level objectives that analyst. expands into a set of typically targeted outcomes per objective. Each TA PARTNER COLLABORATION department has developed its own Close PFTAC collaboration with regional catalogue to ensure consistency in partners is vital to leverage the impact of Partners of PFTAC, Steering Committee, Fiji, developing, documenting, and the PFTAC program. PFTAC’s long and March 2018 importantly reporting CD activities. The productive history of working closely PFTAC program draws on elements of together and jointly delivering training

14 | SECTION I Annual Report 2019 | PFTAC and even some TA delivery with regional opportunities are integral to the PFTAC highlights IMF research on a range of groups will continue. This includes the objective of promoting inclusive growth. gender issues of macro-criticality, Pacific Association of Supreme Audit In terms of training and other events, including work place participation, Institutions (PASAI), the Pacific Islands PFTAC proactively encourages financial inclusion, and gender-based Tax Administrators Association (PITAA) beneficiary agencies to nominate suitably budgeting issues that is increasingly on many tax topics along with the qualified female candidates, and similarly being reflected in the policy discussions Oceanic Customs Organization (OCO), encourages and facilitates participants under the IMF’s surveillance role, and the Association of Financial Supervisors with disabilities. This has included where member country interest and of Pacific Island Countries (AFSPC), and making appropriate arrangements for demand exists, through Capacity the University of the South Pacific (USP). mobility impaired participants at training Development events provided regionally events and seminars, ensuring or customized to country needs. Past Working closely with regional accessibility of accommodation and examples include a joint PFM/Macro development partners such as the ADB, venue facilities. PFTAC has participated workshop on Medium-term expenditure the World Bank, regional organizations in the Pacific Disability Forum in 2018 planning for national sustainable like the Pacific Islands Forum Secretariat and 2017, an important annual multi- development included a session on (PIFS) and the Secretariat of the Pacific stakeholder dialogue event. The most inclusive budgeting with an exercise Community (SPC), as well as United recent engagement built on a 2017 involving participants calculating the Nations (UN) agencies such as the UN PFTAC presentation on budget impact on national GDP if the labor force Development Programme (UNDP) and processes in which the forum discussed participation rate was the same as men. UN Economic and Social Commission for recent findings on trends in public Asia and the Pacific (ESCAP), ensures spending on disability that the comparative advantages and inclusivity across six CHART 1: 368 MILESTONES DUE BY APRIL expertise of these organizations are PICs. 2019 BY PROGRAM melded with the economic and financial expertise of PFTAC to deliver well- The proportion of Financial Sector rounded and comprehensive events for female training Supervision, 43 Revenue our respective, and mostly overlapping participants was Administration, client bases. Some development approximately 40 55 partners can provide co-financing (such percent in FY2019, as the ADB and UN/ESCAP) that may although this is a Macroeconomic train more participants and/or projection as several Programming, Public Financial accommodate additional PFTAC events events are still to be 46 Management, than would have otherwise not been delivered late in the 44 possible. period. PFTAC outreach through Government Finance Real Sector GENDER AND INCLUSIVENESS social media and other Statistics, Statistics, The importance of gender issues and traditional channels 93 87

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I I PFTAC PROGRAMS AND AREAS OF

OPERATION

MACROECONOMIC PROGRAMMING REVENUE ADMINISTRATION PUBLIC FINANCIAL MANAGEMENT

In the area of revenue policy and In this area, the Center supports the This program aims to improve administration, PFTAC supports member planning and prioritization of PFM macroeconomic policy advice to governments and central banks through more countries to strengthen the capacities of reforms based on the PEFA effective medium-term economic frameworks tax administrations, mobilizing tax framework and assessments; and forecasting capacity. revenue, improving taxpayer strengthening legal frameworks; compliance, and promoting citizens’ strengthening budget preparation, ownership of their role as taxpayers. budget transparency, execution; and strengthening budget monitoring, reporting and accountability. OBJECTIVES OBJECTIVES (1) Well-functioning macroeconomic OBJECTIVES (1) Strengthened revenue policy and institutions and improved administration management and (1) Improved PFM laws and effective macroeconomic policy advice to governance arrangements institutions government through sound medium- term macroeconomic frameworks; (2) Strengthened core tax (2) Comprehensive, credible, and strong institutions for policy making; administration functions, including policy based budget preparation improved public access to key an accurate taxpayer base, quality macroeconomic and fiscal information; taxpayer services supporting (3) Improved budget execution and and sound macroeconomic voluntary compliance, and control, supported by an efficient surveillance and policy/ research improvements in filing, payment and financial management system available for policy making. audit services. (FMIS) and with responsive internal audit (3) Improved legal frameworks (4) Improved coverage and quality of fiscal reporting

(5) Improved asset and liability management

(6) Strengthened management of fiscal risks

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GOVERNMENT FINANCE STATISTICS REAL SECTOR STATISTICS BANKING REGULATION AND SUPERVISION In this area, the Center supports the In this area, the Center supports member states in compiling national the member states in compiling In this area, the Center helps the countries accounts that are robust and compliant create resilience in their banking systems and harmonizing government with international standards and in through sound regulation that helps promote finance statistics to ensure they are implementing effective economic policy financial stability and better access to both reliable and consistent with tools. finance. international standards.

OBJECTIVES OBJECTIVES OBJECTIVES (1) Strengthened compilation and (1) Strengthened financial sector (1) Strengthened compilation and dissemination of data on financial surveillance through upgrading of dissemination of data on financial statistics for decision making regulatory framework in line with statistics for decision making international standards

(2) Enhance transparency of financial (2) Make more efficient use of supervisory statistics for decision making through resources to better oversee key risks strengthened dissemination via the in the banking system Fund’s Data Standard Initiative (3) Ensure that banks have strong capital and liquidity positions that adequately cover their risks and contribute to financial system stability

(4) Improved supervisory effectiveness through enhanced capacity in IFRS knowledge related to provisioning.

16 | SECTION I Annual Report 2019 | PFTAC

I I PFTAC MEMBER COUNTRIES AND PARTNERS

PFTAC MEMBER COUNTRIES

PFTAC PARTNERS

Asian Development Bank Korea European Union New Zealand Australia

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SECTION II

RESULTS (MAY 2018 – APRIL 2019)

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Government Finance Statistics Regional Workshop, Fiji, August 2018

I II SUMMARY AND OVERVIEW

FY2019 was a record year for PFTAC on MAIN ACHIEVEMENTS several fronts. It was the 25th year of Multiple metrics can be used to measure operations since establishment in 1993 CD, including inputs such as financial as the first Regional Technical resources and personnel; activities like Assistance Center (RTAC) of the IMF, missions and training events; and outputs now called Regional Capacity like mission reports, strategy documents Development Centers (RCDC) in and medium-term economic frameworks. recognition of the integration of training Outcomes however are what ultimately and technical assistance into Capacity matter to advance each member country Development (CD). A major event was and the region towards their overarching convened in Fiji in early December 2018 objective of inclusive and sustainable to celebrate the anniversary milestone. growth and macroeconomic and financial

stability. .

During Phase V, the five PFTAC programs cumulatively work towards 13 high level outcome objectives, six for PFM, two each for Revenue and FSS, and one each for the Macro and two statistics programs.

The progress towards completion of 368 predefined milestones that were expected to be achieved by the end of April 2019 have been tracked and summarized at Chart 1. Each milestone is scored from 1 (not achieved) to 4 (fully achieved) and are averaged when grouped. This provides a snapshot of where the PFTAC programs are working within each country towards broadly targeted objectives, reflecting the progress towards completion of milestones that ultimately contribute to reaching the targeted outcomes. Box 1 then provides a summary of the main results achieved or underway during the year.

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CHART 2. IMPLEMENTATION PROGRESS OF PFTAC’S LOGICAL FRAMEWORK AT APRIL 30, 2019

4. Results Achieved 3. Results Broadly Achieved 2. Results Partially Achieved 1. Results Not No activity during (4.0<=3.5) (3.4<=2.5) (2.4<= 1.5) Achieved (1.4<=1.0) FY19

PFTAC Cook Solomon Timor Fiji FSM Kiribati Nauru Niue Palau PNG RMI Samoa Tokelau Tuvalu Tonga Vanuatu Region Islands Islands Leste Public Financial Management

Avg Avg Avg Avg Avg Avg Avg Avg Avg Avg Avg 2.0 1. Stronger PFM Laws and Institutions 2.8 3.5 1.5 1.0 2.5 3.5 4.0 3.0 2.5 3.5

2. Comprehensive, credible, and policy-based Avg Avg 1.7 1.7 budget Preparation

Avg Avg 3. Improved Budget Execution and Control 3.0 3.0

4. Improved Coverage and Quality of Fiscal Avg Avg Avg Avg Avg Avg Avg Avg 2.6 3.0 3.0 Reporting 2.5 3.0 1.0 2.5 3.0

5. Improved Integration of Asset and Liability Avg Avg Avg Management 3.0 3.0 3.0

6. Strengthened identification, Monitoring, and Avg Avg Avg Avg 2.3 Management of Fiscal Risks 3.0 1.0 2.5

Revenue Policy and Administration

1. Better revenue administration, management and Avg Avg Avg Avg Avg Avg Avg Avg Avg Avg Avg 1.0 3.5 3.0 2.0 2.0 4.0 2.0 governance arrangements 3.0 4.0 4.0 4.0

Avg Avg Avg Avg Avg Avg Avg Avg Avg 2.6 2.Stronger tax administration core functions 2.6 2.7 2.6 2.0 4.0 2.4 2.6 3.0

Financial Sector Supevision

1. Develop/strengthen banking regulations and Avg Avg Avg Avg Avg Avg Avg Avg Avg 2.3 2.0 2.0 2.0 prudential norms 2.5 2.0 2.0 2.7 2.7

2. Implement a risk-based supervision (RBS) system Avg Avg Avg Avg Avg Avg Avg 2.8 2.0 and upgrade other supervisory processes 2.6 2.8 2.0 2.5 2.5

Macroeconomic Programming 1. Well functioning macroeconomic policy and Avg Avg Avg Avg Avg Avg Avg Avg Avg Avg Avg institutions: improved macroeconomic policy advice 2.7 3.5 1.3 3.0 2.5 1.8 3.3 3.5 2.1 3.0 2.2 to government Government Finance Statistics

1. Strengthen compilation and dissemination of Avg Avg Avg Avg Avg Avg Avg Avg Avg Avg Avg Avg Avg Avg Avg 2.1 2.0 2.0 2.1 2.2 2.3 2.0 2.1 2.8 2.0 data on macroeconomic and financial statistics. 1.2 2.0 2.8 1.3 2.6

Real Sector Statistics

1. Strengthen compilation and dissemination of Avg Avg Avg Avg Avg Avg Avg Avg Avg Avg Avg Avg Avg Avg Avg Avg 1.8 2.2 1.5 2.1 1.8 data on macroeconomic and financial statistics. 1.1 1.4 1.5 3.0 1.8 1.5 1.6 3.0 1.3 2.1 2.5

BOX 1. MAIN RESULTS OF PFTAC TECHNICAL ASSISTANCE CENTER (MAY 2018 TO APRIL 2019)

COOK ISLANDS • VAT tool kit developed, and core analysis and forecasting, including tax administration functions on GDP measurement. • Re-engagement and scaling-up strengthened. of revenue CD program. • Progress in development of a FSS NAURU risk rating model and capacity • Solid progress in FSS built in on-site examination of Supervisory Framework. • Procedures revised to comply with market and liquidity risk. IPSAS Cash accounting. • GDP rebased. • Tax administration organization • Tax administration organizational review as input to MTRS reforms. • Release of a Medium-Term enhancements proposed. Fiscal Strategy. REPUBLIC OF MARSHALL • Efforts ongoing to estimate GDP ISLANDS (RMI) • Chart of Accounts revised for by production drawing on tax data. Financial Management IT • Capacity being established for system and better GFS. NIUE National Accounts to be prepared by statistics office independently • National Accounts and External FIJI of external providers. Sector Statistics tables updated to • Insurance reform started. 2017/18 • Efforts ongoing to improve medium-term budgeting • Tax administration organization • Multi-faceted revenue program processes and documentation. delivering results with respect to restructured, and efforts launched self-assessment, a tax rulings to strengthen core tax functions. • Assistance provided to update program, IT strategic review, banking legislation and on-site updated legislation, and • Drafting assistance to modernize examination. strengthening of core tax the Income Tax Act and Tax administration functions. Administration Act. • Improvements made to taxpayer services and management of • Mapping and refinement of the PALAU arrears and return filing. GFS Chart of Accounts. • A joint tax policy and revenue forecasting mission provided SAMOA • Redrafting of the PFM legislation, advice on the design and development of financial reporting • Full in-country PEFA completed. projected impact of introducing instructions for SOEs, and VAT. capacity built in risk-based internal • Strong progress on PFM reforms audit. including redevelopment of budget • Adoption of compliance documentation, internal audit improvements and restructured FEDERATED STATES OF strategic plan, review of IPSAS tax administration. MICRONESIA (FSM) Cash compliance, development of a warrant system, and • Initiative launched to overhaul • Training for VAT implementation. development of SOE risk indicator banking legislation. monitoring. • Assistance to update banking • Strengthening of filing and debt legislation. • National Accounts finalization compliance, and taxpayer audit covering 2016 census, 2013 capacity building. PAPUA NEW GUINEA HIES, and 2013 business survey. • GFS financial balance sheet KIRIBATI coverage extended to budgetary • Completion and publication for the • Public Investment Management central government. first time of a general government Assessment (PIMA) completed. consolidated time series (FY2013- • National Accounts improvements 2017). • GFS coverage being expanded to to deflation updates, tax data the entire public sector. acquisition and mechanized • Update of insurance legislation processing. and regulation launched. • Small Business Tax regime being developed, and legislation drafted • Extensive customized training • Full review of tax administration for sea bed mining. provided in macroeconomic audit program, structure, staffing Annual Report 2019 | PFTAC SECTION II | 23

arrangements, management • Central Bank (BCTL) enhancing • Launched work to draft insurance practices, risk analysis and case credit risk regulation and legislation and regulations. selection systems to underpin a implementing IFRS9 with PFTAC new audit plan. help. • Expansion of GFS and PSDS coverage to nonfinancial public SOLOMON ISLANDS • Presentation by PFTAC advisor at corporations. the Fiscal Reform Commission’s • Medium-term revenue projections Public and Financial Management produced for the current tax • Publication of new GDP estimates Seminar for Sustainable Growth system, and effects quantified for and Development. a VAT to replace import duty and TUVALU the goods tax. • CD and surveillance integration • Tuvalu Economic Indicators (TEI) strengthened through PFTAC database created and being used • Steps to expand GFS coverage to participation in Article IV mission. to estimate real GDP with industry General Government and the start from world prices and components of expanded coverage of public TOKELAU of the consumer price index. sector debt statistics. • Developing a PFM roadmap • Assistance to develop a banking • Improved adjustments to National arising out of the findings in the supervision framework. Accounts to address under 2016 PEFA self-assessment. coverage, misreporting, and • Updated GDP estimates with the definitional or conceptual TONGA incorporation of the new HIES differences. 2016 data. • Finance Ministry Chief Economist provided peer-to-peer learning • Major expansion in revenue • Tax administration efforts focused with Tuvalu to help develop GDP efforts including: review and on a review of core tax functions; forecasting with Macro Advisor. updating of recent reforms; new strengthening on-time filing and corporate strategy and business payment and taxpayer services; • Training for Internal Audit; plan; measures to improve development of a modernization improvements to Chart of management of tax arrears and plan; design of a compliance Accounts; progress with financial outstanding returns; move to a improvement strategy; and a reporting under IPSAS Cash function-based structure; plans to review of the current IT system. introduce a Large Taxpayer provisions; and PFTAC led Tonga PFM Symposium assessing Office; measures to strengthen VANUATU audit and taxpayer services. progress against PFM Roadmap. • Improvement in the quality of • Progress in development of a risk • Major scaling-up of the Revenue national accounts statistics rating bank supervision model and program relating to PACER Plus: particularly for livestock. capacity built for on-site reviewing reform progress and examination of market and determining future TA needs; • Development of a risk rating liquidity risk. upgrading the tax audit function model for bank supervision. and design of an audit plan; plans • Follow-up cash management to further expand the Large • Risk-based internal audit being training. Taxpayer Office; developed an adopted and Finance Ministry Industry Partnership program to capacity improving in financial tackle high risk industry segments; • PFTAC participation in Article IV reporting with new accounting reviewed and proposed mission to better integrate and regulations. enhancements to the reinforce CD priorities. organizational structure; made • Revenue reforms include an improvements to filing and TIMOR-LESTE updated Compliance Improvement payment compliance and audit Strategy; design of a Taxpayer • Quarterly and annual GFS capacity; and assisted in the Survey; plans to improve on-time compilation improved with rewrite of the Revenue Services filing and payment; drafting a Tax reduced statistical discrepancies. Administration Act and Administration Bill and Consumption Tax Act. regulations; and functional reorganization.

24 | SECTION II Annual Report 2019 | PFTAC

Key indicators in execution of the FY2019 work program and with respect to PFTAC operations and governance were:

2,110 549 62% field person days of CD delivered professional government staff (of of CD was fiscal, either PFM or which 40 percent were women) were Revenue (1,302 of 2,110 field days), trained from the 16 PFTAC member with 40% just Revenue (834 days) countries in 17 regional workshops totaling 2,011-person days of training

151 30% $ 20.5 million activities executed by PFTAC of CD is delivered by the team of contributions received of approx. advisors and experts, comprising 17 seven resident PFTAC advisors (636 US$ 30.7 million pledged by five donors seminars and 134 missions to member of 2,110 TA field days), and 70 percent and 13 of 16 PFTAC countries so far countries of 1 – 2 weeks duration by members of the IMF’s roster of short-term experts

94% $ 6.34 million 37% of resources (771 days) provided to execution rate of the work plan of projected expenses from a budget seven PFTAC countries designated (2,110 TA days versus 2,238 planned), of US$ 7.43 million (approx. 85%), as fragile (Kiribati, FSM, RMI, Papua and 88% of missions (151 of 173 excluding the 7% trust fund fee planned) New Guinea, Solomon Islands, Timor Leste, and Tuvalu)

CHART 3. FY2019 TOTAL TECHNICAL ASSISTANCE DAYS BY COUNTRY

Cook Islands, Vanuatu, 6.4% 7.2% Tuvalu, 3.0%

Tonga, 9.3% Fiji, 14.2%

Tokelau, 0.2%

Timor-Leste, 1.5% FSM, 2.6%

Solomon Islands, Kiribati, 6.4% 10.8%

Nauru, 2.3%

Niue, 1.8% Samoa, 9.9% Palau, 3.0% Marshall Islands, 2.9% Papua New Guinea, Regional, 9.3% 9.1%

Annual Report 2019 | PFTAC

A HIGH LEVEL OF EXECUTION Scheiblecker in late October, and the Two charts illustrate the share of TA by Program execution in FY2019 reached GFS advisor departed in October 2018 country, the pie chart above reflects its highest level in the history of PFTAC with a successor due in April 2019. only 2,110 field mission days, while the in terms of budget utilization and CD Timely recruitment allowed for a month- bar chart below also includes the delivery, projected around 16 percent long hand-over between the Revenue apportioned time at PFTAC that totals higher than FY2018 that had previously advisors from Mr. Stan Shrosbree 2,843 TA days. been the most active year. The higher (outgoing) and Mr. Georg Eysselein execution rate was largely due to an (incoming) in October. Beyond regionally related efforts injection of additional donor financing to (including (sub) regional workshops) expand the Revenue program that RESOURCE UTILIZATION was the that consumes 16.2 percent of TA days, began in mid-FY2019 (November highest yet in FY2019, the total of 2,110 five countries (Fiji, Tonga, PNG, 2018), and gradually scaled-up towards days of TA field delivery is up from Solomon Islands, and Samoa) a FY2020 program approximately 45 1,830 days in FY2018, with the ratio of benefitted from 46 percent of total TA percent larger than the baseline STX to LTX days (1,482:636) days in FY2019. Revenue program before expansion. unsurprisingly increasing over FY2018 (at 1,090:740) given fewer available A further five countries (Vanuatu, Cook Program execution rates of around 90 LTX days and the scaling-up of the Islands, Kiribati, FSM, and Nauru) percent were achieved, slightly higher revenue program mostly using STX accounted for the next 25 percent of as measured in TA field days (94 resources. PFTAC resources. percent) versus delivery of planned missions/activities (88 percent). Most Given at least half of each advisors’ The balance of 13 percent of TA programs had high execution rates time is spent in Suva at PFTAC in delivery is shared by the remaining six despite the change-over of four resident managing their respective programs PFTAC member countries (Palau, experts and gaps between the including backstopping the missions Tuvalu, Niue, RMI, Timor Leste, and departing and incoming advisors. This and activities of STX, these days are Tokelau). included the arrival of Ms. Celeste also tracked and apportioned as Kubasta, the second PFM advisor in accurately as possible to the beneficiary CD efforts for the seven PFTAC June following a gap since February, country receiving the advisors’ members designated as fragile states and the early departures of both attention. This added 733 TA days of (Kiribati, FSM, RMI, PNG, Solomon Statistics advisors (Messrs. Richard LTX time spent at PFTAC in addition to Islands, Timor Leste, and Tuvalu) Wild and Barend de la Beer) for 633 TA field days while on mission, a accounted for 37 percent of field TA Washington-based positions, first the total of 2,843 TA days, the approximate delivery with further growth expected in RSS advisor departed in August and equivalent of 12 full-time equivalent FY2020. was replaced by Mr. Marcus (FTE) person-years.

TABLE 1. PFTAC TA DELIVERY BY STX/LTX DAYS AND MISSIONS: FY17, FY18, FY19 (Proj), FY20 (Plan) STX Days LTX Days Total TA Days Missions Program FY17 FY18 FY19 FY20 FY17 FY18 FY19 FY20 FY17 FY18 FY19 FY20 FY17 FY18 FY19 FY20

Macroeconomic Programming 0 0 11 33 164 137 121 165 164 137 132 198 14 16 15 19 Financial Sector Supervision 154 167 235 171 88 88 67 65 242 255 302 236 20 15 18 23 Govt Finance Statistics 0 50 62 38 0 113 87 83 0 163 149 121 0 11 10 10 Real Sector Statistics 249 170 136 89 131 119 89 125 380 289 225 214 25 21 15 18 Public Financial Management 187 308 291 418 173 196 177 250 360 504 468 668 31 37 31 41 Revenue (incl Legal) 301 395 742 974 111 87 92 84 412 482 834 1058 44 37 62 77 GRAND TOTAL 891 1090 1477 1723 667 740 633 772 1558 1830 2110 2495 134 136 151 188

24 | SECTION II Annual Report 2019 | PFTAC

BOX 2. CELEBRATING 25 YEARS OF PFTAC

To celebrate the 25th anniversary of PFTAC, the IMF’s first Regional Capacity Development Center, two events were convened in Nadi, Fiji— a technical-level workshop on Policy Making to Influence Sustainable Growth and Productivity, December 3 – 5 and a High-Level Dialogue (HLD) on Capacity Development and Growth, December 6 – 7. The event was generously co-financed by New Zealand contributing US$100,000.

The training event and prelude to the two-day HLD was jointly delivered by PFTAC and the IMF’s Institute of Capacity Development (ICD) and trained 36 mid-level and senior officials from 14 of the 16 PFTAC countries. Visiting economists from the IMF’s Asia Pacific Department (APD) contributed to the event through policy discussions with country participants. The event generated positive participant

ratings, with the topics providing a natural segue to the HLD. DMD Grasso, course participants and facilitators were photographed (pictured left) following the award of completion certificates by DMD Grasso.

During her first visit to Fiji, IMF Deputy Managing Director Carla Grasso welcomed participants and dignitaries to the HLD opening event, officiating in various HLD sessions plus engagements with development partners, several Fijian charities, and prominent Fijian women. DMD Grasso also acknowledged the long and dedicated service of Ms. Nina Samuela (pictured above) who has been a local Fund employee for the past 25 years and from the very first day of PFTAC’s existence.

The HLD and Anniversary event drew many senior officials and prominent Pacific dignitaries, including ministers, central bank governors and other financial sector regulators, heads of finance ministries, revenue agencies, and statistical offices, plus the preceding workshop trainees. Development partners were well represented including all five PFTAC donors and other close partners like the World Bank. Pictured right with DMD Grasso are senior European Union developments officials – Christophe Wagner, Suva based head of cooperation and Ms. Erica Gerretsen, Brussels based unit head for budget support, PFM and Domestic Resource Mobilization. Other participants included representatives of regional bodies, civil society organizations, academia, the private sector, youth, and the media. A wide cross section of IMF departments contributed including officials from APD, ICD, Communications and TA Departments (Fiscal Affairs, Legal, Statistics, and Monetary & Capital Markets) and regional offices (Bangkok, Tokyo, New Delhi and Singapore).

Following DMD Grasso’s opening remarks, and on behalf of PFTAC’s host, the Acting Prime Minister of Fiji and Minister for Economy, Hon. Aiyaz Sayed-Khaiyum noted the important contribution of PFTAC to the region’s economic development over the past 25 years. In addition to the effectiveness of the IMF’s capacity development for its member countries, the Minister noted the strong engagement and complementary support and financing of development partners in the progress achieved in the Pacific.

The first panel session of the HLD chaired by Minister Sayed-Khaiyum explored the Growth Opportunities for the Pacific and Achievement of the Sustainable Development Goals (SDGs) with Deputy Prime Minister Toafa of Tuvalu, Finance Minister Tuioti of Samoa, Robert Utz from the World Bank, and Mr. Kolone Vaai, a former senior Samoan official and one of the original instigators in the establishment of PFTAC in 1993. This distinguished panel along with DMD Grasso and Ms. Alison Stuart and Mr. Odd Per Brekk from APD are pictured right.

24 | SECTION II Annual Report 2019 | PFTAC

In a highlight of the two day event, and in a thought provoking hour-long session, the Financial Times Tokyo bureau chief, Mr. Robin Harding interviewed Ms. Helen Clark the former New Zealand Prime Minister and former UNDP head across a wide range of topics—from multilateralism; to the SDGs; how the Pacific should address their development issues and the challenges of climate change; strategies to raise growth; debt sustainability; gender equality and challenges facing aspiring women leaders.

Ms. Clark and Mr. Harding are pictured left during this highly applauded interview that can be viewed at: www.pftac.org.

DMD Grasso also presented awards to the winners of two youth engagement competitions held prior to the anniversary event. A youth photography competition was held across the Pacific through social media for youth aged 16 – 24 years, plus an essay contest for Fijian high school students. The aim of both competitions was to engage regional youth to showcase success stories on development and growth in their home countries that they see as benefiting their fellow citizens. Entries were received from youth in Fiji, Kiribati, Papua New Guinea, Solomon Islands, Timor Leste, and Vanuatu, with recognition and prizes awarded for entries from Fiji, Solomon Islands, and Mr. Binsar de Jesus from Timor Leste who is pictured right receiving his award jointly from DMD Grasso and Governor de Vasconselos of Banco Central de Timor Leste.

During her time in Fiji, DMD Grasso made two charity donations on behalf of the IMF Giving Campaign. These well received donations were made to a pre-school program called “Champs on Wheels” (pictured right), and a local environmental project, “Nature Fiji” (pictured below). The representative recipients for the two groups were deeply appreciative of the recognition of the IMF to the importance and impact of their causes to the community and environment respectively.

Meeting with prominent Fijian women, DMD Grasso heard key messages that women need to be in highly visible political leadership positions, and the need to promote change to traditional attitudes towards women’s roles; as well as the need for greater public funding for early childhood education, and to support female workforce participation.

The weeklong event and the culminating HLD demonstrated that there was broad recognition and strong appreciation of the work of PFTAC. Representatives of PFTAC donors and development partners spoke of their appreciation of PFTAC’s contribution to national and regional development including across a range of successful examples with respect to macroeconomic stability, statistics, financial sector supervision, public financial management, and revenue mobilization. Donor partners expressed their ongoing support and commitment to the future of PFTAC. Overall, it was noted that the IMF’s Regional Capacity Development Center model and the PFTAC experience has been highly effective in the Pacific and beyond. It has evolved and adapted to changing needs and developments, with an expectation of continuation into the foreseeable future from both beneficiary and donor perspectives.

Key takeaway messages from the event were elicited through a fast-paced and innovative online voting process. These included the critical issues of climate change and natural disasters that drive priorities to build strong institutional capacity to support sustainable and inclusive growth; and tackling core budget, revenue mobilization, financial supervision, and statistical priorities, while PFTAC has been responding to more recently emerging demands in Fintech and Public Investment Management. Annual Report 2019 | PFTAC SECTION II | 25

TABLE 2. EXECUTION OF WORK PROGRAM DURING FISCAL YEAR 2019 (IN PERSON-DAYS)

May 2018 through April 2019 TA Days Executed Planned Country/Region/Seminar Execution rate Resident advisors Short-term LTX & STX Total (In percent) At PFTAC In-Field experts Field Days COOK ISLANDS 14 60 91 165 124 122 FIJI 20 45 255 320 281 106

KIRIBATI 12 10 125 147 130 104

MARSHALL ISLANDS (RMI) 5 14 47 66 49 124 MICRONESIA (FSM) 66 2 53 121 47 117

NAURU 51 18 30 99 68 71

NIUE 33 0 39 72 58 67

PALAU 28 11 53 92 85 75

PAPUA NEW GUINEA (PNG) 33 95 95 223 220 86

SAMOA 20 84 125 229 228 92 SOLOMON ISLANDS 4 67 160 231 236 96

TOKELAU 3 5 0 8 5 160

TIMOR-LESTE 15 4 28 47 32 100

TONGA 101 40 157 298 193 103

TUVALU 13 19 44 76 118 53 VANUATU 47 35 100 182 131 103 Regional work & workshops 270 124 75 469 234 85 GRAND TOTAL 733 633 1,477 2,843 2,239 94

Fragile states 214 143 557 914 700 77

CHART 4. FY2019 TOTAL 2,110 MISSION DAYS BY PROGRAM

Macro, 6%

Revenue, 40% PFM, 22%

Financial Sector, Statistics, 18% 14%

26 | SECTION II Annual Report 2019 | PFTAC

CHART 5. FY2019 EXPERT DAYS DELIVERING AND BACKSTOPPING TA

Note: 2,843 TA Days (includes 633 LTX and 1,477 STX Mission Days plus 733 LTX Backstopping Days at PFTAC)

Supervision Framework Enhancement Program, Papua New Guinea, 2018

Annual Report 2019 | PFTAC SECTION II | 27

TABLE 3. IMPLEMENTATION OF THE FISCAL YEAR 2019 WORK PROGRAM (IN NUMBER OF ACTIVITIES)

Country/Region/Seminar Activities planned Activities executed Execution rate

COOK ISLANDS 8 10 125 FIJI 18 19 105 KIRIBATI 11 9 82 MARSHALL ISLANDS (RMI) 4 4 100 MICRONESIA (FSM) 5 2 40 NAURU 7 4 57 NIUE 5 3 60 PALAU 8 5 62 PAPUA NEW GUINEA (PNG) 15 15 100 SAMOA 14 12 86 SOLOMON ISLANDS 19 16 84 TOKELAU 0 0 n/a TIMOR-LESTE 2 3 150 TONGA 16 16 100 TUVALU 7 5 71 VANUATU 11 9 82

Regional seminars and courses 22 19 86

GRAND TOTAL 172 151 88 Fragile States 63 54 86

Commencing the PEFA in Samoa, August 2018

28 | SECTION II Annual Report 2019 | PFTAC

TRAINING EVENTS further expanded the change in LTX and scheduling Supervisors of Pacific Island Countries in FY2019, with 17 events training 549 challenges. The Revenue program (AFSPC) and the Pacific Islands Tax government officials (a 43 percent hosted the most with seven events, Administrators Association (PITAA). increase) during 2,011 training days, up reflecting the scaling-up including PFTAC is also increasingly integrating from 14 events in FY2018 that trained specifically targeted topics relating to its CD efforts through joint events with 383 officials over 1,837 training days. the scaling-up such as VAT and TADAT the IMF’s more traditional training However, a modest increase in the workshops. A highly successful joint delivered in Washington at ICD and at number of training days of just 9 percent Caribbean and Pacific revenue the Singapore Training Institute (STI). is because each event averaged 3½ mobilization conference was held in days in FY2019 versus 4¾ days in July 2018 between PFTAC and In response to member country FY2018. CARTAC that also included the other requests for customized training, small island states of Cape Verde, PFTAC organized three joint training The most common training venue was Maldives, Mauritius, and Seychelles. events under the Macro program with Fiji with nine events held in Nadi and Given the success of this event that ICD and STI in FY2019. This example one in Suva; five elsewhere in the drew on IMF expertise and resources, of integrating TA and training adapted Pacific (two in Vanuatu and one each in another joint event in Washington is IMF training course material to Pacific PNG, Samoa, and the Solomon planned on PFM issues in circumstances with regional events held Islands); and two outside the region in FY2020.Training effectiveness is in the Solomon Islands in July and Sydney and Washington DC enhanced through collaboration, both November 2018, and a PNG in-country respectively. across PFTAC programs such as the training event in April 2019. This entails joint PFM/Macro Cash Management customization to local issues and data All programs convened at least one workshop, and with regional groupings availability. event other than RSS program given such as the Association of Financial

TABLE 4. FY2019 WORKSHOPS/ SEMINARS

Duration Training Sector Partner Location Topic Male Female Total (Days) Days Macro/ PFTAC 25th Anniversary - Sustainable Macro Nadi, Fiji 3 20 16 36 108 ICD Growth & Productivity Macro/ Port Moresby, Macroeconomic Policy for Stabilization Macro 5 20 10 30 150 ICD/ STI PNG and Growth CARTAC/ Joint Caribbean/Pacific Workshop on Revenue Washington 5 9 5 14 70 FAD Revenue Mobilization Revenue PITAA Nadi, Fiji Revenue Administration TA Planning 1 21 11 32 32 Annual PITAA Heads Meeting: Overview Revenue PITAA Nadi, Fiji 3 32 16 48 144 of Regional Reforms Revenue Nadi, Fiji Tax Leadership 1 21 11 32 32 Revenue Nadi, Fiji Value Added Tax (VAT) 3 23 8 31 93 TADAT Tax Administration Diagnostic Revenue Nadi, Fiji 4 14 12 26 104 Sec Assessment Tool (TADAT) Revenue PITAA Nadi, Fiji Taxpayer Surveys 4 17 15 32 128 FSS Suva, Fiji Insurance Regulation 5 10 9 19 95 Santo, Annual AFSPC Meeting and Joint FSS AFSPC 2 16 13 29 58 Vanuatu Workshop APRA/ Santo, Information Technology Risk Assessment FSS 3 16 13 29 87 AFSPC Vanuatu & Supervision FSS APRA Sydney Prudential Regulation 2 8 7 15 30 GFS Nadi, Fiji Government Finance Statistics Training 5 28 21 49 245 Solomon Macroeconomic Policy for Stabilization Macro IMF/ICD 5 32 16 48 240 Islands and Growth in the Pacific PFM WB Nadi, Fiji Financial Reporting 5 16 13 29 145 PFM/Macro Samoa Cash Management and Forecasting 5 30 20 50 250 TOTALS 61 333 216 549 2011

Annual Report 2019 | PFTAC SECTION II | 29

CHART 6. FY2019 PROJECTED PROGRAM OUTTURN-PERCENT OF BUDGET EXPENDED

TABLE 5. PFTAC FY2019 BUDGET (US DOLLARS) BY PROGRAM

Revenue PFM Macro FSS RSS GFS Other Total Resident Advisors (Long Term Experts - 328,371 647,454 357,913 311,920 309,754 209,754 - 2,165,166 LTX) LTX Travel 71,062 124,502 70,075 57,019 57,679 56,080 - 436,417 Short-Term Experts (STX) 1,122,973 479,523 44,315 303,492 193,952 73,488 136,882 2,354,625 Diagnostic Missions 145,659 113,034 - 22,992 25,280 75,000 39,500 421,465 Training/Seminars/Workshops 293,997 152,298 163,893 158,244 119,628 112,994 169,336 1,170,390 Backstopping/Project Management 54,056 53,189 - 79,306 76,514 71,348 39,102 373,515 Other Costs (Evaluation, misc., etc.) 19,477 - - 26,619 3,691 455,240 505,027 Total TA Provision/Delivery* 2,035,595 1,570,000 636,196 932,973 809,426 602,355 840,060 7,426,605 Trust Fund Management Fee 142,492 109,900 44,534 65,308 56,660 42,165 58,804 519,862 Total Trust Charges 2,178,087 1,679,900 680,730 998,281 866,086 644,520 898,864 7,946,467 * Trust Fund Fee is 7 percent of funds utilized for TA delivery

TABLE 6. PFTAC FY2019 PROJECTED OUTTURN (US DOLLARS) BY PROGRAM

Revenue PFM Macro FSS RSS GFS Other Total Resident Advisors (Long Term Experts - 318,020 601,509 351,899 317,020 220,880 186,740 - 1,996,068 LTX) LTX Travel 70,960 118,773 80,134 44,592 50,793 20,326 - 385,578 Short-Term Experts (STX) 1,039,169 301,632 13,567 312,444 197,255 74,642 71,501 2,010,210 Diagnostic Missions 130,000 110,106 - 1,810 6,879 38,353 38,713 325,861 Training/Seminars/Workshops 253,482 154,673 166,389 168,742 15,890 86,223 135,485 980,884 Backstopping/Project Management 52,499 37,037 - 41,456 46,176 50,129 40,921 268,218 Other Costs (Evaluation, misc., etc.) - - - - 2,500 - 369,015 371,515 Total TA Provision/Delivery* 1,864,130 1,323,730 611,989 886,064 540,373 456,413 655,635 6,338,334 Trust Fund Management Fee 130,489 92,661 42,839 62,024 37,826 31,949 45,894 443,683 Total Trust Charges 1,994,619 1,416,391 654,828 948,088 578,199 488,362 701,529 6,782,017 * Trust Fund Fee is 7 percent of funds utilized for TA delivery

24 | SECTION II Annual Report 2019 | PFTAC

TABLE 7. PFTAC FY2019 PROJECTED OUTTURN BY PROGRAM

Revenue PFM Macro FSS RSS GFS Other Total Resident Advisors (Long Term Experts - LTX) 97% 93% 98% 102% 71% 89% 0% 92% LTX Travel 100% 95% 114% 78% 88% 36% 0% 88% Short-Term Experts (STX) 93% 63% 31% 103% 102% 102% 52% 85% Diagnostic Missions 89% 97% 0% 0% 0% 51% 98% 77% Training/Seminars/Workshops 86% 102% 102% 107% 13% 76% 80% 84% Backstopping/Project Management 97% 70% 0% 52% 60% 70% 105% 72% Other Costs (Evaluation, misc., etc.) 0% 0% 0% 0% 9% 0% 81% 74% Total TA Provision/Delivery 92% 84% 96% 95% 67% 76% 78% 85%

CAPACITY DEVELOPMENT AND THE IMF’S SURVEILLANCE ROLE

CD is one of the Fund’s three core processes and systems. This will design have traditionally played a more activities and has grown in importance enhance transparency and strengthen hand-on role given proximity to in recent years. It supports member the basis for strategic decision making members, remain well-positioned to countries’ efforts to build the institutions support a more flexible, needs-based and capacity necessary to formulate Categorizing CD as TA or training is model in collaboration with and implement sound economic increasingly difficult as CD continues to headquarters. policies, thereby complementing the move toward a medium-term project Fund’s surveillance and lending focus with more flexible engagement Thirteen of the 16 PFTAC countries are mandates. Member countries, partners, modalities. This means continuing to subject to regular macroeconomic and external commentators give the shift toward multi-year project policy consultations with IMF staff Fund high marks for the quality of its engagements and knowledge sharing, through the Article IV surveillance CD. At the same time, efforts need to including through peer-to-peer process. This however does not apply continue to strengthen Fund CD to interactions and attachments. This also to the Cook Islands, Niue, and Tokelau serve members’ current and evolving requires continuing to strengthen that are PFTAC members but as New needs. This led to the 2018 CD Strategy flexibility in delivery modalities, Zealand realm jurisdictions are not Review that examines progress since reducing emphasis on producing members of the IMF individually. the last review and strategy developed detailed TA reports and focusing more in 2013 and proposes a CD strategy for on assisting with implementation, To further strengthen the integration of the next five years. including through related training for CD and surveillance, members of the officials. PFTAC team overlapped with the The review builds upon the existing CD Article IV missions in FY2019 to PNG, strategy, focusing on two mutually From the training side, it means less Solomon Islands, and Timor Leste to reinforcing objectives. First, the impact emphasis on classroom-based training follow up on key CD areas that are also of Fund CD needs to be increased by of diverse groups of officials and more macro-critical areas for surveillance further strengthening integration with emphasis on online training and which helps build better synergies the Fund’s policy advice and lending tailoring classroom training by targeting between the authorities, the APD operations, while continuing to make similar groups of officials or customizing country teams, and PFTAC to ensure progress in framing CD through delivery to a specific organization to consistency in advice. This will continue comprehensive strategies tailored to carry out policy functions. Peer learning with one or more advisors or the each member’s needs, capacity, and workshops have become increasingly coordinator participating in future conditions, focusing on implementation common in project engagements with surveillance engagements depending and outcomes. Stronger coordination countries and help sustain the impact of on the country specific circumstances. between CD and the Fund’s other core both TA and training. functions will better connect CD with countries’ risks and vulnerabilities and Finally, CD departments are ensure surveillance and lending increasingly adjusting the mix of integrate lessons from CD more technical support, combining field- effectively. Second, the efficiency of CD based experts and HQ-based missions. needs to be increased by improving CD RCDCs, including PFTAC which by

Annual Report 2019 | PFTAC SECTION II | 25

WORKPLAN MANAGEMENT for CD In late October 2018 at the mid-point of Ministers Meeting (FEMM), PFTAC delivery falls under a Resource FY2019, a detailed review was contributes an annual report through Allocation Plan (RAP) for each region completed of the workplan and budget PIFS on the state of PFM reforms, that covers detailed planning for the execution against the changing particularly progress against PFM forthcoming or current fiscal year landscape. On a demand driven basis, Roadmaps associated with PEFA running from May 1 to April 30 that also new activities and missions were added assessments that PFTAC often either has a longer horizon to cover following consultation with APD and the leads or coordinates. The PFM advisors programmatic plans in the second and backstopping department. Other from PFTAC convene regular meetings subsequent years. activities were rescheduled as to share information amongst donors necessary, and in some instances and other CD providers who are active The PFTAC workplan is just one dropped if no longer required. Two key in the PFM space that is often quite component of the RAP for the Asia developments during the mid-FY crowded. The time and effort devoted to Pacific Department (APD), along with review led to a net change in planned this coordination led by PFTAC is not workplans from other regional IMF missions from 167 to 173, and a net insignificant but is essential. centers in China, India, Thailand, and increase in planned TA delivery from Singapore, as well as for CD delivered 1,980 to 2,238 TA days. The most Working closely with regional directly from Washington based significant change arose from the development partners such as the ADB, functional departments (e.g. FAD, LEG, Revenue program scaling-up with total the World Bank, regional organizations MCM, and STA). Development of the TA days for the entire year growing like the Pacific Islands Forum RAP is launched in December under from 518 to 781 and an increase in Secretariat (PIFS) and the Secretariat the leadership of the respective APD missions from 43 to 65, just over 50 of the Pacific Community (SPC), as well mission chiefs based on their percent increase on an annualized as United Nations (UN) agencies such consultations with country authorities basis. This was slightly offset by a slight as the UN Development Programme about their CD needs to assist in the reduction in the RSS program due to (UNDP) and UN Economic and Social implementation of the Fund’s policy the advisor gap, and an approximate 25 Commission for Asia and the Pacific advice and the authorities’ own reform percent reduction in the Macro program (ESCAP), ensures that the comparative and capacity building priorities. given the postponement until FY2020 of advantages and expertise of these recruitment of an overlapping second organizations are melded with the The development of the workplan and resident advisor for a six-month period. economic and financial expertise of RAP is an iterative multiparty exercise. PFTAC to deliver well-rounded and The TA needs expressed by the Delivery of all programs has been comprehensive events for our beneficiary countries transmitted projected through April 30, 2019 based respective, and mostly overlapping through various formal and informal on expectations at March 1, 2019. client bases. channels drive the process. For Reported execution and outturn results PFTAC, much of this arises from the are based on the version of the FY2019 PFTAC continues working productively frequent interactions between the workplan that was amended at the mid- by jointly delivering training and even PFTAC team and member country point of the FY on November 1, 2018 some TA with regional groups. This officials and technical counterparts. and that was made available publicly includes the Pacific Association of PFTAC and APD country teams through the PFTAC website. Budget Supreme Audit Institutions (PASAI) regularly consult to foster the closest outturn is similarly based on the uplifted where PFTAC jointly delivered a PFM possible integration of surveillance and budget to reflect the additional funds Symposium in Tonga and attended the CD, with feedback and needs factoring injected to expand the revenue program annual PASAI congress in Australia. into prioritizing and scheduling activities as well as an earmarked New Zealand Most of the training component of the in the PFTAC workplan, including contribution of $US 100,000 towards PFTAC Revenue program is now responding to unforeseen events. the 25th Anniversary event. delivered jointly with the Pacific Islands Tax Administrators Association ADAPTIVE WORKPLANS ensure COLLABORATION LEVERAGES the (PITAA), with topics covered in FY2019 flexibility and responsiveness to effectiveness and impact of PFTAC’s including Tax Leadership, VAT, changing circumstances. While the efforts. This occurs through multiple TADAT, and Surveying Taxpayers. FY2019 workplan endorsed by the mechanisms and forums, and in several PFTAC aims to hold at least one March 2018 Steering Committee joint events each year. Most donors and revenue event annually with the meeting was a comprehensive and development partners have a very Oceania Customs Organization (OCO). realistic program, it was constantly close interest in PFM issues and often Such joint efforts are likely to grow in monitored and adjusted throughout the also directly support their own CD response to the PACER Plus initiatives year with regular reporting in the activities or link PFM reform milestones that require both domestic tax and PFTAC Quarterly reports. to budget support. Given a 2009 customs responses to replace declining mandate from the Forum Economic trade tax revenues.

Annual Report 2019 | PFTAC

In the financial sector, PFTAC PFTAC additionally advertised and longer term, the possibility of facilitating continues to provide secretariat selected a single intern for the the placement of interns in central services to the Association of Financial January/February 2019 period to work banks or other economic agencies will Supervisors of Pacific Island Countries on the following projects: be explored. (AFSPC), delivering a topical training event in conjunction with the annual • a postgraduate economics student PEER LEARNING continues to be a AFSPC meeting. The FY2019 worked with the PFTAC Macro very effective CD modality to facilitate workshop on IT and cyber Risk Advisor and local economist in the the sharing of skills and experiences of Assessment was delivered by a team of Resident Representative office to staff from one country with counterparts cutting-edge experts and was highly contribute to an ongoing project on in other countries. appreciated by regional financial Estimating Potential Output. regulators. The Macro program has had some • an undergraduate commerce excellent results in FY2019 such as the WORKING WITH ACADEMIA has student assisted the FSS advisor in experience with the Tonga Finance extended the reach of PFTAC to benefit Developing a Pacific Financial Ministry sharing their knowledge with Sector Supervision Map. from local and regional expert views Tuvalu officials and in facilitating the and to share the experience and Samoa Macroeconomic Policy • another undergraduate commerce knowledge of the Fund with the next Coordination Committee to experience student worked as an intern over generation of analysts and policy the operations the Fiji Macroeconomic the year-end break in January makers and their teachers. In April each Committee. The model is flexible to 2019 with the Revenue advisor and year, the PFTAC advisors and different circumstances, such as PFTAC Economic Analyst on facilitating the participation of bank coordinator deliver guest lectures to a developing a framework Taxpayer supervisors from RMI in on-site FIDC post graduate PFM class at the Survey as input to an April 2019 supervision of a Guam based bank. University of the South Pacific (USP) at regional workshop. the Suva campus. University faculty are The fiscal programs have also regularly engaged in various economic These three modest internship and statistical forums with PFTAC staff experiences confirm the value of the organized attachments, including Fijian and participated in the PFTAC 25th model that will continue with several tax officials joining missions to Niue and Anniversary. interns competitively recruited from a plans for inclusion of regional PFM wider pool of academic institutions for officials in PEFA assessments. Peer PILOT INTERNSHIP placements have both the month-long mid-year semester learning was also advanced through the now been successfully trialed at PFTAC break in July and the longer year-end joint CARTAC/PFTAC revenue for three USP students. USP faculty break in December and January. Space mobilization conference that facilitated assisted in the advertising and selection constraints and mentoring needs will an expansion of networking between of two students over the month-long likely limit this to one or two interns small state tax administrators. semester break in July 2018 and concurrently at PFTAC, but in the

Annual Report 2019 | PFTAC SECTION II | 25

FINANCIAL REPORT

The estimated cost of PFTAC the extra funds and underspending operations in FY2019 are projected carrying forward to FY2020; and From a budget category perspective, around US$ 6.8 million including the 7% LTX costs (salary and allowances) are Trust Fund Management Fee, although • several other smaller increases to expected to have a high outturn of 92 actual outturn may vary slightly given the FY2019 baseline program percent and LTX regional travel at 88 budgets including PFM late workplan delivery adjustments and percent. An overall STX budget outturn (+US$70,000) and FSS as actual costs are posted. While some (+US$130,000). of 85 percent is projected, suppressed budget categories (LTX travel, STX by PFM and Macro underspending costs, and workshops) are tracked and The following analysis of expenditure despite full utilization by the FSS, GFS, projected locally, other budget outturn is with respect to the uplifted and RSS programs, and 93 percent by categories are controlled centrally (LTX budget. The Revenue, Macro, and FSS Revenue. A similar 84 percent salary, diagnostic missions, programs have very high outturns at 92 workshop/seminar outturn is projected, backstopping and project management percent, 96 percent, and 95 percent of with high utilization of all programs charges) and have therefore been budget respectively. The slightly lower except RSS. The training course that estimated. PFM outturn of 84 percent is an preceded the 25th anniversary event improvement over FY2018 but is held was financed by a specific ICD training Amounts cited exclude the IMF’s in-kind down by an STX budget underspend at budget that was sufficient for one major contribution that covers the salaries and 63 percent. Over Phase V, PFM event during Phase V and is now mostly expenses of the coordinator and four of utilization of the STX budget has lagged exhausted. the support staff and other annual but a pick up late in FY2019 is expected overheads of approximately US$ 0.5 to continue. The PFTAC administrative budget million. (separate from the IMF contribution) Unsurprisingly, both statistics budgets included a one-time supplement as The projected FY2019 expenditure were underspent, with the RSS endorsed by the 2018 SC meeting of outturn exceeds the budget of US$ 6.6 program at 67 percent and GFS at 76 $100,000 towards the cost of the million including management fee that percent, primarily from reduced LTX anniversary, and a recurring annual was endorsed by the 2018 Steering costs given the gaps between outgoing budget of $US 50,000 was also Committee meeting. However, it and incoming advisors. The modest approved to finance the recruitment of a represents an outturn of around 85 STX budgets for both statistics locally employed Economic Analyst percent of the budget that was programs were fully used, whereas the who joined the PFTAC team in August subsequently adjusted upwards to workshop budgets, particularly for RSS 2018. This administrative budget also US$ 7.95 million during the year from: was mostly untouched given the covers the office rental costs at the challenges for a newly appointed Reserve Bank of Fiji, and the cost of the • an initial pledge of US$ 1.0 million advisor to deliver a regional training annual Steering Committee that have from Australia to expand the event that was hampered by scheduling been projected for the March 2019 Port Revenue program of which the conflicts. The outgoing Moresby meeting. revenue administration and legal GFS advisor delivered a planned single budgets were expanded by US$700,000, with the balance of regional event before leaving.

24 | SECTION II Annual Report 2019 | PFTAC

TABLE 8. PROPOSED FY2020 BUDGET (US DOLLARS millions)

% of Prog FY2019 FY2020 Program Tot Est Ph V Doc Budget Document Expenses to thru end- Projected Orig. Proposed Budget end-FY19 Budget Change FY19 Outturn Budget Budget Resident Advisors (Long Term $12.6 $5.0 40% $2.17 $2.00 $2.28 $2.46 $0.2 Experts - LTX) LTX Travel $2.3 $1.0 42% $0.44 $0.39 $0.39 $0.46 $0.1 Short-Term Experts (STX) $11.4 $4.4 38% $2.35 $2.01 $2.10 $2.35 $0.2 Diagnostic Missions $1.2 $0.6 50% $0.42 $0.33 $0.20 $0.32 $0.1 Training/Seminars/Workshops $6.0 $1.2 19% $1.17 $0.98 $1.07 $1.22 $0.1 Backstopping/Project $1.9 $0.6 31% $0.37 $0.27 $0.37 $0.40 $0.0 Management Other Costs (Evaluation, misc., $1.6 $0.4 26% $0.51 $0.37 $0.50 $0.74 $0.2 etc.) Total TA Provision/Delivery $36.9 $14.1 38% $7.43 $6.34 $6.91 $7.94 $1.0 Trust Fund Management Fee* $2.6 $1.0 38% $0.52 $0.44 $0.48 $0.56 $0.1 Total Trust Charges $39.5 $15.1 38% $7.95 $6.78 $7.40 $8.50 $1.1 IMF and Host Country In-Kind $2.6 $0.50 $0.59 $0.50 $0.50 $(0.0) Contribution TOTAL $42.1 $8.45 $7.37 $7.90 $9.00 $1.1 * Trust Fund Fee is 7 percent of funds utilized for TA delivery

However, the first pledge and tranche of THE FUNDING GAP is nominally FUND RAISING faces challenges US$ 1.0 million will be exhausted before US$9.5 million, which is the difference ahead from a funding gap that needs to the mid-point of FY2020, so for the between the Program Document fund- be closed in FY2020. Of US$ 29.93 expanded program to continue raising target of US$ 39.5 million and million pledged, US$ 20.49 million in uninterrupted in delivery of the current pledges of almost US$ 30 contributions have been received (see proposed FY2020 workplan requires million. The baseline budget for the Annex). The contribution agreement further commitment and contribution of remaining three years including the with the European Union finalized in funds in FY2020 to avoid an abrupt trust management fund fee is US$ 22.2 FY2019 for € 6.0 million included a scaling-back of the Revenue program m (FY2020 - US$ 7.5 m; FY2021 - large initial contribution that improved returning to the baseline scenario. An US$7.2 m; FY2022 - US$7.5 m). Added short-term liquidity and outlook. Further expanded but unfunded Revenue to the US$ 15.1 million actual expenses donor partner contributions of US$ 7.26 program cannot continue at the through end-FY2019 suggests a slightly million should continue to safeguard expense of the other PFTAC programs. lower financing requirement of liquidity during FY2020. US$ 37.3 million over the baseline According to the Phase V Program Phase V budget, reducing the funding Member country contributions are Document, the resident GFS advisor gap to US$ 7.3 million. However, encouraging with 44 percent of position is due to end in April 2020, with several factors impact this analysis: expected inflows received (US$ 1.71 of the GFS program contracting to a few US$3.89 million), although US$770,000 STX missions in FY2021 and FY2022. • Revenue program scaling-up adds is at risk given the still outstanding A new GFS advisor arrives at PFTAC in US$ 1.0 million for each of the final commitments RMI, Palau, and Timor April 2019 and under current plans will three years and must be funded Leste to sign Letters of Understanding have an assignment of just over one additionally beyond closing the baseline gap. that are a prerequisite to financially year. However, a groundswell is contributing. emerging from the region to retain the • Even at the best outturn yet, GFS program with an extension of the budget execution in FY2019 was By April 30, 2019, Phase V is 45 percent resident advisor beyond April 2020. 85 percent, that realistically may be complete at 30 of 66 months over, yet Either an offsetting adjustment between difficult to better. The same ratio around 38 percent of the program programs is needed to remain within the applied to the remaining three budget of US$ 39.5 million has been $US 39.5 million budget envelope for years would see actual expenses closer to US$20.1 million versus utilized. The proposed FY2020 budget Phase V, or an increase to the budget the baseline budget of US$ 22.2 of US$ 8.5 million including trust fund envelope adding to the existing funding million, which would reduce the fee (see Section III) - is inclusive of gap. funding gap by $US4.3 million US$ 1.0 million of Australian funding to down to US$ 5.2 million. expand the Revenue program. • If the GFS program was to be 24 | SECTION II Annual Report 2019 | PFTAC

extended, the annual cost of financed from the funds carried- would need to be closed or retaining an LTX would be forward from Phase IV, and the financed by savings found. approximately US$400,000. The second year would expand the first-year extension could be funding gap to US$ 5.6 million that

TABLE 9. STATUS OF FINANCIAL CONTRIBUTIONS FOR PHASE V (AS OF MARCH 1, 2019)

Contributions Payments pending (U.S. Commitments received Currency* dollars) (partner currency) (U.S. dollars) (U.S. dollars) PARTNERS

ADB U.S. dollar 800,000 800,000 800,000 0

Australia Aust. dollar 11,300,000 7,579,202 5,444,427 2,134,775

European Union Euro 6,000,000 7,013,442 3,382,466 3,630,976

Korea U.S. dollar 2,500,000 2,500,000 1,000,000 1,500,000

New Zealand NZ dollar 12,000,000 8,147,855 8,147,855 0

SUBTOTAL, PARTNERS 26,039,499 18,774,648 7,265,751

MEMBER COUNTRIES

COOK ISLANDS U.S. dollar 110,000 60,000 50,000

FIJI U.S. dollar 687,500 375,000 312,500

KIRIBATI U.S. dollar 82,500 33,925 48,575 MARSHALL ISLANDS (RMI) U.S. dollar LoU Pending 110,000 - 110,000

MICRONESIA (FSM) U.S. dollar 110,000 40,000 70,000

NAURU U.S. dollar 82,500 82,026 -

NIUE U.S. dollar 27,500 4,975 22,525

PALAU U.S. dollar LoU Pending 110,000 - 110,000

PAPUA NEW GUINEA (PNG) U.S. dollar 1,375,000 625,000 750,000

SAMOA U.S. dollar 165,000 165,000 -

SOLOMON ISLANDS U.S. dollar 165,000 165,000 -

TOKELAU U.S. dollar 11,000 11,000 -

TIMOR-LESTE U.S. dollar LoU Pending 550,000 - 550,000

TONGA U.S. dollar 110,000 49,921 60,079

TUVALU U.S. dollar 27,500 12,500 15,000

VANUATU U.S. dollar 165,000 90,000 75,000

SUBTOTAL, MEMBER COUNTRIES 3,888,500 1,714,347 2,173,679

GRAND TOTAL 29,927,999 20,489,095 9,439,430

Source: IMF, Institute for Capacity Development

Annual Report 2019 | PFTAC SECTION II | 25

PIF and PFTAC Member Flags – except French Polynesia. Timor-Leste is not a PIF member.

26 | SECTION II Annual Report 2019 | PFTAC

I II REVENUE ADMINISTRATION

MAIN ACHIEVEMENTS (3) Improving the emphasis and (5) Facilitating the introduction of VAT (1) Facilitating the function based effectiveness of taxpayer or modernizing existing VATs; and approaches to revenue services; administration; (6) Modernizing tax legislation (4) Strengthening the management including Income Tax Acts, VAT (2) Developing and implementing risk- and compliance of the large Acts, and Tax Administration Acts. based compliance improvement taxpayer segment; strategies;

15th Pacific Island Tax Administration Association Annual Heads Meeting, Fiji, September 2018

Annual Report 2019 | PFTAC

27 | SECTION II

WORK PROGRAM EXECUTION prioritization in responding to (PITAA) in presenting CD workshops. In The PFTAC revenue administration member country needs. Those 2018-19 these included a VAT program continues to focus on two demands have grown more given Implementation workshop for those key objectives: (1) strengthening the wider revenue mobilization countries contemplating the introduction of revenue administration and agendas of most Pacific countries. VAT; ‘Leading Change’ and a ‘Regional governance arrangements, and The 2017 signing of the regional Technical Assistance Needs’ workshop (2) strengthening core tax PACER Plus trade agreement by which provided an opportunity to discuss administration functions. The some Pacific nations has added PIC tax reform progress and CD needs. A program is delivered by a resident tax pressure given projected trade tax regional Tax Administration Diagnostic administration advisor and draws on losses that will need to be offset by Assessment Tool (TADAT) workshop an extensive pool of international tax new revenue sources, with the provided senior tax administration officials administration experts. These efforts impact varying by country. Given the with an overview and training on the are expected to help mobilize expanding demand for PFTAC TADAT methodology. A workshop to domestic revenue with lower Revenue assistance that has been facilitate the design of a Taxpayer Survey administrative costs but better filing highly effective over the years, framework adaptable by all member and payment compliance rates. negotiations with Australia countries will be repeated annually and is Additional modest resources are culminated in June 2018 with an expected to provide a valuable resource to provided from the IMF’s Legal injection of financing to PFTAC to better monitor taxpayer satisfaction levels Department for drafting new or scale-up the Revenue program. and address identified weaknesses. revised tax legislation to support the revenue program objectives, as well Potentially, this means that the A joint CARTAC/PFTAC event on Revenue as tax policy expertise from the Fiscal revenue program will expand by Mobilization in the Caribbean, Pacific, and Affairs Department. approximately 45 percent from the other Small Island States was convened at baseline Phase V plan with program IMF Headquarters in Washington in July Through the generous support of the delivery expanded through the 2018. Tax administration heads or senior Australian government, additional delivery of additional short STX and officials participated from 18 Caribbean and funding to expand PFTAC’s revenue Headquarters delivered TA. Most of 12 Pacific nations as well as Cape Verde, program by approximately 45 the scaling-up is directed to PACER Maldives, Mauritius, and the Seychelles. percent was pledged with an initial Plus signatories, with early Presentations on tax administration, tax tranche received in FY19. This expansion in the Cook Islands, policy, and tax legislation were delivered by scaling-up of the revenue program Kiribati, Solomon Islands, and a wide range of very experienced and will provide tax policy advice, tax Tonga, as well as Fiji that is not a knowledgeable experts in tax legislation drafting, and extensive tax signatory to the trade agreement. administration, tax policy, and tax administration CD. Beyond a broad legislation made presentations from the revenue mobilization objective, these IMF, Small Island Developing States At the regional level, PFTAC works additional resources will support (SIDS) and other development partners. closely with the Pacific Island Tax countries facing declining trade tax The workshop addressed issues and Administrators Association revenues expected through trade challenges relevant to the Caribbean, the liberalization under the PACER Plus Agreement. PFTAC capacity building and training focuses largely on strengthening core tax functions and facilitating the design of compliance improvement strategies.

Revenue Program Expansion There has been long-standing unmet demand for additional assistance under the PFTAC revenue program. With a single resident advisor, the program has operated at full capacity in recent years, necessitating difficult Delegates at the Joint CARTAC/ PFTAC event on Revenue Mobilization, Wash DC, July 2018

28 | SECTION II Annual Report 2019 | PFTAC

Pacific and other SIDS. (5) designed the framework to introduce a (2) development of a tax rulings small business tax; and

program; For the second consecutive year, (3) completion of an IT quality (6) assisted with drafting amended PFTAC hosted an annual awards assurance review; legislation for the implementation of dinner and recognized the Sea Bed Mining. achievements of three countries for (4) improved risk management Strengthening of revenue administration in their progress in advancing their synchronized to new IT system RMI led to: revenue reforms. Fijian Minister for developments;

Economy, Hon Aiyaz Sayed- (5) implementation of VAT audit (1) improving taxpayer registration Khaiyum, presented the awards to tools; and processes; and Kiribati for strengthening core tax

functions, Fiji for supporting regional (6) an objective report on the (2) an action plan to improve the tax administration development, and effectiveness of reforms and management of outstanding returns Tonga for strengthening revenue effects of adopting a risk-based and tax arrears. Compliance Improvement PFTAC’s support to Nauru facilitated: Strategy, with respect to:

(1) a review of current organizational • improvements in on-time arrangements and recommendations filing, on-time payment and for further enhancements; and the management of tax

arrears and outstanding (2) an action plan to improve core tax returns; functions. • a strategy to improve Niue benefitted from assistance that led to: compliance in the High Net-Worth Individual administration and governance segment; (1) improvements to the current arrangements. organizational structure; • legislative review of the

VAT and Stamp Duty Acts. (2) a plan to improve core tax functions; In the Cook Islands PFTAC assistance led to: FSM received PFTAC support to: (1) a review of reforms and (3) recommendations to modernize the opportunities to further (1) strengthen on-time filing, on- Niue Income Tax Act; and strengthen revenue time payment and the

administration and core management of tax arrears and (4) legal assistance to renew the Niue Tax functions; outstanding returns; and Administration Act with harmonized procedural and administrative rules. (2) the development of a renewed (2) improve audit capability PFTAC assistance to Palau helped with: Fiji’s minister for Economy, Hon In Kiribati, PFTAC provided Aiyaz Sayed-Khaiyum presents technical assistance to: (1) a joint tax policy and revenue awards to Kiribati Commissioner. forecasting mission provided advice on strategic and business plan; and (1) develop a modernization the design and projected impact of project plan; introducing VAT; (3) new processes to strengthen arrears and returns (2) develop a VAT audit tool kit to (2) a VAT training manual to support the management. strengthen audit processes; implementation of VAT legislation;

audit capability and planning; (3) a training program for staff to prepare Extensive support to Fiji led to the for VAT implementation; and following achievement: (3) strengthen the collection of tax

arrears and outstanding returns; (4) development of a function-based (1) development of a platform for the organization to manage compliance.

full implementation of self- (4) strengthen the collection of tax assessment that is aligned to arrears and outstanding administration’s new Information returns; Technology (IT) system;

29 | SECTION II Annual Report 2019 | PFTAC

BOX 3. REGIONAL VAT WORKSHOP- FIJI

Seven PICs and representatives from shared from established VAT Bhutan attended a workshop on regime countries such as Fiji ‘Implementing a Successful Value and Kiribati. The workshop Added Tax (VAT)’. Participating also included discussions countries without a VAT included relating to potential revenue Solomon Islands, Palau, RMI, Nauru, reforms arising from the and FSM who received advice on the Pacific Agreement on Closer critical issues relating to the successful Economic Relations (PACER implementation of VAT with experience Plus) trade agreements with Australia and New Zealand. Regional VAT Workshop, Fiji, September 2018 In Papua New Guinea, the PFTAC Revenue (3) developed a plan for the further program contributed to: (3) an action plan to strengthen the expansion of the Large Taxpayer Office; management of tax arrears and (1) an evaluation of organization wide outstanding returns; (4) developed an Industry Partnership reforms and recommendations to approach to deal with high risk industry advance their implementation; and (4) implementation of a function-based segments; structure; (2) the implementation of a Medium-Term (5) reviewed the organizational structure Revenue Strategy (MTRS) funded (5) an action plan to introduce a Large and provided recommendations for through the Revenue Mobilization Trust Taxpayer Office; further enhancements; Fund and backstopped by FAD. (6) assisted in the development of a plan to In Samoa technical assistance led to: (6) a plan to strengthen the audit function; improve on-time filing, on-time payment (1) a full review of the audit program, (7) the design of a modernization strategy; and the management of tax arrears and structure, staffing arrangements, and outstanding returns; management practices, risk analysis and case selection systems and (8) strengthening the taxpayer services (7) facilitated the design of a plan to assistance in designing a new audit function. improve the audit function;

plan. In Tonga, PFTAC is contributing to a major (8) reviewed the impacts of the PACER Expanded engagement with the Solomon scaling-up in revenue reforms including: Plus Trade Agreement; and Islands contributed to: (1) a review of overall reform progress and (1) a review of overall reforms undertaken the identification of future technical (9) assisted in the rewrite of the Revenue in recent years and recommendations assistance needs; Services Administration Act and for further modernization; Consumption Tax Act. (2) the development of the tax audit (2) the development of a new Corporate function and design of an audit plan; Strategy and Business Plan;

30 | SECTION II Annual Report 2019 | PFTAC

BOX 4. REVENUE REFORMS IN TONGA Modernizing our tax administration is a Framework that is designed to improve compliance trends already improving. top priority which over the last few the quality of life for all Tongans by The taxpayer services function, years has resulted in several initiatives 2025. An increase in taxpayer services included in the new organizational contributing to increased tax revenues. and education activities over the last structure, arranged a tax week This has included improvements to our two years has seen an increase in the “Revenue from the Community for the legal framework such as a redrafted number of registrations for Income Tax, Community” which raised wide Revenue Services Administration Act Small Business Tax, Employers awareness of tax obligations and was and a Consumption Tax Act. (PAYE), and Consumption Tax. The supported by an intensive media Modernizing our organization along creation of our Risk Management Unit campaign. These initiatives have functional lines has sharpened our has taken the lead in risk identification played a significant role in improving efficiency and increased performance and embarked upon numerous compliance with tax revenues far across core functions. Our new compliance activities that have exceeding projections for both 2016 corporate plan supports the produced good results. The creation of and 2017. Government’s Strategic Development our Large Taxpayer Office has proved Kelemete Vaha, Chief Executive to be a good strategic decision with Officer, Ministry of Revenue and Customs, Tonga

Technical assistance to Tuvalu included: (5) a review of the current IT system. (3) drafting a Tax Administration Bill, technical notes and regulations; (1) a review of core tax functions; In Vanuatu, PFTAC’s support contributed

to: (4) facilitating the design of a renewed (2) strengthening on-time filing, on-time Compliance Improvement Strategy for payment and taxpayer services; (1) implementation of a new function-based 2019 – 2010; structure; (3) development of an overarching (5) the design of a Taxpayer Services modernization plan; (2) the design of a project plan to facilitate Strategy; and implementation of organizational (4) the design of a compliance improvement reforms; (6) a plan to improve on-time filing, on-time strategy to improve compliance; and payment and management of tax arrears and outstanding returns.

BOX 5. MODERNIZATION OF VANUATU’S DEPARTMENT OF CUSTOMS AND INLAND REVENUE

Vanuatu’s administrative reforms have Using Vanuatu’s Model of The Vanuatu segment by 53 percent with modest gained momentum over the last few Economy (MOVE) we were able to increases across the small and years resulting in: (a) the development demonstrate that a large proportion of medium segments. A renewed CIS is of a new strategic and business plan; this increase was attributed to currently under development and (b) a risk-based Compliance increased voluntary compliance. In includes elements related to the Improvement Strategy (CIS); (c) 2018 VAT increased by 20 percent TADAT framework. implementation of a function-based over 2017, although part of this A prosecution strategy has resulted in the structure; (d) implementation of basic increase is attributed to a 2.5 percent prosecution of 5 high risk taxpayers performance standards; (d) a computer increase in the VAT rate, indications sending a strong message to taxpayers system which has facilitated taxpayer are that part of this growth, as in 2017, that strong enforcement action will be compliance; and (e) setting up a project can be linked to increased voluntary taken against those that do not comply. management framework and compliance. PFTAC has played an important role governance structure to oversee The CIS has seen inroads into reducing supporting us in our reform agenda for reform implementation. the number of outstanding VAT returns which we are most appreciative. Under our CIS, we have seen an by 24 percent & reducing the number increase in VAT revenues and an of debtors by over 25 percent. Debt Collins Gesa, Acting Director, Division improvement in targeted areas. VAT levels in the Very Large segment was of Customs and Inland Revenue, revenues increased by over 17 percent reduced by 40 percent, the Large Vanuatu in 2017 compared to 2016. segment by 81 percent, and the Micro

31 | SECTION II Annual Report 2019 | PFTAC

BOX 6. RECENT TAX LAW WORK IN THE PACIFIC

A considerable volume of legislative working group has been put together to in Niue and the work on the TAA will drafting assistance has been provided oversee the rewrite process with the run in parallel with the ITA rewrite. under the PFTAC Revenue program in aim of keeping the new ITA to no more Tax reform work has commenced in the Pacific. The reforms have primarily than 100 pages!! The working group Kiribati, with legislation prepared to involved updating and modernizing tax includes representatives from Treasury amend the ITA to provide for the legislation, particularly for the income and the Internal Revenue Commission. taxation of seabed mining operations tax and VAT. Work has commenced on modernizing and to introduce a presumptive tax for Two countries with old Income Tax and simplifying VAT legislation in Fiji small business. Acts (ITA), Papua New Guinea (1959) and Tonga (where the tax is referred to and Niue (1960), have commenced the as “consumption tax”). Fiji has also process of rewriting their ITA as a started a rewrite of the Stamp Duties modernized and simplified income tax Act. A focus of the VAT rewrites is on law suitable for the current business improving the taxation of supplies of and economic environment in the imported services, including digital respective countries. Interestingly, in products, and reviewing exempt and their origin, the ITAs in both countries zero-rated supplies. Work has were largely transplanted from other continued in Palau on the development countries (Australia in the case of PNG of a VAT law. and New Zealand in the case of Niue) Several PICs have been working on a and, therefore, the ITA rewrite in both Tax Administration Act (TAA). In broad countries is an opportunity to terms, a TAA provides for harmonized Attendees at a training program on the implement income tax legislation that is procedural and administrative rules Vanuatu TAA run by the University of New more relevant to the needs of the two applicable to inland taxes, particularly South Wales with financial support from countries. the income tax and VAT. Both PNG Australian AID showing their excitement at having a TAA. The PNG ITA has been amended many and Vanuatu have recently enacted a times since its original enactment and TAA, and the bill for a new Revenue Services Administration Act in Tonga is a long and complex piece of legislation running to around 800 went to Parliament in February 2019. sections and over 450 pages. A small The drafting of a TAA has commenced

Mr. Peter Mondoro, Assistant Secretary, The initial work in Tonga was interrupted Revenue Policy, Treasury, and chair of by Cyclone Gita, which hit during the the ITA rewrite working group, and Mr. middle of the mission and saw tax Lee Burns (who noted that the PNG ITA reform work give way to helping with the was “born” the same year as he was, clean-up. which is a good reason of itself to rewrite it!

32 | SECTION II Annual Report 2019 | PFTAC

I II PUBLIC FINANCIAL MANAGEMENT

MAIN ACHIEVEMENTS policy-based budgets through (6) Facilitating effective cash (1) Improving capacity to meet fiscal improved documentation management through improved responsibilities by using accompanying parliamentary forecasting and monitoring; and diagnostic assessments to build budget submissions; reform programs; (7) Improving the management of (4) Improving data integrity and fiscal risks associated with (2) Modernizing public financial budget execution through risk oversight of state owned management legislation to based internal audit; enterprises by establishing support on-going reforms, fiscal oversight and reporting responsibility, and transparency; (5) Strengthening the coverage of mechanisms. reporting with improved account (3) Helping PICs to have more structures; comprehensive, credible, and

Public Financial Management Seminar hosted by the Fiscal Reform Commission, Timor-Leste, March 2019

42 | SECTION II Annual Report 2019 | PFTAC

WORK PROGRAM EXECUTION

In FY2019, PFTAC completed 31 country countries to improve reporting on assets identified additional improvements and/or missions (totalling 468-person days) and and liabilities within the notes to the strategies for improving monitoring and conducted or participated in three regional financial statements. Examples of oversight. workshops and two regional meetings on changes being supported through PFTAC PFM topics. More than one third of the assistance include reporting on non- In the Cook Islands PFTAC helped: missions, in terms of person days, were financial assets and equity investment. conducted by the two Suva-based PFM Data classification in financial reporting is (1) Prepare the structure of the Chart of advisors with the remainder delivered by occurring through additional reporting on Accounts for implementation with the STX and with Fiscal Affairs Department functional and administrative new FMIS. (FAD) staff in one case. classifications while economic Extensive support to Fiji led to the classifications are now being structured to following achievements: The major users of PFM TA during the year reduce overlap and provide improved were Fiji, Kiribati, Samoa and Vanuatu. economic data. (1) Completion of a comprehensive The major topics of assistance continued redrafting of the Public Financial to be Public Expenditure Framework These IPSAS reforms were addressed in a Management Bill to replace the Evaluation (PEFA) assessments; January 2019 workshop on financial current public Financial improving controls and developing internal reporting that allowed for member Management Act; audit processes; implementing countries at more advanced stages of International Public-Sector Accounting reform to present their experiences and (2) Adoption of a risk-based audit Standards (IPSAS) cash accounting and challenges to others from the region. This methodology for payroll that is a accounting frameworks and policies. peer-to-peer interaction allows countries to significant component of the budget; appreciate problems shared by others to The PEFA framework was updated by the work collaboratively towards solutions. (3) Further development of a new Chart PEFA Secretariat in 2016 with the revised of Accounts, including development framework now implemented across the Expansion and enhancement of cash of new economic classifications of region. Multi-phase assessments are now management and cash flow forecasting will revenues, expenditures, assets, and required covering: (1) a review of the be the focus of country officials during a liabilities; progress achieved since the last PEFA, workshop planned for late April. It will utilizing the previous framework; (2) provide countries an opportunity to share (4) Draft instructions on financial completion of an assessment under the their existing forecasting models and cash reporting for small public enterprises new framework, and (3) inclusion of both management practices. Presentations will and statutory authorities; and assessments in the report. This requires focus on the relationship between the additional assessment effort and lengthens medium term fiscal strategy and (5) Building on earlier TA for the the report. This was fully implemented in management practices, including analysis of fiscal risks associated the Samoa assessment during 2018. communication strategies. Participants with SOEs. Planning for the PEFA in PNG has been should learn best practices in forecasting underway throughout 2018, and more models, with an opportunity to review and In Kiribati the focus of PFTAC assistance recently, a Fiji PEFA is being explored. enhance their models through interactive in conjunction with FAD: discussions with country officials and (1) Finalized the PIMA assessment to Improvements in internal audit practices workshop moderators. Country officials have been occurring throughout the region. improve processes around public who have successfully reformed cash investment management. While initially this involved the management and/or cash flow forecasting establishment of audit committees, will present their achievements and PFTAC’s support to Nauru is helping implementation of audit charters and discuss the challenges faced. Such make: reporting, recent work has turned to interaction allows countries to recognize updating planning and audit practices that (1) Systematic and procedural changes commonly experienced problems to work to improve compliance with IPSAS are consistently risk based. This includes cooperatively to find solutions. establishing risk-based audit of systems, cash reporting. such as procurement and payroll. Finally, reforms in monitoring the fiscal In Papua New Guinea, the PFTAC PFM risks associated with state owned program: Financial reporting is being enhanced on enterprises (SOE) and oversight of SOEs multiple fronts. A major update to the has been improving in the region from (1) undertook preparatory work ahead of IPSAS cash reporting requirements related PFTAC assistance and previous a national PEFA assessment in early to financial reporting took effect in January workshops. Missions during the year FY2020. 2019 (with earlier implementation reviewed country implementation and encouraged). It provides opportunities for

Annual Report 2019 | PFTAC SECTION II | 43

BOX 7. PEFA in SAMOA

Samoa was the first PFTAC information and more emphasis on The Government's PEFA member to undertake a full PEFA use of macro forecasts and the Taskforce were responsible for the assessment under the revised adoption of a medium-term initial evidence gathering and the 2016 methodology, noting that the approach towards budget. conduct of a self-assessment last PEFA to be undertaken in PNG outlined the initial surprise “Being was a test version of the revised Samoa has undertaken ongoing able to clearly demonstrate that methodology. Samoa’s previous PFM reforms for over a decade improvements had been made PEFA experience in 2014 utilized which at first glance under the new since 2014 was a positive point to the 2011 methodology. methodology looked to have had make. The process towards little success in terms of the ratings. developing a new roadmap will now What is considered good PFM The 2016 guidelines for reporting need to consider the greater practice has evolved over time indicate that a direct comparison expectations around PFM actions mostly driven by ongoing PFM cannot be made. Tracking change and the Samoan context in where reforms, resulting in higher is done by using the PEFA we need to focus our efforts to expectations. Amongst other framework used in the previous consolidate our gains and meeting things, the updated PEFA assessment to the corresponding these new expectations. framework has a stronger focus on data for the years covered by the internal financial controls, greater current assessment. Essentially requirements for public access to applying two lenses to the same more comprehensive financial evidence.

In Samoa, an extensive program of PFM Public and Financial Management technical assistance included: (2) Follow-up training on cash Seminar for Sustainable Growth forecasting and a progress review of and Development. (1) A full in-country PEFA assessment outcomes from previous cash under PFTAC leadership including forecasting missions. In Vanuatu, PFTAC’s support post-assessment follow-up; In Tonga PFTAC: contributed to:

(2) Redevelopment of budget (1) Assisted in the PFM Symposium (1) Adoption of a risk-based approach documentation for submission to hosted by the Tongan government towards internal audit activities and Parliament to enhance in conjunction with PASAI to assess reviewing the progress on the risk- understanding of the budget; progress against the PFM roadmap based internal audit of the payroll system; and (3) Developing a strategic plan for the (2) Assessed the progress of internal Internal Audit Unit and training to audit and financial reporting facilities (2) Developing capability and capacity in implement a risk based audit along with training for internal the Ministry of Finance in the methodology; auditors on risk-based auditing; adoption of improved financial reporting and new accounting (4) A review of the government’s (3) Assisted with further improvements to regulations. compliance with requirements of economic classifications in the IPSAS cash accounting standards existing chart of accounts; and and drafting of non-financial asset accounting and reporting policy; (4) Reviewed progress with the implementation of financial reporting (5) Developing a revised warrant reforms and compliance with IPSAS system to improve cash cash. management processes; and Help to Tokelau included: (6) Developing risk indicators to monitor each of the SOEs (1) Developing a PFM roadmap arising The Solomon Islands benefited from: out of the findings in the 2016 PEFA self-assessment. (1) the PFM advisor joining the Article IV missions to ascertain how PFM Timor Leste benefited from: reforms were progressing and to PEFA Assessment, Samoa, Aug 2018 identify opportunities to further (1) Participation of the PFM advisor in integrate CD and surveillance; and the Fiscal Reform Commission’s

44 | SECTION II Annual Report 2019 | PFTAC

BOX 8. WORKSHOP TO STRENGTHEN FINANCIAL REPORTING IPSAS CASH OR ACCRUALS BASED ACCOUNTING

Finance ministry officials from 14 compliance with cash basis, which genuine desire to learn from the countries and audit officials from is considered a requirement for the experience of each other. Many two countries attended a PFTAC transition to accruals. Participants participants noted the lack of organized workshop in late January noted that the standard allows understanding in their country that 2019. Countries shared their reporting on data associated with compliance with even the most financial reporting and accounting accrual accounting, such as fixed basic reporting standards requires practices which highlighted that assets, payables, and government robust accounts, which in turn most countries used cash basis business enterprises within the relies on a basic level of capability accounting and were working notes to the financial statements. in relation to internal controls, toward accrual accounting, with just The importance of appropriate human resources, Financial a few already on a full accrual basis timing and a pathway for transition Management Information Systems, of accounting and financial from cash to accrual accounting chart of accounts, and reporting. provides an opportunity to reflect reconciliations. on the implementation of full Presentations, activities and peer accrual accounting and the benefits Each country developed an action engagement during the workshop versus the cost. plan for financial reporting activities improved understanding of the which was presented by country requirements of the International Presentations were delivered by officials to reflect a practical Public-Sector Accounting countries that reflect advances in approach to improving financial Standards (IPSAS) and challenges practices such as electronic reporting taking into consideration in improving reporting in payments (Fiji), improvements to individual country circumstances. accordance with these standards, notes to accounts (Samoa), and Appropriate follow-up with each particularly issues with recent enhancements in asset country will be built into PFTAC’s changes in the IPSAS “Financial management (Fiji). Engagement future CD engagements. Reporting under the Cash Basis of was extensive with and between Accounting”. The change eases workshop participants and a

Regional Workshop on Improving Financial Reporting, Fiji, January 2019

Annual Report 2019 | PFTAC SECTION II | 45

TABLE 10. PEFA & PIMA ASSESSMENTS AND PFM ROADMAPS IN PACIFIC ISLAND COUNTRIES

Most Number of PFTAC Guided Most Roadmap Planned Planned Completed Country Recent PEFAs Self- Recent Development Roadmap PEFAs PIMA External (Final) Assessments Roadmap Support Development

Cook Islands 2014 2 2013 - - 2016 Self - FSM 2012 1 2016 - - 2018 Self FY19 Fiji 2012 1 2012 Full: FY19 - 2016 PFTAC - Kiribati 2009 2 2017 - 2018 2011 EU FY20

Nauru 2010 1 2016 - - Revised ADB/PFTAC FY19 Revised Niue 2011 1 - - - PFTAC - 2014 Palau - 0 2013 Full: FY19 - - - FY19

PNG 2015 3 2014-15 Full: FY20 - 2015 PFTAC/FAD -

RMI 2012 1 2012 - - 2013 PFTAC - Samoa 2018 4 2013 - - 2014 Self - Solomon Islands 2012 2 2012 - - 2018 PFTAC -

Timor Leste 2019 3 - - 2017 - - -

Tokelau - 0 2018 - - 2019 PFTAC - Tonga 2010 2 2014 Self: FY20 - 2014 PFTAC -

Tuvalu 2011 2 2015 - - 2017 PFTAC Vanuatu 2012 3 2015 - - 2016 PFTAC

46 | SECTION II Annual Report 2019 | PFTAC

I II MACROECONOMIC PROGRAMMING & ANALYSIS

MAIN ACHIEVEMENTS leading capacity development at Planning to develop GDP (1) Ten of PFTAC’s 16 members, their institutions, the PNG public forecasting; and Cook Islands, Fiji, Palau, PNG, sector and the region; RMI, Samoa, Solomon Islands, (5) In response to member requests Tonga, Tuvalu, and Vanuatu (3) The Samoa Macroeconomic for customized training, PFTAC have a macroeconomic Policy Coordination Committee organized joint training events programming framework that is was revitalized following an with the IMF’s Institute for observation attachment to Fiji; used in policy analysis; Capacity Development and

Singapore Training Institute. (4) The Tonga Ministry of Finance (2) The Bank of Papua New Guinea assisted staff at the Tuvalu and Department of Treasury are Ministry of Finance and Economic

WORK PROGRAM EXECUTION

Bank of Solomon Islands and the was to bring together IMF and technical The macroeconomic program is focused Ministry of Finance and Treasury in staff from member countries to better on assisting members to develop Honiara. It brought together 48 analysts integrate capacity development and quantitative tools for use in policy from Cook Islands, Fiji, PNG, Samoa, surveillance. Staff from the IMF’s Asia analysis, forecasting, debt sustainability, Solomon Islands, Timor-Leste, and Pacific Department joined the and external vulnerability analysis; Tonga, Tuvalu, and Vanuatu to workshop to help facilitate discussions. strengthening inter-agency coordination; discuss the importance of sound and sharing experience, knowledge and macroeconomic policy and institutions. It The Bank of Papua New Guinea expertise among policy analysts and was followed by a two-day extended (BPNG) and the Department of Treasury advisors across the region. session for participants from PNG (DoT) will co-host a five-day course on and Solomon Islands on ‘Adjustment Macroeconomic Policy in April. It will be In response to member requests for Options for Commodity Exporters’. held at the DoT and facilitated by ICD, customized training PFTAC organized PFTAC and STI. Participants have been three joint training events with the IMF’s Thirty-six participants from 14 PFTAC invited from the BPNG, the Departments Institute for Capacity Development and members analyzed sources of economic of Finance, National Planning and Singapore Training Institute in FY2019: growth and productivity at a three-day Monitoring and Treasury, the Internal workshop on ‘Policy Making to Influence Revenue Commission, the National A five-day course on ‘Macroeconomic Sustainable Growth and Productivity’ in Economic and Fiscal Commission and Policy for Stabilization and Growth in the Nadi. An important aspect of the training the PNG Customs Services. Pacific’ was co-hosted by the Central

42 | SECTION II Annual Report 2019 | PFTAC

BOX 9. CUSTOMIZED TRAINING GETS HIGH MARKS

In response to member requests for provided a mix of theoretical training agreeing that they would recommend customized training PFTAC designed from ICD lecture material, the training events to others. organized joint training with the IMF’s country presentations, group Participants particularly valued that Institute for Capacity Development discussions and technical hands-on the courses were tailored to the and Singapore Training Institute. A exercises for which new tools and Pacific and the peer-to-peer learning. five-day course on Macroeconomic country data were constructed. The positive Pacific experience is Policy for Stabilization and Feedback suggests that customized helping design other IMF customized Growth in the Pacific and a two-day regional training is a key aspect of training. extended session on Adjustment capacity building with 98% and 91% Options for Commodity Exporters of participants agreeing or strongly were hosted by the Central Bank of Solomon Islands and the Ministry of Finance and Treasury. The courses focused on strengthening the understanding of linkages between macroeconomic sectors by constructing sector by sector a “microframework” populated with PNG data.

A three-day workshop on Policy Making to Influence Sustainable Growth and Productivity preceded and fed into PFTAC’s 25th anniversary celebrations. The event

Regional Course on Macroeconomic Policy for Stabilization and Growth in the Pacific, Solomon Islands, July 2018

The FY19 events were designed from ICD macroeconomic stability: an output gap for Fiji using ICD training and STI training material and focused on material and computer code. Potential topics of relevance to the region and (1) A medium-term fiscal strategy has output and the output gap are useful available data. PFTAC members highly been released for 2019/20-22/23; indicators for the conduct of monetary value the IMF’s extensive program of ICD and fiscal policy but not directly and STI courses, workshops and seminars (2) To establish and implement new observable. which are an important complement to fiscal rules, following IMF PFTAC technical assistance, but methodology, Ministry of Finance (1) A working paper was prepared and participants often find it difficult to apply new and Economic Management presented at the Nadi workshop skills and knowledge acquired at these (MFEM) staff developed a tool and the inaugural South Pacific events in their home countries because of which is integrated with the fiscal Central Banking Research lack of data. forecasting and budget processes; Conference; and

PFTAC continued to facilitate multi-topic (3) MFEM has agreed to share the (2) Work has started to estimate workshops. The macroeconomics program new tool with Pacific neighbours. potential and output gaps for other was involved in training events on GFS, VAT Pacific countries. Implementation and Cash Management. Work is also on-going to estimate the economic and revenue contribution of To address fiscal challenges and make Cook Islands is preparing for a surveillance the international financial services the tax system fairer and more efficient type-technical assistance mission. It will be industry. Palau is considering fiscal reform led by the IMF’s Asia and Pacific Department options. Grants are terminating under with PFTAC assistance and review Researchers at the Reserve Bank of Fiji the Compact Agreement with the United macroeconomic policy and institutions. are collaborating with an Economist States and fishing revenues will fall from the IMF Resident Representative following the signing into law of the Prudent fiscal management is essential for Office and the PFTAC Macroeconomic Palau National Marine Sanctuary Act. Advisor to estimate potential output and Fiscal reform options include:

Annual Report 2019 | PFTAC SECTION II | 43

BOX 10. PEER TO PEER LEARNING: FROM TONGA TO TUVALU AND BACK

In October 2018 Sione Faleafa, Chief and particularly informing our to join me in Tuvalu!” Iris Claus, Economist, Ministry of Finance, Tonga, decision-makers in a timely PFTAC. joined PFTAC Macroeconomic Advisor Iris manner.” Niuatui Niuatui, Director of Claus in Tuvalu to share his knowledge Planning, Budget and Aid and Tonga’s experience with GDP Coordination, Tuvalu Ministry of forecasting and assist staff at the Ministry Finance & Economic Planning. of Finance and Economic Planning to develop their own GDP forecasting “Helping set up the Tuvalu framework. Having indicators of economic framework has given me new ideas activity is critical for forecasting and a for how we can enhance our own database, Tuvalu Economic Indicators framework back home.” Sione (TEI), was set up. Faleafa, Ministry of Finance, Tonga.

“Having access to a good forecasting Peer-to-peer learning is invaluable. framework is remarkably enriching the Thank you Minister Tu'I’onetoa and government in its budget preparation CEO Fa’otusia for releasing Sione

PFTAC Macro Advisor, Iris Claus with

Sione Faleafa from Tonga Ministry of

Finance

(1) Introduction of a VAT and expansion of Work is continuing to incorporate In Samoa a Technical Forecasting the net profit tax for businesses to enhanced GDP compilation methods Committee was formed in 2017. In 2018 replace import duties and the highly into forecasts and develop composite members from the committee distorting gross revenue tax; and indexes of indicators to estimate and participated in a two-week attachment forecast non-mineral and mineral GDP. to the Reserve Bank of Fiji to observe (2) Reductions in wage and salary tax to the process of the Fiji Macroeconomic compensate workers for a one-off The Budget is a key document for the Committee. Following the observation increase in process that may result from Government to communicate how it attachment, the team made the VAT. plans to achieve policy objectives in the recommendations on how “to enhance short and medium term. Staff at the RMI GDP forecasting ability for better policy Increased revenue could be used to build Ministry of Finance are continuing to: making, planning and budgeting”. The up the Palau trust fund to provide a team’s recommendations led to the perpetual revenue stream. (1) Progress medium-term budgeting; Samoa Macroeconomic Policy and Coordination Committee being The BPNG and DoT are leading capacity revitalized. development for macroeconomic analysis (2) Enhance budget processes and and forecasting at their institutions, the documentation. PNG public sector and the region. Joint ICD-STI-PFTAC events happened because of a BPNG request to ICD for tailored training.

(1) The BPNG’s Monetary and Fiscal Forecasting (MFF) Model was used for the Honiara training; and

(2) The DoT hosted an interagency workshop which was an important event to share data and knowledge on national accounts following methodology changes by the NSO to the measurement of GDP.

Sub-Technical Committee debating the Forecasts, Samoa, October 2018

44 | SECTION II Annual Report 2019 | PFTAC

BOX 11. REVITALIZED SAMOA MACROECONOMIC POLICY COORDINATION COMMITTEE

To strengthen institutional structures Coordination Committee (MPCC) was produces consolidated forecasts that for macroeconomic policymaking a revitalized with a new structure, terms are published in the Fiscal Strategy. Technical Forecasting Committee of reference and memorandum of was formed in 2017 comprising understanding that is to be finalized “The observation attachment to the members from the Central Bank of before the end of the 2018/19 financial Reserve Bank of Fiji was a great Samoa, the Ministry of Finance, the year. opportunity for the team Samoa Ministry for Revenue, and the Samoa (from the Technical Forecasting Bureau of Statistics (advisory role). The new proposed MPCC has three Committee) to grasp the knowledge Committee members participated in a levels chaired by the Ministry of and experience the process of two-week attachment to the Reserve Finance—Main Committee, Technical conducting meetings, and to gain Bank of Fiji in 2018 to observe the Committee and Sub-Technical an understanding of the nature of process of the Fiji Macroeconomic Committee—and the following each level of each committee’s Committee. members: a. Ministry of Finance; b. focus, roles and responsibilities.” Central Bank of Samoa; c. Ministry for Samoa Attachment Report, October Following the observation attachment Revenue; d. Ministry of Commerce, 2018 and recommendations by the team, Industry and Labor; and e. Samoa the Macroeconomic Policy Bureau of Statistics. The MPCC

estimate and forecast non-mineral and In Solomon Islands staff at the Central Tuvalu to help develop GDP mineral GDP are now being developed Bank of Solomon Islands (CBSI) and the forecasting. in PNG. Ministry of Finance and Treasury (MoFT) continue to enhance their macroeconomic In Tuvalu staff at the Ministry of Finance programming frameworks. A template for and Economic Planning continue to the monetary sector which was discussed build capacity for GDP forecasting during the ICD-STI-PFTAC training in which is a key statistic for Honiara was adopted in the CBSI model. macroeconomic analysis, monitoring and forecasting. The MoFT’s Solomon Islands Macroeconomic Model (SIMEM) is being (1) Having indicators of economic used to inform tax reform to support private activity is critical and a database, sector economic activity and investment: Tuvalu Economic Indicators (TEI), was set up; (1) Medium-term revenue projections have been produced for the current (2) Real GDP estimates and forecasts tax systems; and by industries are produced based on the economic and fiscal (2) The effects were quantified of indicators in the TEI database and introducing a VAT to replace the GDP deflators are forecast with goods tax and import duty which world prices and components of the are particularly harmful to consumer price index; and economic activity and the sales tax and other ‘nuisance tax’ which do (3) Methods were also enhanced to not generate significant revenue derive annual estimates of but are costly to collect. economic and fiscal variables when partial data for the year are Staff at the Tonga Ministry of Finance available. continue to use and enhance tools developed in joint technical assistance Staff at the Reserve Bank of Vanuatu provided in FY2016 by PFTAC and a (RBV) continue to use the Model of the secondee from the Reserve Bank of Vanuatu Economy. In 2016 RBV staff New Zealand. Peer-to-peer learning is a presented on GDP forecasting using a key aspect of capacity building and the composite index of indicators at a Finance Ministry’s Chief Economist PFTAC workshop on GDP compilation joined the Macroeconomic Advisor in and forecasting. Composite indexes to

Annual Report 2019 | PFTAC SECTION II | 45

BOX 12. INAUGURAL SOUTH PACIFIC CENTRAL BANKING RESEARCH FOR POLICY CONFERENCE

The central banks of Fiji, PNG, conferences. Non-technical versions and policy; and (iv) encourage Solomon Islands and Vanuatu, of the papers are published in the local retention of high quality researchers in together with Australia’s Griffith media and posted on the South the region. This year’s research for University convened an inaugural Pacific Centre for Central Banking policy conference will be hosted by the research conference in Suva, Fiji on (SPCCB) blog. The objectives of the Reserve Bank of Vanuatu. There are December 12 – 13, 2018. The event SPCCB are to: (i) build credible local plans for a central banks-SPCCB- brought together central bank capacity for policy-oriented research; PFTAC collaboration in 2019 which researchers to share with academics, (ii) generate research results for use will be further explored at the PFTAC policy makers, regulators, multilateral by policy analysts and policy makers; steering committee meeting in Port organizations, business leaders, civil (iii) promote links between research Moresby. society, from the South Pacific and Australasia current research on the region and to explore vital links between research and policy relating to central banking, including financial and private sectors and economic growth and development. Invited key stakeholders from the ADB, DFAT, IMF/PFTAC, the Reserve Banks of Australia and New Zealand, the World Bank and commercial banks, participated in the conference as moderators, speakers and panelists.

Papers presented will be published as working papers and submitted to journals and international

Delegates at the Inaugural South Pacific Central Banking Research for Policy Conference, Suva, December 2018 .

46 | SECTION II Annual Report 2019 | PFTAC

I II MACROECONOMIC STATISTICS

MAIN ACHIEVEMENTS

(1) Improving the use of tax and compilers, through the other administrative data to publication of more timely (5) Compilation and dissemination supplement or replace business results; metadata; and good of Government Finance surveys in the compilation of quality internal business process Statistics (GFS) for the gross domestic product (GDP); documentation; budgetary central government (BCG), and expanding coverage to the general government (GG); (4) Ensuring that new national chart (2) Providing general and targeted and training to local staff to build of accounts (CoA) are mapped compilation capacities; and aligned to the classifications according to the Government (6) Increased coverage in the Finance Statistics Manual 2014 compilation of public sector debt (3) Improving the information (GFSM 2014) for automation in statistics (PSDS). available to data users and the financial systems;

Regional Workshop on GFS Classification, Compilation and Dissemination, Fiji, August 2018

Annual Report 2019 | PFTAC SECTION II | 47

WORK PROGRAM EXECUTION

Government Finance Statistics increase in the number of in October 2018. This slightly lowered reporters from eleven (FY2018) the projected delivery outturn of the The GFS program maintained to 13 (FY2019) PFTAC member updated workplan to around 80 momentum in FY2019 despite the countries, a major achievement percent, with 15 of 18 planned early departure of the PFTAC GFS since the inception and missions/activities delivered, utilizing resident adviser in October 2018 completion of the Japan 225 days of TA delivery time versus a who continued to oversee and government funded GFS project plan of 275 days (89 LTX days deliver the program from his new in the Pacific; delivered versus 102 days planned, assignment at the Statistics and 136 STX days delivered versus Department at IMF Headquarters. A (3) Expanding coverage to the GG, 173 days planned). Of the 15 replacement resident advisor is due with progress in data preparation delivered missions, two covered to arrive at PFTAC in April 2019. As in Fiji, RMI, Solomon Islands, External Sector Statistics to the RMI envisaged in the Phase V Program Tonga, and Vanuatu. Cook and Kiribati respectively accounting Document and as budgeted, the Islands and Samoa produced full for 36 STX days of field TA. Two position of a resident GFS advisor is consolidated general government regional or sub-regional workshops currently due to end in April 2020. accounts for the first time with a that had been planned during FY19 complete data series of three did not materialize due to the change Over FY2019, nine GFS missions years (FY2015-17) and five years in experts and challenges in (totaling 143 TA field days) were (FY2013-17) respectively. PNG scheduling for the targeted beneficiary delivered: 75 days by the PFTAC kept the momentum of expanding countries. GFS resident adviser, and 68 days GFS coverage to its national by STX. The program also delivered budget volume II with further Despite the gap and changeover of two training programs: a regional improvements to the overall resident advisor, several important workshop in August 2018 in Fiji budget compilation process accomplishments are noted during attended by 11-member countries, aligned to the GFSM 2014; and FY19 including: and a sub-regional GFS training (4) In country missions continued to mission for two northern Pacific (1) Finalizing of rebased National increase coverage in the countries in February 2019 in FSM. Accounts through 2017 in Fiji compilation of PSDS, with and Samoa; progress made in Fiji, Samoa, The main themes in FY 2019 for the Solomon Islands, Tonga, and GFS program were: (2) Improved calculation of cattle Vanuatu. livestock data, an important

(1) Increased assistance in the contributor to economic activity In the northern Pacific nations of the coding and mapping of the new in Vanuatu; and RMI, FSM, and Palau, remote national chart of accounts aligned assistance enabled the compilers to to the guidelines provided (3) Commencement of report GFS for budgetary central through the GFSM 2014. independent GDP calculations and state governments to the GFSY. Reforms started and progressed in RMI. RMI received continued support in in the Cook Islands, Fiji and the compilation and dissemination of The sole objective of the RSS Tonga. Chart of accounts and quarterly GFS for BCG. A hands-on- program is to strengthen financial system reforms were training mission in February 2019 macroeconomic and financial also initiated in the RMI, FSM and assisted new and current GFS statistics compilation and Palau. These reforms may see compilers of RMI and FSM to further dissemination. potential improvements in improve compilation techniques and producing financial statistics if the methodologies. Reliable macroeconomic statistics GFS is automated as part of the (National Accounts (NA) and Balance process; Real Sector Statistics of Payments (BoP)) are essential for

evidence based economic policy- (2) Compilation and dissemination of The RSS program was similarly making by country authorities. They GFS for the BCG for decision affected by a change in resident also provide the private sector, foreign making and IMF surveillance as advisor, with a gap between the investors, rating agencies, and the well as for reporting to IMF’s GFS departure of the former advisor in public in general with important inputs annual database, resulting in an August and the arrival of a successor 48 | SECTION II Annual Report 2019 | PFTAC in their decision-making, while In Niue, developments included: informing economic analysis and IMF (4) Improvements in the quality of surveillance. The Macroeconomic national accounts statistics with (1) both the national accounts and programming and analysis program respect to the definition of output the external sector statistics also relies heavily on high quality data (particularly relating to tables were updated to 2017–18; for monitoring, analysis and research agricultural output and the air and purposes available for policymaking. transport industry) and the application of double deflation; (2) preparatory work was undertaken Capacity development in this field and ahead of rebasing national aims to improve the ability of member accounts in 2019, including (5) Staff training to correctly derive countries to compile independently analysis of the 2015-16 constant price GDP through the and timely high-quality data, to make household income and correct use of intermediate them available to the public, to provide expenditure survey. consumption prices and information about their reliability, and production of volume estimates of to provide expertise about methods In Papua New Guinea, the PFTAC taxes on products and imports and data sources. assistance helped with: and subsidies.

In the Cook Islands: (1) coverage being expanded to the In Kiribati, developments included: financial balance sheet for

(1) time series GFS data was for the budgetary central government by (1) revisions and reclassification of first time submitted for inclusion in collecting and calculating institutional sectors and general the IMF’s annual GFS database; balances for currencies and government GFS data with an deposits and accounts payable expansion of coverage to the rest (2) progress towards implementation and expense arrears; of the public sector commenced; of a revised chart of accounts for and the budgetary central (2) review of national budget volume

government was made to support II and advice for 2019 budget (2) advice provided to reconcile data a new financial management implementation; sets and improve statistics on information system; overseas development (3) National Accounts improvements (3) economic and functional codes assistance. to deflation updates; tax data were mapped to automate GFS in acquisition and mechanized the new financial system; and In RMI local capacity is being processing; and created: (4) completion of the rebase of the (4) revisions to GDP by Production annual and quarterly GDP (1) for the authorities to develop through joint assistance with the estimates were published in National Accounts independently ABS. December 2018. of external providers with PFTAC help towards independent In Samoa: Fiji received assistance on determination of value added statistical issues towards the estimates for some production (1) strengthened linkages between following: activities. PFM and GFS through participation in the PEFA (1) completion of the general In Nauru, assistance in National assessment; government unconsolidated data Accounts has contributed to series (FY2010-15) to be progress despite staff constraint (2) training of 18 officials of the published as production tables on with: budget and treasury divisions of the Fiji Bureau of Statistics the Finance Ministry on website; guidelines for the GFSM 2014 (1) estimates of gross domestic and how to apply the (2) preparation of draft gross debt product (GDP) by production; methodology during budget statistics for corporations; preparation; (2) utilizing new tax information to (3) mapping and refinement of replace weaker modelled (3) completion and publication of a economic and functional codes components. general government consolidated to automate GFS in the new time series (FY2013-17) for the financial management system; Annual Report 2019 | PFTAC SECTION II | 49

Tuvalu assistance in April 2019 will help with:

(1) updating GDP estimates with the incorporation of the new HIES 2016 data.

In Vanuatu, PFTAC’s support contributed to:

(1) reconciliation of variances by the Ministry of Finance and Economic Management between balance sheet presentation for stocks and flows of nonfinancial Regional Government Finance Statistics Workshop, FSM, February 2019 assets, financial assets, and liabilities; first time;

PFTAC assisted Timor-Leste to: (2) improvement in the quality of (4) rebasing of National Accounts national accounts statistics was finalized that incorporated (1) improve quarterly and annual particularly for livestock for cattle the 2016 Population Census, the GFS compilation with aiming at estimates and fishery output that 2013 Household Income and reducing statistical have been re-estimated in Expenditure Survey and the 2013 discrepancies; and accordance with 2008 SNA Business Activity Survey; and standards; (2) align GFS and financial reporting (5) Publication of revised National needs raised by the treasury and (3) staff capacity building for more Accounts figures in March 2019. the Fiscal Reform Commission to efficient quality control of

ensure overall improvements in incoming data through support The Solomon Islands efforts reporting. from automated outlier detection included: and replacement software; and

The focus of PFTAC assistance to (1) an expansion of GFS coverage to Tonga was: (4) explanation of methods for General Government (GG); national accounts compilation

(1) an expansion of GFS and PSDS concerning production side (2) a start to expand coverage of coverage to nonfinancial public activities. public sector debt; corporations;

(3) improved adjustments to National (2) investigate possibilities of Accounts to address under increasing frequency of reporting coverage, misreporting, and advice on current reporting definitional or conceptual procedures; and differences, reconciliation of two

GDP measures, and balancing (3) in support of efforts to rebase product level estimates; and GDP starting in 2019 and drawing

on the latest business census, (4) advice on imputation processes with plans to publish new for the business survey. estimates in March 2020.

50 | SECTION II Annual Report 2019 | PFTAC

BOX 13. PACIFIC STATISTICS STANDING COMMITTEE (PSSC) MEETING

The annual meeting was convened in development partners under Phase 3 acknowledged their diverse work and Fiji November 1 – 2 and was the first of the SPC’s Ten-Year Pacific PFTAC’s support of statistics in the opportunity of the just appointed Real Statistics Strategy (TYPSS). region. The group also expressed Sector Statistics advisor, Mr. Marcus Improvements were noted in socio- their concern that funding for the Scheiblecker to meet many demographic statistics with steady PFTAC Government Finance Government Statisticians from the progress of regional economic Statistics (GFS) program would Pacific as well as other Statistical statistics. The Donor and conclude in April 2020 and planned to development partners include the Development Partners Group (DDPG) advocate for resources to be secured Pacific Community (SPC), the – of which PFTAC is a member – to allow for a continuation of the Australian Bureau of Statistics (ABS) agreed on more frequent meetings to program. and New Zealand Statistics. improve the coordination of measures and to consider the establishment of The conference focused on the terms of reference including clear progress of members and principles of partnership. The PSSC

2018 ABS Pacific Statisticians Leadership Forum, Brisbane, August 2018

Annual Report 2019 | PFTAC SECTION II | 51

I II FINANCIAL SECTOR SUPERVISION

MAIN ACHIEVEMENTS

(1) Contribute to macroeconomic (3) Development and implementation stability and growth through stable, of Financial Supervision Framework (5) On-site financial sector examination well-supervised financial Enhancement strategies; capacity building.

(2) institutions that contribute to (4) Supporting and facilitating banking financial inclusion; regulation reform; and

Annual Meeting of the Association of Financial Supervisors of Pacific Countries (AFSPC), Vanuatu, August 2018

Reserve Bank of Vanuatu Governor Simeon Athy making opening comments at the AFSPC Meeting

52 | SECTION II Annual Report 2019 | PFTAC

the establishment of medium term experience, and thus training and WORK PROGRAM EXECUTION supervision enhancement strategies capacity needs); and

(MTSES) and TA plans were completed in Financial Sector Supervision 2017 for the Cook Islands, Vanuatu, (4) Assess the efficiency and

PNG, and the Solomon Islands. effectiveness of the operation of the The FSS FY2019 program contributed to framework, i.e. does a changed risk significant enhancement and reform of the To develop MTSES and TA plans, PFTAC rating lead to a reassessment of financial sector regulatory and supervision and the supervisory authorities of the supervisory action; and is financial frameworks of member countries. member countries assessed the structure analysis incorporated into an overall Provision of TA commenced on some long- and operation of the supervision risk assessment of the institution. standing gaps and inefficiencies in the frameworks, in relation to the size and supervisory systems, while work continued complexity of the respective financial Key findings of the diagnostics were: with the Supervision Framework sectors, and against international Enhancement Program and the Banking supervision standards and practices. (1) Gaps in the coverage of banking Regulatory Reform project. New in prudential standards; FY2019, PFTAC made a start on long The assessment focused on four key requested TA to enhance insurance components of risk-based supervision (2) Underdeveloped and outdated on-site regulatory frameworks in the Pacific. (RBS) frameworks: examination processes and

infrastructure; Overall, the FSS program delivered 18 of (1) Regulation (legislation, prudential 20 planned missions/activities in FY2019, (3) Lack of operating risk-rating models; standards, licencing); using 302 days of field TA versus 297 planned days, although the weighting (4) Lack of in-depth financial analysis (2) Risk identification and assessment shifted slightly more to STX (235 days (entity specific and industry wide); (off-site and on-site supervision delivered versus 220 planned) than LTX processes); (67 days delivered versus 77 days (5) Lack of risk-focused supervisory planned). action planning processes; and (3) Risk-rating models; and

(6) revisions and reclassification of The success of PFTAC’s FY2019 (4) Supervisory action planning. institutional sectors and general workplan is mostly attributed to a strategic government GFS data with an focus that builds on foundational efforts The aim of the framework assessment expansion of coverage to the rest of around four key pillars: Strategic, Focused, was to: the public sector commenced. Innovative, and Efficient.

(1) Identify structural weaknesses and Strategic: CD is Focused: CD Since 2017, PFTAC has undertaken 14 based on targeted projects are gaps in regulatory/supervisory projects aimed at formulated on missions ((PNG (5), Cook Islands (4), infrastructure, e.g. are there: (1) fundamental mutually assessed Vanuatu (2), Solomon Islands (3)) enhancement and and agreed prudential standards covering all key across all key components of the project. reform of regulatory needs; and in line risk areas; (2) an operating risk rating and supervisory with the recipient’s These missions account for a large share model; and (3) supervisory action frameworks as a strategic goals of FSS program resources utilized since whole, over a 2-4 and ability to planning processes; year timeframe. absorb the CD. 2017.The Risk Rating and Supervisory

Action Planning Enhancement Innovative: (2) Assess the quality (and identify component of the project is largely Methods of CD Efficient: deficiencies) of the infrastructure, delivery are adjusted Practical durable complete, with all countries now having e.g. (1) are prudential standards to recipient CD is delivered new risk rating models with RBS action circumstances, TA through providing sufficient guidance to and training multilateral planning infrastructure developed with banks on minimum expectations; (2) resources, IMF/ expandable PFTAC assistance. On-site examination does the risk rating model produce a PFTAC coordination projects. process and infrastructure development and time constraints. net risk rating by key risk area or has progressed steadily. PFTAC does it not have a sufficiently detailed Supervision Framework Enhancement commenced this work with all countries rating characteristic framework/ Program and will finalize it in FY2020. Work on the guidance; (3) is supervisory action off-site supervision component of the planning focused on supervisory PFTAC initiated a medium term strategic project (financial analysis and prudential activities, rather than risk-based approach in 2017 to assist Pacific reporting) has commenced and will be a supervisory action; countries to enhance the structure and priority in FY2020. Regulatory reform

and enhancement had the least attention operational effectiveness of their FSS (3) Assess the ability of supervisory staff so far and will be a focus in FY2021. frameworks. Initial diagnostic missions and to implement a framework (skills and 54 | SECTION II Annual Report 2019 | PFTAC

the IMF’s Monetary and Capital Market’s

Implementation Progress Supervisor Supervisor Licensing Department (MCM) held a regional mandate governance criteria workshop on insurance regulation in Fiji in May 2018. The workshop was attended by

Resolution Business License representatives from the Cook Islands, conduct revocation Fiji, PNG, Samoa, Solomon Islands, Timor Leste, Tonga, and Vanuatu. The

workshop: (1) provided information on Exposure Audit Fit & Proper

international good practice on insurance standards standards standards

legislation and prudential standards

(content and structure); (2) facilitated a Risk Governance Operational self-assessment of current legislation and management standards risk standards against international standards; standards standards Banking Regulatory Reform and (3) established a proposed regulatory In late 2016, the RMI Banking reform strategy and technical assistance Commission, the FSM Banking Board Implementation Progress plan for Fiji, Samoa, and Tonga. and the Financial Institutions Commission of Palau, requested TA to The self-assessments highlighted the enhance their banking legislation and Training on Detailed Stakeholder need for significant reform of the international drafting consultation prudential standards frameworks. In good assistance insurance regulatory frameworks of response, PFTAC and the IMF Legal practice for Final participating countries. Key weaknesses Department (LEG) conducted a legislation Initial drafting identified in insurance legislation and and Regional Workshop for these authorities stakeholder assistance prudential engagement prudential standards ranged from not in Guam in July 2017. standards: having any legislation to govern the insurance sector, to gaps in legal Participant The workshop provided information to self- protection for supervisors, consolidated participants on international good assessment supervision, risk-based capital, resolution, practice on banking legislation and and offshore placement of insurance prudential standards (content and Reform strategy and cover. structure); facilitated a self-assessment planning of current legislation and standards Arising from the participant discussions against international standards; and about the regulatory reform plans, and established a proposed regulatory PFTAC and LEG have undertaken four given the commonalities of each of the reform strategy and TA plan for each missions as part of this project, jurisdictions, PFTAC and MCM identified jurisdiction. Representatives from the completing the initial phase of bilateral the most efficient way to deliver TA is to Kiribati Attorney General’s Office and work. More work will follow in FY2020 on provide a single draft example insurance the Kiribati Ministry of Finance and the detailed drafting of the revised law and suite of prudential standards. Economic Development also banking laws and regulations. The These can then be adapted to each participated to learn about banking project has suffered delays of about six country’s circumstances. To undertake regulatory frameworks. months behind original expectations this work PFTAC employed the services of agreed between PFTAC, LEG and the two insurance regulation experts over a 3- The regulatory reform program respective authorities, mainly due to month period from November 2018 to continued in FY2019 with the first constraints in mobilizing LEG resources. produce a draft example insurance law; a bilateral follow-up missions to Palau draft example suite of prudential (May 2018), RMI (July 2018) and FSM As a result, PFTAC and LEG will standards; and a gap analysis of existing (in April 2019). The bilateral missions commence using short term legal laws and prudential standards. recommended the strengthening of experts backstopped by LEG to ensure current banking legislation and that the project progresses well in For this project, PFTAC and MCM have regulations in several key areas and FY2020, and to enable it to be expanded undertaken three missions so far. provided drafting suggestions to revise for the development of a banking However, budget utilization is significantly legislation and regulation. The key areas regulatory framework for Kiribati. higher than the number of missions of recommended strengthening suggests, given the two experts were included: Insurance Regulatory Reform employed for 20 and 30 days respectively. Using the banking regulatory reform The next step will be to adapt the example project structure as a model for law and prudential standards for local insurance regulatory reform, PFTAC and conditions and legal frameworks, and then Annual Report 2019 | PFTAC SECTION II | 55

start the consultation process. PFTAC plan was developed to enhance the credit will assist with this process through (1) Introduction to prudential risk governance and credit risk FY2020. supervision; management regulations, incorporating the application of IFRS 9 forward-looking Implementation Progress (2) Introduction to bank financial loan loss provisioning by Timorese Training on international good practice for analysis; and commercial banks. A follow-up mission in legislation and prudential standards. • Participant self-assessment October 2018 provided additional training • Reform Strategy and Planning (3) Introduction to credit risk on the implementation of IFRS9 and • Example Insurance Law assessment. produced for the BCTL draft regulations • Example Insurance Prudential Standards on credit risk management and IFRS 9’s • Bilateral drafting assistance • Initial Stakeholder engagement The mission provided guidance to the forward-looking loan loss provisioning • Stakeholder Consultation MFED in conducting on-site based on expected credit losses (ECL). • Final Drafting Assistance examinations of credit risk and The mission also produced proposed

operational risk at the NBT and DBT. amendments to BCTL’s regulations for Supervision Framework Development The exercise provided on-the-job capital adequacy and asset classification A supervision project was initially training to MFED staff, particularly in to address needed enhancements for the suggested in November 2016 with a TA loan file assessment. The Supervision adoption of IFRS 9. mission agreed for November 2017 with Expert provided introductory training on the Tuvalu Ministry of Finance and operational risk concepts. On-site Examination Support Economic Development (MFED). A In FY2018 PFTAC supported the RMI supervision strategy and TA plan As part of its on-site examination CD, Banking Commission through the envisages the development of a the mission developed templates and attachment of two Banking Commission supervision framework on three tools for the MFED to create its examiners to attend an FDIC on-site coordinated levels: assessment framework for credit risk examination of a Guam-based bank. The

and operational risk, including: attachment aimed to build capacity of the (1) Supervision Expert – will be engaged Commission examiners in on-site by the MFED under the Banking (1) A proposed Credit Risk examination, particularly with respect to Commission Act to undertake direct Assessment Framework document familiarity of US Anti-Money Laundering off-site and on-site supervision of and a proposed Operational Risk surveillance, supervision and the National Bank of Tuvalu (NBT) Assessment Framework document examinations standards, on which the and the Development Bank of that outlines the key areas of Commission’s own examination Tuvalu (DBT) and develop assessment for inherent risk, framework is based. The attachment supervisory capacity of the MFED; adequacy of management and provided the examiners an opportunity for

controls, and information on-the-job training from experienced FDIC (2) PFTAC will assist in developing the requirements for on-site examiners with the AML/BSA standards. supervisory infrastructure and will examination; The learnings from the FDIC attachment train MFED staff in all aspects of will be applied to the Commission’s onsite prudential supervision and will (2) Proposed timeframes to undertake examinations in RMI. assist the Supervision Expert and on-site examinations; MFED with enhancing off-site and Following on from this successful on-site supervision practices; and (3) A proposed outline of the structure attachment, in October 2018, PFTAC

and content of credit risk and again supported an attachment of Banking (3) MFED staff will be assigned to operational risk assessment Commission examiners to attend an on- develop supervisory skills and guidance manuals; site examination, but this time, with the experience by working with the experienced examiners of the Palau Supervision Expert on direct (4) An onsite examination scoping Financial Institutions Commission. banking supervision. They will template;

benefit from the training provided by PFTAC’s support for these attachments PFTAC and the Supervision Expert (5) Loan file review line sheet; and provides RMI Banking Commission with and will work with PFTAC on valuable, durable CD through on-the-job developing the supervisory (6) Loan policy assessment checklist. on-site examination training, at an efficient infrastructure. cost to PFTAC’s budget. PFTAC does not Implementation of IFRS 9 PFTAC completed the first follow-up In early 2018, Banco Central de Timor need to employ short term experts to mission of the project in November 2018 to Leste (BCTL) requested training on provide the knowledge transfer and provide training to the MFED on: IFRS 9 that PFTAC provided in April experience sharing that these on-the-job 2018. During the mission, a strategy and training opportunities facilitate. 56 | SECTION II Annual Report 2019 | PFTAC

regional supervisory issues and risks. In RMI assistance has worked towards: AFSPC Prudential Reporting Workshop Following on from the 2017 Annual (1) effective on-site examination; and The regional Prudential Regulatory Meeting in which AFSPC members

Workshop on reporting was held in identified cybersecurity and IT risk as an (2) banking regulatory infrastructure. Sydney during June 2018 attended by important issue for supervisory attention representatives from the Cook Islands, and found that there is a need for TA in In Palau progress is being with: Tonga, Samoa, Fiji, Vanuatu, managing such risks, PFTAC and MCM Solomon Islands, Papua New Guinea, staged a three-day workshop on Cyber (1) banking regulatory infrastructure. Timor Leste, Palau, RMI, FSM, the Security and IT Risk during the meeting. World Bank (Sydney), and the Australian In Papua New Guinea, the PFTAC Prudential Regulatory Authority (APRA). The workshop drew on global expertise assistance helped with: Additionally, four private sector in managing cyber and IT risk, including information technology service providers the participation of cyber experts from (1) developing a risk rating model and attended the workshop. MCM and ITD; APRA; Financial supervisory action planning process; and Services - Information Sharing and

The workshop launched AFSPC efforts Analysis Center and the Central Bank of (2) building capacity in the on-site of the Prudential Reporting Working Armenia. examination of market and liquidity Group to facilitate contacts with private risk. service providers and regional regulators The workshop provided an overview of In support of the financial sector in Samoa: experienced in developing online how to manage such risks and identified reporting processes. The event gaps in regulatory frameworks and (1) work was launched to revise and contributed to the group’s determination supervision practices. The workshop will redraft insurance legislation and of next steps, priorities, and workplans to be followed with targeted bilateral TA in regulations. address the long-standing challenges of assisting with the development of The Solomon Islands efforts included: manual Excel based prudential comprehensive risk regulations and reporting. Four private sector IT service capacity building. (1) developing a risk rating model and providers (three from Australia and one supervisory action planning process; from the United States) presented the Bilateral TA Coverage FY2019 v FY2018 and group with ideas and concepts for FY2019 saw PFTAC expand its bilateral (2) assisting the CBSI to build capacity automating prudential data submission TA coverage of member countries to 13, in the on-site examination of market and analysis reporting. up from 7 in FY2018. This was the result and liquidity risk. of additional support provided to the In Timor Leste: Follow-up work from the workshop PFTAC FSS workplan by MCM; the involved the working group developing increased use of short term experts; and (1) BCTL is enhancing its credit risk standard system requirements and three the efficient use of PFTAC’s resources regulation and incorporating of the service providers developing a through innovative TA delivery. implementation of IFRS 9. project outline and costing to develop a In Tonga: prudential reporting system for AFSPC In the Cook Islands: members. The working group will (1) work to draft insurance legislation continue the assessment of the (1) a risk rating model and supervisory and regulations was launched. proposals in FY2020, with an aim to action planning process were In the Tuvalu, PFTAC is working: identify possible solutions by the end of developed. (1) to develop a banking supervision 2019. framework. In Fiji: AFSPC Annual Meeting In Vanuatu, PFTAC’s support contributed The Association of Financial Sector (1) work commenced on revising and to: Supervisors of Pacific Countries redrafting insurance legislation and (1) development of a risk rating model (AFSPC) held its annual meeting in regulations. and supervisory action planning Vanuatu in August. The gathering process. facilitates coordination among the 11 In FSM assistance is providing for:

AFSPC member and two observer (1) banking regulatory infrastructure. countries on financial-sector issues and promotes cooperation on managing

Annual Report 2019 | PFTAC SECTION II | 57

Regional Workshop on Cyber and IT Risk Workshop, Vanuatu, August 2018

58 | SECTION II Annual Report 2019 | PFTAC

SECTION III

WORK PROGRAM (MAY 2019 – APRIL 2020)

Annual Report 2019 | PFTAC SECTION III | 65

I III SUMMARY AND OVERVIEW

This section summarizes the work institutional capacity development in change will occur with the scheduled program planned for the period May 1, the core economic and financial departure of the Macro advisor in 2019 to April 30, 2020, corresponding to competencies of the IMF, with ultimate February 2020 after a five-year the 2020 IMF fiscal year (FY2020). The progress depending on the assignment. Her successor is currently work program reflects the strategic development and effective being recruited with a target start in objectives programmed over the fifth implementation of appropriate policies September 2019 to facilitate a six- operational phase of PFTAC financing, by PIC governments and the month overlap with a slightly expanded covering the period November 2016 – reinforcement, commitment, work program. April 2022. encouragement, and resources from partners and stakeholders. With one of the PFM advisors and the PFTAC’s delivery of CD during FY2020 FSS advisor both beginning their fourth will continue to build upon the earlier ADAPTIVE TA MODALITIES year at PFTAC in October and July Phase V investments and during FY2019. PFTAC is a demand-driven provider of 2019 respectively, their departure Reflecting the adaptiveness of the PFTAC CD. In-country missions of typically should be anticipated at the end of the model, the FY2020 plan can be adjusted one or two weeks duration by the fourth year or possibly sooner, although with appropriate consultation to resident PFTAC advisor or an STX extension for a fifth-year could be accommodate opportunities for new remains the main delivery mode to considered. Early or unanticipated staff engagements or reengagements with build capacity and help implement changes have a greater adverse impact member countries, that ultimately work specific reforms. For a few more on program delivery than when towards three overarching objectives as strategically focused missions each recruitment occurs well in advance to articulated in the Phase V PD: year, additional skills or leadership may facilitate a smooth transition as was the be provided from the HQ functional case with the Revenue advisor and is • Strengthening macro-financial department, such as for PIMA planned for the Macro advisor. resilience to natural disasters and assessments, tax policy expertise, or other shocks. specialist financial sector knowledge. The recruitment of a local Economic Analyst in August 2018 following the • Enhancing macro-financial Peer learning is crucial to share best 2018 SC meeting endorsement and sustainability so that PICs have practices and country experience that budget provision has been highly sustainable systems, institutions, and often spurs new demand for PFTAC successful and has contributed to resources to tackle the medium and CD. Regional workshops and seminars improved outreach efforts including the longer-term challenges faced by their and customized training is at the heart adoption of the new Annual Report societies from social, health, and of this knowledge sharing. Attachments format. demographic changes, and further reinforce the impact of regional particularly the impact of climate events with PFTAC facilitating short change. visits between countries.

• Facilitating sustainable, inclusive STAFFING CHANGES growth, the ultimate objective for the With the turnover of four of the team of citizens of the region and their seven LTX in FY2019, the outlook for leadership that PFTAC contributes stability with the team of resident towards through individual and experts in FY2020 is favorable. One firm 66 | Section III Annual Report 2019 | PFTAC

TABLE 11. FY2020 PLANNED WORKSHOP/SEMINARS

Estimated Duration Sector Partner Location Topic Date (Days) Joint PFTAC/CARTAC Conference on Small State PFM PFM IMF/ CARTAC Washington Dec-19 5 Reform and Climate Change and Disaster Resilience PFM PIFS Suva, Fiji PFM Leadership (fully financed by EU/PIFS) Jun-19 3 PFM Nadi, Fiji Internal Audit Workshop Jan-20 5 Revenue Nadi, Fiji Managing Large Taxpayers Feb-20 5 Managing Effective Compliance Improvement Revenue Nadi, Fiji Mar-20 5 Strategies Revenue Nadi, Fiji Managing Taxpayer Services for Operations Managers Oct-19 5 Revenue Nadi, Fiji Workshop for Taxpayer Audit Managers Jul-19 5 Management of Core Tax Functions for Senior Revenue Nadi, Fiji Nov-19 5 Managers Revenue PITAA Majuro, RMI Annual PITAA Conference Sep-19 2 Capacity Development for Government Finance Statistics/GFS Nadi, Fiji Aug-19 5 Statistics Statistics/RSS Nadi, Fiji Workshop for National Accounts Seasonal Adjustments Jul-19 5 FSS Guam Risk Based Supervision Northern Pacific Sub-Region Feb-20 5 FSS Nadi, Fiji Cyber Risk Regulation Nov-19 5 FSS AFSPC Tonga Annual AFSPC Meeting Sep-19 2 FSS AFSPC Tonga Cross Border Regulation Sep-19 3 Port Moresby, Macro STI Fiscal Frameworks May-19 5 PNG Revenue/ Effective Exchange of Admin and Tax Data for GDP PITAA Majuro, RMI Sep-19 3 RSS/Macro Compilation PFM/ Macro WB Honiara Managing Fishing Revenues Aug-19 5

PFM /Macro Nadi, Fiji Managing Fiscal Risks Apr-20 5

PFM/ Macro UNDP Nadi, Fiji Budget Documentation Nov-19 5 GFS/Macro STI Nadi, Fiji Workshop on GFS and Debt Sustainability Feb-20 5 TOTAL 93

TRAINING/WORKSHOP EVENTS at Every PFTAC program is scheduled to draw on a recent IMF Working Paper. the regional or sub-regional level are deliver at least one training event, with expected to be up 24 percent with 21 the expanded Revenue program Training collaboration also extends to events planned versus 17 delivered in accounting for a third of the total. Five other parts of the IMF as well as FY2019. Most events are open to all 16 events will be delivered jointly with the development partners. A customized PFTAC member countries, others may Macro program, three with the PFM IMF Fiscal Framework course will be target sub-groups, either program, one with GFS, and another held in PNG with STI, and a joint geographically designated (a common with both the RSS and Revenue CARTAC/PFTAC event on PFM approach for the three northern Pacific programs. This reflects the cross- Reforms and Climate Change and nations of FSM, Palau, and RMI, and cutting nature of the Macro program Disaster Resilience is planned in occasionally other Micronesian states), that is focused on building capacity with Washington along the lines of the highly or where the participating countries medium-term economic frameworks successful Small State Revenue share common issues, such as those and forecasting that is closely related to Mobilization Conference in July 2018. receiving significant fishing revenues. the capacity building of the other programs around fiscal management, Joint events with AFSPC and PITAA are Illustrating the integration of TA and revenue collection, and statistical planned as in the past, and PFTAC will training into seamless CD, it is also compilation. The joint Macro/ play a key role at a PIFS organized PFM quite common for a seminar or RSS/Revenue workshop will focus on Leadership symposium, and a follow-on workshop to be provided exclusively for the challenges of Statistical Offices to a highly successful 2018 Fishing the officials of a country receiving a TA having access to reliable tax and other Revenue Management event will be mission, particularly under the Macro administrative data for GDP delivered with the World Bank. and PFM programs. compilation that is essential for forecasting and economic modeling. This workshop will be held in conjunction with the annual PITAA heads meeting in Majuro, RMI and will

Annual Report 2019 | PFTAC SECTION III | 67

CHART 7. FY2020 WORKPLAN (2,495 DAYS) VS. FY2019 OUTTURN (2,110 DAYS)

400 343 350 303 300

250 224 215 207 200 171 153 147 150 130 129 116 85 100 72 71 67 57 50 5 0 Fiji Tonga Regional Solomon Cook Vanuatu Papua New Rep of Kiribati Samoa Palau Timor-Leste Tuvalu Niue FSM Nauru Tokelau Islands Islands Guinea Marshall Islands (RMI)

FY19 Outturn FY20 Plan

FY2020 WORK PROGRAM will expand further than the However, this will be achieved with 22 percent fewer record outturn in FY2019 as follows: Field TA days that will decline to 236 from 302 following a boost in the STX budget in FY2019 to finance • 2,495 TA Field days are planned (772 LTX and 1,723 unforeseen demands in the Solomon Islands and other STX), up 18.2 percent from 2,110 days. countries. Several STX assignments in FY2019 were longer than the historic TA average to support insurance • 188 Activities are planned (167 missions and 21 reforms, accounting for a surge in TA Field Days but with workshops), up 24 percent over 151 activities (134 a lower activity count. missions and 17 workshops). CHART 8. DISTRIBUTION OF FY2020 MISSION DAYS The respective workplans are summarized in annexes to the (2,495 DAYS) BY PROGRAM following program chapters. Full FY2020 plan details are available at www.pftac.org from two perspectives, program- FSS, 9% by-program and additionally by country. GFS, 5% Changes to the overall work program are attributed to: Revenue, RSS, 9% • Revenue program expansion that reflects scaling-up 42% over the entire year versus only the second half of FY2019. The number of activities will grow 24 percent (77 up from 62), and TA field days by 27 percent (1,058 up from 834). The resident advisor will devote slightly Macro, 8% more time to managing the program with LTX field days dropping from 92 to 84 days, with 92 percent of the program delivered by STX at 974 field days. PFM, 27% • The PFM program is finally expected to reach a long- envisaged level of execution, with 43 percent more Field TA Days (668, up from 468), and 32 percent more • Macro program resource utilization will grow from a activities (41 up from 31). With both resident advisors planned overlap of up to six months between the expected to be in place throughout the year, the number outgoing resident advisor who is due to finish after five of LTX days will grow from 177 to 250, plus a years in February 2020 and the appointment of a proportionate increase in STX from 291 to 418 days. successor targeted for September 2019. Activities will increase by 27 percent (19 up from 15), and TA Field • The FSS program will see a 27 percent increase in Days will increase 50 percent to 198 from 132 days, activities with 23 planned compared to 18 in FY2019. predominately LTX days (165 up from 121), and to a lesser extent STX days (33 up from 11). Annual Report 2019 | PFTAC Section III | 67

• Workplans for the two Statistics programs are expected days, partly offset by additional LTX days given the return to deliver slightly more activities but using fewer to stability with the resident advisors. resources compared to FY2019. Overall, 12 percent more Statistics activities are planned at 28 versus 25, all The proportion of resources targeted to the seven fragile attributed to the RSS program with the GFS activities Pacific states in FY2020 is approximately the same as in remaining steady. TA field days are expected to decline FY2019 at 35 percent (869 of 2,495 planned TA Field Days). 10 percent net from 374 to 335 days, all due to fewer STX

COUNTRY LEVEL planning will see CHART 9. FY2020: 188 PLANNED MISSIONS/ ACTIVITIES slightly less than half of the 2,495 days of field deliver in FY2019 provided to five countries, with Fiji (13.7 percent), Vanuatu, 13 Cook Islands, Tonga (12.1 percent), Solomon Tuvalu, 7 16 Islands (8.6 percent), Cook Islands (8.3 percent), and Vanuatu (6.9 Tonga, 20 Fiji, 24 percent). While Fiji has traditionally been a major recipient of PFTAC Tokelau, 0 assistance across all programs, and the Timor-Leste, 7 FSM, 6 Solomon Islands and Vanuatu are Kiribati, 9 usually in the top six countries, Tonga Solomon and the Cook Islands have moved up Islands, 14 Nauru, 6 from recent years as moderate Niue, beneficiaries, in both cases from Samoa, 11 6 expanded engagement in fiscal issues, Palau, 9 PFM as well as Revenue where efforts RMI, 11 PNG, 8 are focused on revenue mobilization Regional, 21 including within the context of PACER

Plus reforms.

The next five countries will account for 27 percent of PFTAC resources, with CHART 10. FY2020: 2,495 PLANNED TA FIELD DAYS

PNG (6.1 percent), RMI (5.9 percent), Vanuatu Kiribati (5.2 percent), Samoa (5.2 Tuvalu 7% Cook Islands percent) and Palau (4.6 percent). 3% 8% PNG’s share has dropped marginally Tonga 12% over recent years with their heavy Fiji 14% revenue mobilization TA needs now Tokelau being met from the HQ managed trust 0% fund that is financing a resident advisor FSM Timor-Leste and extensive TA inputs. The volume of 3% 3% PFM support that Samoa received in Kiribati FY2019 will proportionately decline, and 5% while a modest revenue program is Solomon Nauru currently planned, this could Islands 2% subsequently scale-up at mid-year with 9% Niue respect to PACER Plus needs. Revenue 3% Samoa Palau support to both Kiribati and Palau will be RMI Regional PNG higher in FY2020 to support revenue 5% 5% 6% 9% 6% mobilization objectives, and possible

VAT implementation in Palau.

The remaining six PFTAC member FSM (2.7 percent), Nauru (2.3 percent), A reallocation or reprioritization of countries account for a further 14 percent and Tokelau (0.2 percent). Even though resources may eventuate during the mid- of allocated resources for in-country these planned resources may be initially year work program review, including the support, Timor-Leste (3.4 percent), modest, every country also benefits from possibility of expansion of programs in Tuvalu (2.9 percent), Niue (2.8 percent), regional training events. Timor-Leste and Nauru if the authorities’ 68 | Section III Annual Report 2019 | PFTAC revenue reform strategies move forward. A further 9 percent of PFTAC resources exclusive of the time spent by the seven In the case of Timor-Leste this entails (224 TA field days) are currently resident advisors in managing and plans to introduce VAT, and for Nauru to earmarked to regional activities, primarily overseeing their respective programs develop tax reforms to compensate for in the preparation and delivery of 21 from the PFTAC office in Fiji. This significant tariff revenues that must be planned workshops and seminars amounted to 733 work days in FY2019, replaced under PACER Plus. an average of at least 100 days per year Finally, the 2,495 TA Field Days that for each advisor. constitute the FY2020 work program is

TABLE 12. PROPOSED FY20 BUDGET (US DOLLARS)

% of Prog FY2019 FY2020 Program Tot Est Ph V Doc Budget Document Expenses to thru end- Projected Orig. Proposed Budget end-FY19 Budget Change FY19 Outturn Budget Budget Resident Advisors (Long Term $12.6 $5.0 40% $2.17 $2.00 $2.28 $2.46 $0.2 Experts - LTX) LTX Travel $2.3 $1.0 42% $0.44 $0.39 $0.39 $0.46 $0.1 Short-Term Experts (STX) $11.4 $4.4 38% $2.35 $2.00 $2.10 $2.35 $0.2 Diagnostic Missions $1.2 $0.6 50% $0.42 $0.33 $0.20 $0.32 $0.1 Training/Seminars/Workshops $6.0 $1.2 19% $1.17 $0.98 $1.07 $1.22 $0.1 Backstopping/Project $1.9 $0.6 31% $0.37 $0.27 $0.37 $0.40 $0.0 Management Other Costs (Evaluation, misc., $1.6 $0.4 26% $0.51 $0.37 $0.50 $0.74 $0.2 etc.) Total TA Provision/Delivery $36.9 $14.1 38% $7.43 $6.34 $6.91 $7.94 $1.0 Trust Fund Management Fee* $2.6 $1.0 38% $0.52 $0.44 $0.48 $0.56 $0.1 Total Trust Charges $39.5 $15.1 38% $7.95 $6.78 $7.40 $8.50 $1.1 IMF and Host Country In-Kind $2.6 $0.50 $0.59 $0.50 $0.50 $(0.0) Contribution TOTAL $42.1 $8.45 $7.37 $7.90 $9.00 $1.1 * Trust Fund Fee is 7 percent of funds utilized for TA delivery

PROPOSED FY2020 BUDGET is just over broadly consistent with the increase in the In FY2019, the LTX cost outturn was below $US 1.1 million more than the baseline work program (18 percent more TA field budget because of a cumulative gap of 10 budget, effectively reflecting the scaling-up days and 24 percent more activities). The months between incoming and outgoing of the Revenue program, and contingent remaining variance is attributed to advisors. While the PFTAC anniversary on a further tranche being received or at $US0.46 million in LTX costs to cover a full created a one-time boost in other least pledged before the middle of FY20. year of the entire team of seven resident expenses, $US 0.3 million budget advisors plus six months of a second provision is included in FY2020 for the At $US 8.5 million, the proposed budget is Macro advisor. 25.2 percent higher than the projected mid-term external evaluation of the fifth FY2019 outturn of $US6.78 million. This is phase of PFTAC operations.

68 | Section III Annual Report 2019 | PFTAC

TABLE 13. PFTAC FY20 BUDGET BY PROGRAM (US DOLLARS)

Revenue PFM Macro FSS RSS GFS Other Total Resident Advisors (Long Term 335,499 664,830 517,339 318,362 309,754 309,754 2,455,538 Experts - LTX) LTX Travel 61,546 124,910 101,999 57,765 57,679 56,080 459,979

Short-Term Experts (STX) 1,173,766 570,000 64,862 222,072 168,283 33,734 112,932 2,345,649

Diagnostic Missions 177,668 65,595 49,635 12,767 12,767 318,432

Training/Seminars/Workshops 396,030 249,713 164,415 192,245 123,000 91,451 1,216,854

Backstopping/Project Management 59,850 79,232 83,875 73,842 68,842 36,660 402,301

Other Costs (Evaluation, misc., etc.) 14,036 27,355 10,142 10,142 679,491 741,166

Total TA Provision/Delivery 2,218,395 1,781,635 848,615 923,954 755,467 582,770 829,083 7,939,919

Trust Fund Management Fee* 155,288 124,714 59,403 64,677 52,883 40,794 58,036 555,794

Total Trust Charges 2,373,683 1,906,349 908,018 988,631 808,350 623,564 887,119 8,495,713 * Trust Fund Fee is 7 percent of funds utilized for TA delivery

24 | Section III Annual Report 2019 | PFTAC

I III REVENUE ADMINISTRATION

PFTAC’s CD strategy for revenue administration for FY2020 represents a continuation and expansion of TA activities working towards:

• Objective 1: Strengthened revenue administration management and governance arrangements,

• Objective 2: Strengthened core tax administration functions,

Under the proposed FY2020 biggest impacts from the PACER Plus mobilization and are being promoted to workplan, 77 activities are planned, trade agreement. Although PACER facilitate the transition towards more representing a 38 percent increase Plus implementation is scheduled to effective and efficient tax systems. over the expected outturn of 56 take place over an extended time Raising TADAT awareness has also activities in FY2019. This will be frame, PICs are becoming increasingly provided PICs with an objective view of reflected in expected 1,058 TA field aware of its implications and have the strengths and weaknesses of their days of technical support, compared requested extra PFTAC TA to assess respective administrations and the need with786 in FY2019. its impact on tax revenues and for their reform agendas to include evaluate options to replace possible TADAT indicators. The upscaling of the Revenue revenue losses. In response, PFTAC is Program now enables PFTAC to planning a program to support affected AT THE REGIONAL LEVEL, delivery of address a large unmet TA demand PICs in identifying and evaluating the Revenue Administration program in and facilitates considerable policy options in terms of revenue FY2020 will include seven regional expansion of the program including impact, legislative change workshops up from six in FY2019, responding to a range of revenue requirements, and administrative covering the following topics: mobilization needs to address constraints. declining trade taxes, revenue (1) Managing the Large Taxpayer; volatility (from natural resources and PFTAC will continue to promote the use of fishing licenses), and to build ISORA, TADAT, and the implementation (2) Management of Debt and Returns Workshop for individual and institutional capacity of an MTRS for those countries Operations Managers; for modern revenue administration. undertaking substantive reforms. These

tools are increasingly playing an important (3) Management of Taxpayer Through the upscaling PFTAC will part in strengthening revenue Services for Operations assist those countries facing the administration and domestic revenue Managers;

Annual Report 2019| PFTAC Section III | 73

FSM will initially receive a mission to be (4) Audit Planning and Tonga is actively pursuing revenue delivered jointly with PITAA to Management; mobilization and administration strengthen audit skills, with the modernization and will benefit from 8 likelihood of additional TA needs (5) A joint workshop with the missions following a late FY2019 tax emerging given the criticality and high Macroeconomic Programming policy mission led from Washington to priority of revenue mobilization for the and Real Sector Statistics set the scene for responses to PACER authorities. programs on Facilitating Effective Plus Challenges. Exchange and Use of In support of ambitious fiscal reforms in Administrative (Tax and Social Other PACER Plus countries that will Timor Leste, provision has been made Security) Data for National see more TA than in recent years, for 3 strategically focused missions for Accounts; and include Kiribati with 4 missions; Nauru possible development of an MTRS and with an initial plan for 3 missions that plans towards implementation of a VAT. (6) Managing Effective Compliance may subsequently expand depending Improvement Strategies on the authorities’ reform intentions; Niue will receive 2 tax administration

similarly, Samoa with 5 missions; and missions plus a tax legislation mission (7) Management of Core Taxes Vanuatu with 4 missions to build on to advance ongoing reform efforts, and Functions for Senior Managers recent gains, and potentially to support Tuvalu is currently slated to receive a

the implementation of income tax single mission. IN TERMS OF COUNTRY subject to parliamentary passage. ACTIVITIES, TA and training in Of the 16 PFTAC member countries, 14 FY2020 will continue to entail TA Fiji has been a very effective user of will receive bilateral direct TA, with no provided to PICs by the resident PFTAC revenue assistance and has plans for either Tokelau or PNG that is advisor with a significantly higher generously shared its experiences and now receiving extensive resources and proportion provided by STX, managed challenges from the region and will support under the FAD managed MTRS and backstopped by the resident benefit from 7 missions in FY2020. program that is financed under the advisor and HQ staff. IMF’s Revenue Mobilization Trust Fund

In the Northern Pacific, RMI will be that provides for significant CD The scaling-up of the Revenue hosting the 2019 PITAA annual meeting resources in tax administration, tax program entails significantly larger that will be supported by PFTAC with an policy, and tax legislation including the programs in several countries, mostly adjoining workshop on the sharing of tax placement of a resident advisor. The signatories to the PACER Plus data with national statistical offices for PFTAC Revenue program will however agreement, including Solomon GDP compilation. RMI will additionally remain closely informed of Islands with 9 missions planned to receive 4 PFTAC missions and Palau developments in PNG to add value support extensive modernization of will similarly receive 4 missions to build when opportunities arise and in terms of the tax administration around core on administration strengthening in longer-term sustainability of the functions, creating an effective large advance of the possible introduction of ambitious reform program. taxpayer program, and holistic VAT. revenue reforms including potentially a MTRS.

74 | Section III Annual Report 2019 | PFTAC

TABLE 14. FY2020 WORK PROGRAM SUMMARY: REVENUE ADMINISTRATION

Beneficiary Mode Activities Current Position Expected Outcomes Comments/ Risk

STRATEGIC OBJECTIVE 1: BETTER REVENUE ADMINISTRATION, MANAGEMENT AND GOVERNANCE ARRANGEMENTS Cook Review Strategic and No strategic or annual Strategic and operational STX Islands Operational Plan operational plan plans prepared Design Function Based Function based structure Cook Made progress but not Improve monitoring and STX Structure and Compliance introduced and effective CIS Islands implemented effectively evaluation of risk Improvement Strategy facilitating compliance Cook Review reform progress and Review reform progress and LTX Periodic review required Islands status of Recommendations status of recommendation Review compliance Effective CIS facilitating high Determine effectiveness and improvement strategy and Effective implementation levels of compliance and Fiji STX further improvement Public and Private Ruling required disputes resolution process needed. Program in place

Areas identified for further Quality assurance review E-tax and risk needs further Fiji STX IT Quality Assurance review technical assistance completed assistance

Develop industry partnership Industry partnership in Industry partnership Industry partnership to Fiji STX strategy process of being designed developed by 31/12/2019 improve compliance

Review reform progress and Review reform progress and Fiji LTX Periodic review required status of Recommendations status of recommendation Finalize renewal of Stamp Legislation not finalized Modernized laws Request by authorities to Fiji STX Duty and VAT legislation yet. implemented by 6/30/2020. modernize their tax laws. Review reform progress and Review reform progress and FSM LTX Periodic review required status of Recommendations status of recommendation Review organisation Strong governance Implementation of modernisation project plan Project plan developed framework needed and Kiribati STX modernization strategy and and compliance improvement and being implemented expanded compliance improved compliance levels strategy project improvement strategy Review reform progress and Review reform progress and Kiribati LTX Periodic review required status of Recommendations status of recommendation Support for Facilitate seabed mining and Modernized laws Request by authorities to Kiribati STX implementation of new small business tax implemented modernize their tax laws. legislation required

Marshall Review compliance Compliance improvement An effective CIS facilitating Determine effectiveness and STX Islands improvement strategy strategy developed high levels of compliance. further improvement.

Marshall Review reform progress and Review reform progress and LTX Periodic review required Islands status of Recommendations status of recommendation Pacer Plus will impact on Modernized laws Provide options to recoup Nauru FAD Pacer Plus mission revenue. implemented by 30/6/2021. losses from trade taxes LTX / Review reform progress, Ensure appropriate Nauru Periodic review required Reform strategy in place. STX organizational arrangements institutional settings. Facilitate implementation of Function based structure An organizational structure Assistance to ensure Niue STX new organizational structure introduced recently in place and suitably staffed successful structure Review reform progress and Review reform progress and Niue LTX Periodic review required status of Recommendations status of recommendation Renewal of Income Tax Act Renewal of tax legislation Modernized laws Request by authorities to Niue STX and Tax Administration Act in progress implemented modernize tax laws. Review implementation of Functional structure f Organizational structure in PFTAC recommendations Palau STX functional structure being implemented place and suitably staffed accepted. Facilitate implementation of VAT system implemented on New tax necessary -reduced Palau STX VAT to be introduced VAT scheduled date. grants Review reform progress and Review reform progress and Palau LTX Periodic review required status of Recommendations status of recommendation Renew compliance Plan needs evaluation and New generation CIP and Industry partnership strategy Samoa STX improvement strategy and improvement, support industry partnership introduced but struggle to get industry partnership strategy needed for implementation designed and implemented off ground LTX / Review reform progress and Review recommendations Samoa Periodic review required STX core tax function and status of implementation

Annual Report 2019| PFTAC Section III | 75

Beneficiary Mode Activities Current Position Expected Outcomes Comments/ Risk

Facilitate implementation of Design of LTO delivered and Assistance requested for Solomon Plans for implementation STX the large taxpayer office and function-based structure design of LTO and function- Islands of LTO developed function-based structure introduced based structure Solomon Need identified for a Design and implementation Authorities requested FAD Facilitate design of MTRS Islands MTRS mission of an MTRS assistance with MTRS. Solomon Facilitate compliance Compliance improvement New generation CIP Compliance Improvement STX Islands improvement strategy plan needs to be renewed designed and implemented Plan is evaluated Solomon Assist with implementation of VAT implementation Successful implementation Decision to implement a STX Islands VAT require support of VAT. VAT has been made Need identified for a Design and implementation The authorities requested Timor-Leste FAD Develop MTRS MTRS mission of an MTRS assistance with MTRS. Facilitate implementation of VAT implementation Successful implementation A decision to implement a Timor-Leste STX VAT requires support of VAT. VAT has been made Review implementation of Need identified to expand Strategy developed to Tonga STX Plan in place to expand LTO large taxpayer (LTO) office the LTO expand LTO Renewed CIP implemented Renew the compliance Strategies implemented and high-risk segments Current strategies and plans Tonga STX improvement strategy and but needs to be renewed showing compliance evaluated industry partnership strategy improvements LTX/ Review reform progress and Implementation of reform Tonga Periodic review required STX governance arrangement and governance framework. Finalize renewal of Renewal of tax legislation Modernized laws Request by authorities to Tonga STX Consumption Tax legislation in progress implemented by 30/6/2019. modernize their tax laws. Review compliance Compliance improvement improvement strategy and plan needs to be renewed, Effective implementation of Governance framework Tuvalu STX overarching modernization support needed with the strategy and reforms provide better outcomes plan implementation Review compliance Compliance improvement Compliance Improvement Renewal of Plan may be Vanuatu STX improvement strategy plan needs evaluation Plan is evaluated needed Review reform progress and Review reform progress and Vanuatu LTX Periodic review required status of Recommendations status of recommendation LTX / Training on establishing Assist authorities in the Regional Managing Large taxpayers Important reform step STX (LTO’s) needed design of LTO’s LTX / Introducing effective Training on compliance Focus on importance of Support effective risk Regional STX compliance improvement improvement needed effective risk management management Tax and Social Security Data Sharing data for national Sharing of data for national Identify constraints and Regional LTX for National Accounts accounts problematic accounts improved present best practice

STRATEGIC OBJECTIVE 2: STRENGTHENED CORE FUNCTIONS EVIDENCED BY AN ACCURATE TAXPAYER BASE, TAXPAYER SERVICES SUPPORTING VOLUNTARY COMPLIANCE, IMPROVEMENTS IN FILING, PAYMENT AND AUDIT SERVICES

Review reform progress and Review reform progress and Niue LTX Periodic review required status of recommendations status recommendation Improve management of Improvement required for Operational plan in place to Potential to improve on time Palau STX outstanding tax returns and management of returns improve on-time filing and filing and payments tax arrears and arrears payment Review taxpayer service and Improvement required for Improved delivery of More TA is needed to Palau STX facilitate improvements the taxpayer service taxpayer services support implementation Review reform progress and Review reform progress and Palau LTX Periodic review required status of recommendations status recommendation Improve management of Improvement required for Operational plan in place to Potential to improve on time Samoa STX outstanding tax returns and management of returns improve on-time filing and filing and payments tax arrears and arrears payment Improve taxpayer services Improvement required to Improved taxpayer services Improvement in voluntary Samoa STX and audit function service and audit and audit function compliance. Review reform progress and Review reform progress and Samoa LTX Periodic review required status of recommendations status recommendation Improve management of Improvement required for Operational plan in place to Solomon Potential to improve on time STX outstanding tax returns and management of returns improve on-time filing and Islands filing and payments tax arrears and arrears payment Develop audit strategy and Solomon Audit and taxpayer service Develop audit plan and TA requested to develop STX operational plan, improve Islands to be improved improve taxpayer service new generation audit plan taxpayer service Improve management of Improvement required for Operational plan in place to Potential to improve on time Timor Leste STX outstanding tax returns and management of returns improve on-time filing and filing and payments tax arrears and arrears payment

76 | Section III Annual Report 2019 | PFTAC

Beneficiary Mode Activities Current Position Expected Outcomes Comments/ Risk

Improvement required for Improved delivery of TA needed to institutionalize Timor Leste STX Strengthen taxpayer services the taxpayer service taxpayer services concept Improve management of Improvement required for Operational plan in place to Potential to improve on time Tonga STX outstanding tax returns and management of returns improve on-time filing and filing and payments tax arrears and arrears payment Review progress and further Improvements required for The audit function operating Audit modernization plan Tonga STX strengthen the audit function the audit function at improved efficiency levels has been accepted LTX/ Review reform progress and Successful implementation Tonga Periodic review required STX revenue administration of reform Improve management of Improvement required for Operational plan in place to Potential to improve on time Tuvalu STX outstanding tax returns and management of returns improve on-time filing and filing and payments tax arrears and arrears payment Review and improve taxpayer Improvement required for Improved delivery of Introduce a taxpayer Tuvalu STX services, the taxpayer service taxpayer services services strategy. Improved delivery of Improve taxpayer services Improvement required for TA requested to build Vanuatu STX taxpayer services and audit and review audit function taxpayer service and audit function and capability. function Improve management of Improvement required for Operational plan in place to Potential to improve on time Vanuatu STX outstanding tax returns and management of returns improve on-time filing and filing and payments tax arrears and arrears payment Review reform progress and Review reform progress and Vanuatu LTX Periodic review required status of recommendations status recommendation Management of Core Tax Training on management Senior management LTX/ Strengthen management of Regional Functions for Senior of Core Tax Functions for increased awareness of STX tax functions Managers Senior Mangers needed managing core tax functions LTX / Training on audit Improve audit management Enhanced audit Regional Audit Managers Workshop STX management needed expertise. management capability Training on debt and LTX/ Management of Debt and Improve returns and debt Enhanced debt and returns Regional return management STX Returns for Ops Managers management capability. management needed LTX / Management of Taxpayer Training on managing Improve management of Enhanced taxpayer services Regional STX Services for Ops Managers taxpayer services needed Taxpayer services management

Annual Report 2019| PFTAC Section III | 77

I III PUBLIC FINANCIAL MANAGEMENT

In FY2020, TA in PFM will continue to assist members using various modalities to strengthen capacity in three broad areas, consistent with the objectives set out in the program document: • Planning and prioritization of PFM reforms based on the results of PEFA assessments, ongoing development of PFM reform roadmaps; and support for strengthening of legal frameworks; • Strengthening budget preparation, including better integration of planning and budgeting; improved budget transparency, execution; and stronger regional, sub-regional, and country- forecasting and management; and debt, asset, and risk management; and specific training jointly sponsored by PFTAC and regional partners like PASAI, • A workshop on the disclosure and • Strengthening budget monitoring, management of contingent liabilities PRIF, and PIFS. reporting and accountability. and other specific fiscal risks.

Planned regional or sub-regional events PFM Capacity Development will be IN TERMS OF COUNTRY ACTIVITIES, include: delivered in a variety of forms including: TA the delivery under the PFM program in provided directly to member countries FY2020 will be at least 30 percent • Working with the Pacific Islands greater than FY2019, with 41 through missions by the PFTAC resident Forum Secretariat (PIFS), a PFM missions/activities planned versus an advisors and/or by an STX. A little under half leadership seminar with Finance the missions will involve STX, but since their Ministry heads will discuss issues of expected FY2019 outturn of 31, and with missions tend to be longer than those of the commonality in PFM; 668 days of TA field delivery up 200 days resident advisors, almost two-thirds of from FY2019. mission days (418 of 668 days) are expected • A joint Caribbean/Pacific event is planned to bring together Small to be delivered by STX; In the Cook Islands, TA will target Island States senior PFM officials improving treasury operations and together in Washington to be PFTAC will continue to coordinate with other controls for non-salary expenditure. providers of PFM TA to ensure consistency coordinated with CARTAC that will include a focus on disaster resilience; and sustainability in the delivery of TA to PTAC will work across multiple PFM members. objectives with the Fiji authorities in FY2020 • Building on a highly successful event AT THE REGIONAL LEVEL, five regional or including preparations for and conducting in 2017, a regional workshop on the PEFA assessment. Assistance will be sub-regional workshops are planned drawing fishing revenue on Expenditure provided to revise financial instructions on the resources of the PFTAC resident Forecasting/Budget Documentation advisors, IMF Fiscal Affairs Department staff, is planned; consistent with new PFM legislation, STX, and experts from other development including alignment with international partners including the UNDP, the World Bank • A regional workshop on internal audit; standards and good practices, and address and ADB; and existing limitations. To facilitate the new • A regional workshop on cash flow PFM legislation, a mission on preparing an 78 | Section III Annual Report 2019 | PFTAC

implementation plan will be conducted. Palau will be provided guidance with a financial reporting will also continue with Efforts will also continue to make planned PEFA self-assessment. a focus on notes to the financial improvements to risk-based audit systems. statements and a fixed asset framework. PFTAC will lead a full national PEFA in Further training for ministries on the Chart of PNG working with other development Tuvalu will be supported in making Accounts will be provided as well as the partners that are expected to support improvements in their annual budget quality control of a CoA manual. Finally, subsequent sub-national PEFA documentation. assistance will be provided to improve the assessments. presentation of budget execution reporting In Samoa a review of treasury business and analysis. In support of a PEFA assessment in operations is planned to improve Timor Leste, PFTAC will work with the efficiency of financial reporting and work PFTAC will provide input to Kiribati, on their authorities and other development will continue improving financial PFM roadmap. partners on preparation of a PFM Reform reporting. Roadmap. RMI will be supported in making The Solomon Islands will receive further Ongoing assistance in the development improvements in their annual budget TA to help improve treasury operations of a PFM Reform Roadmap will continue documentation. and controls for non-salary expenditures. for Tokelau.

FSM will receive TA to improve treasury Tonga will receive support for a planned Vanuatu will benefit from reviews on: (1) operations and controls for non-salary PEFA self-assessment, in addition to progress on improving accounting expenditures. consideration for updated PFM internal controls and CD needs to adopt legislation, and further TA for payroll new accounting regulations, and (2) risk audit. A review of the Chart of Accounts Nauru will be supported with complying based internal audit functions with will identify next steps to be taken. A with IPSAS Cash reporting standards. additional training planned. Assistance mission to prepare a revision to the PFM will also be provided to improve financial Niue will receive assistance in drafting new legislation will focus on updating reporting and compliance with financial PFM legislation. legislation consistent with on-going and regulations. planned reforms. Work on improving

Annual Report 2019| PFTAC Section III | 79

TABLE 15. FY2020 WORK PROGRAM SUMMARY: PUBLIC FINANCIAL MANAGEMENT

Beneficiary Mode Activities Current Position Expected Outcomes Comments/ Risk

STRATEGIC OBJECTIVE 1: IMPROVED LAWS AND EFFECTIVE PFM INSTITUTIONS The draft legislation is currently being reviewed and will need to go Strategy to update to bill drafters after review. Delay in Draft legislation prepared ministries and officials Prepare implementation plan preparation could be problematic Fiji STX and circulated for on changes required in for draft PFM Legislation and require date changes in comments new legislation and implementation plans. This is timetable especially critical for those areas with delayed implementation dates Review Financial Regulations and identify changes needed Minimal updates are Update regulations to Delay in approval or legislation is Fiji STX updating financial regulations underway support new legislation staled could change dates through work at home mission PEFA assessment is Government officials will Need to LTX/ Planning for PEFA is Fiji PEFA Assessment conducted and report plan and prepare evidence for STX underway is issued assessment prior to fieldwork Working with the Secretary to A number of diagnostics PFM Roadmap establish set of PFM priorities LTX/ missions have been Kiribati PFM Roadmap Development endorsed by taking into account findings from STX undertaken. PFM Government the PEFA self-assessment and Roadmap still not drafted PIMA and other diagnostic efforts The current law Working with the Department to Draft PFM Legislation Niue STX Draft new PFM Bill governing PFM is over prepare a contemporary PFM law prepared 40 years old to cover all of Government in Niue Climate change Preparing and working with Palau LTX/ readiness recommended PEFA Self- Palau PEFA Self-Assessment officials to undertake a PEFA self- STX that Palau undertake a assessment conducted assessment PEFA PEFA assessment to be conducted Pre-PEFA work has PEFA report checked LTX/ with assistance for agencies, ADB PNG PEFA Assessment commenced with concept by PEFA Secretariat STX and WB. Sub national PEFA's to be note finalized and finalized undertaken by other providers Providing input into PFM Working with officials and Establishing PFM reform White Paper. Field work PFM Roadmap development partners post PEFA Timor-Leste LTX priorities post PEFA on PEFA underway led established assessment on future actions in by the WB PFM Using the PEFA self-assessment PFM Roadmap Establishing PFM reform Self-Assessment undertaken in 2017 to establish a Tokelau LTX adopted by priorities post PEFA undertaken in 2017 roadmap of priority actions to be Government undertaken in subsequent years PEFA self-assessment A lack of information available The need for update of LTX/ is conducted and can during the self-assessment mission Tonga Pre-PEFA PEFA framework and STX be used to update may require government officials to indicators acknowledged reform plans finalize after the mission Review legislation and Review draft recommend updates Reform activities will need to be Prepare draft amendment or legislation and Tonga STX consistent with current reviewed by government to ensure revision to PFM Legislation implementation operations and reform inclusion within the revisions strategies plans Currently proposed to be Workshop with leaders of the Workshop-PFM Leadership working with EU and Completion of Regional LTX Ministries of Finance on key Workshop PIFS on a PFM Workshop contemporary issues Symposium Model on the successful revenue conference in 2017 bringing Review draft Currently proposed for together the leaders of the Conference- Joint legislation and Regional HQ implementation in Nov Ministries of Finance in Caribbean CARTAC/PFTAC Leadership implementation 2019 and Pacific to work through strategies common PFM issues and disaster management STRATEGIC OBJECTIVE 2: STRENGTHEN BUDGET PREPARATION TOWARDS MORE COMPREHENSIVE, CREDIBLE & POLICY ORIENTED BUDGET 2019/20 Budget Further developing budget Working with the Macro Advisor to document is improved Marshall process development tools to enable improved budget LTX in terms of Islands automate the process and presentation. presentation and improve budget documentation Assisting the MoF to utilize development process 80 | Section III Annual Report 2019 | PFTAC

Beneficiary Mode Activities Current Position Expected Outcomes Comments/ Risk of the budget is improved budgeting development improved. tools across government

2020 Budget is reported in an Working with PRIF to improve Working with PRIF to improve the improved format with a Tuvalu LTX the multiyear budget process budgeting for capital and more credible for infrastructure and capital. infrastructure. approach towards public investment. Working with macro adviser and Initial workshop was other providers, FFA, WB, Tuna completed in February Workshop - Fishing Revenues Completion of the Commission, ADB and the PNA to Regional LTX 2017 bringing together Follow up workshop provide follow up on budget work national institutions particularly looking at revenue involved in fishing. projections and credible MTF's Working with UNDP who provide a Work has been floating budget analysis team undertaken by the UNDP Workshop - Improving Budget Completion of the across countries on the Pacific to Regional LTX with Parliamentarians on Document Transparency workshop help MPs understand budget analyzing budget document. (in conjunction with documents. Macro) STRATEGIC OBJECTIVE 3: IMPROVED BUDGET EXECUTION AND CONTROL New FMIS is currently Adoption of new Improve treasury operations Looking to improved operations Cook LTX / being implemented. procedures. Improved and controls for non-salary with implementation of the new Islands STX Assisted with structuring internal controls over expenditure system across government. of CoA. budget execution. Training is provided on The work activity associated with implementing a risk based Payroll audit is Training has been the payroll audit may not be internal audit for procurement, conducted and provided on risk-based adequate to identify LTX/ review of payroll audit and reviewed by mission. Fiji payroll audit. Updates to implementation. Similarly, if the STX prepare (or update) audit Preparation for risk legal framework are draft legislation is not in final stages, charter, audit committee based procurement underway. limited activity may have occurred structure and documentation audit. prior to the mission. consistent with PFM law Adoption of new Improve treasury operations LTX/ procedures. Improved Improving business operations for FSM and controls for non-salary STX internal controls over new FMIS system. expenditure budget execution. Risk based planning implemented and Training is provided on Training on risk based reviewed during Implementation on risk based Tonga STX implementing a risk based planning has been mission. Training on planning may not initiate on a internal audit for payroll provided. conducted a risk timely basis. based payroll audit is provided. Improve treasury operations Identify improvements Improve effectiveness of the Samoa STX and controls for non-salary in treasury operations Accounts Division in budget expenditure and internal controls execution and financial reporting. Risk based planning Delay in implementation of new Government wide audit Training is provided on implemented. Training strategic plan or mission activity is underway and Samoa STX implementing a risk based on conducted a risk recommendations from April 2019 risk based planning has internal audit for payroll based payroll audit may hinder mission activities in been initiated. occurs. 2020. Improvement in control Improve treasury operations IMF led mission identified Following up on 2018 work on Solomon over non-salary STX and controls for non-salary priority actions to be priority actions in the Ministry of Islands expenditure and expenditure undertaken in the MoF. Finance. account reconciliation. Review risk based internal Review of Training on risk based Delay in audit activities due to audit functions and provide procurement audit and planning, payroll, and special audit requests can hinder Vanuatu STX additional training on auditing implementation of risk procurement audits has progress in implementation modern and recommendation based annual audit been provided. internal audit function. monitoring. plan. Completion of the Combined workshop with PIFS on Regional LTX Workshop - Internal Audit workshop internal audit practice in the region. STRATEGIC OBJECTIVE 4: IMPROVE COVERAGE AND QUALITY OF FISCAL REPORTING Chart of Accounts Revisions to structure and lack of Training for ministries on chart PFTAC recommended structure is adopted by detail in the manual on the Fiji STX of accounts and quality control structure adopted by MoE with mapping of all segments may result of CoA manual. MOE. implementation dates in limited improvements and and training provided. provide opportunity for improper

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Beneficiary Mode Activities Current Position Expected Outcomes Comments/ Risk economic codes to be identified in the future.

Assisting with analytical tools to Improved presentation of Quarterly execution assess within year execution Fiji STX budget execution reporting and reports are published reports consistent with the revised analysis. legislation. Looking to have the 2016/17 and Follow up work on initial 2017/18 FS submitted to the Follow up mission on Nauru STX mission in March 2019 on auditor by Dec 19 and looking to work done in FY-2019 Cash reporting have the 2018/19 compliant with IPSAS cash standards. Accounts division Mission works with continues resolving staff to review Limited change occurs due to staff issues relating to asset Samoa LTX Improved reporting on notes progress and identify turnover and reduced capacity to and liabilities, while strategies for implement reforms. managing audit improvement. recommendations. Updated economic Review progress on chart of Ministry of Finance is The finalization may not occur on a code is implemented. Tonga STX accounts and identify next finalizing new economic timely basis or may be substantially Segment structure is steps. codes. delayed. adopted. Roles and responsibilities Improved operations Improving fixed asset reporting and Review of treasury business are not adequately implemented to enable notes to financial statement and LTX/ Tonga operations to improve defined to reflect MoF timely reporting on in identifying treasury functions and STX efficiency of financial reporting. and line ministry year and annual investing potential for electronic activities. financial reported payments Improved operations Activities are underway Review of treasury business implemented to enable Financial statement preparation is to prepare 'unissued' Vanuatu STX operations to improve timely reporting on in delayed and reforms are unable to annual financial efficiency of financial reporting. year and annual be implemented. statements. financial reported STRATEGIC OBJECTIVE 6: STRENGTHEN IDENTIFICATION, MONITORING, AND MANAGEMENT OF FISCAL RISKS Fisk risk monitoring Review of fiscal risk monitoring improvements Fisk risk framework The monitoring changes are Fiji STX and management for improved recommended by and reporting process adopted but not implemented on a reporting. February 2019 mission is adopted by MOE. timely basis. are adopted. Fiji STI Workshop - Fiscal Risks Workshop Completed In conjunction with STI

82 | Section III Annual Report 2019 | PFTAC

SECTION III SECTION III MACROECONOMIC DD PROGRAMMING & ANALYSIS

Under the macroeconomic programming and analysis CD work program for FY2020, efforts will contribute towards three outcomes:

• Outcome 1: Timely, high quality macroeconomic monitoring, analysis, and research available for policymaking;

• Outcome 2: Ready public access to key monetary, fiscal, and financial soundness information; and

• Outcome 3: Sound medium-term macroeconomic programming

framework.

Under the proposed FY2020 workplan, 19 PFTAC will continue to organize multi- management and fiscal and monetary missions/activities are planned versus an topic workshops including on Effective policy because they underlie the forecasts expected outturn of 15 missions, a 27 Exchange and Use of Administrative Data, of revenue collections, inflationary percent increase over FY2019, requiring Budget Documentation and Fiscal Risks, pressures and the balance of payments. an expected 198 TA field day (165 LTX and partner with STI to deliver training Through CD, tools and methodologies for and 33 STX), up 42 percent from 140 in tailored to Pacific countries on forecasting GDP will be developed in FY2019 (124 LTX and 16 STX), primarily Government Finance Statistics and Debt Palau and continue to be enhanced in resulting from an overlap of up to six Sustainability. Tuvalu. GDP forecasting will be reviewed months between the outgoing and following re-benchmarking and rebasing in incoming resident advisors. IN TERMS OF COUNTRY ACTIVITIES, Solomon Islands and Vanuatu TA and training in FY2020 will continue to AT THE REGIONAL LEVEL, building on a develop and support the use of Prudent fiscal management remains a successful event in 2018, PFTAC will quantitative tools. Ten of PFTAC’s 16 focus for the program. The PNG partner with the Asian Development Bank members, Cook Islands, Fiji, Palau, Department of Treasury will host a course and the World Bank Group to host a PNG, RMI, Samoa, Solomon Islands, on Fiscal Frameworks to be delivered second workshop on Managing Fishing Tonga, Tuvalu, and Vanuatu have a jointly by PFTAC and STI for participants Revenues. Participants from the fisheries macroeconomic programming framework from PNG and Solomon Islands. PFTAC agencies and ministries of which is a useful empirical tool for the will support empirical analysis of tax finance/treasuries will be invited from analysis of economic developments. reform in RMI and a climate change policy member countries of the Parties to the Countries’ frameworks will continue to be assessment in FSM. Nauru Agreement (PNA), FSM, Kiribati, enhanced to undertake medium-term Nauru, Palau, PNG, RMI, Solomon projections, debt sustainability and PFTAC will continue to support peer-to- Islands, and Tuvalu, and other countries external vulnerability assessments. peer learning by encouraging regional with significant fishing revenues, Cook empirical analysis and research and Islands and Tokelau. A joint seminar for GDP is a key macroeconomic statistic. facilitating staff attachments. Staff Kiribati and Tuvalu will follow up on GDP estimates and forecasts are attachments entail analysts from one country specific issues. important for macroeconomic country visiting another country (usually in Annual Report 2019 | PFTAC Section III | 83 the region) for one to three weeks so that and benefit to their country. PFTAC covers A new Macroeconomic Advisor will start in they can share their expertise and the travel and accommodation costs and FY2020. The work plan assumes a six- knowledge or observe and learn first-hand per diems of participants while the persons month overlap of the incoming and how a country has instituted a reform or attached continue to receive their regular outgoing advisors. development that may have application salary.

TABLE 16. FY2020 WORK PROGRAM SUMMARY: MACROECONOMIC PROGRAMMING AND ANALYSIS

Beneficiary Mode Activities Current Position Expected Outcomes Comments/ Risk

STRATEGIC OBJECTIVE 1: IMPROVED MACROECONOMIC POLICY ADVICE TO GOVERNMENT AND CENTRAL BANK MANAGEMENT OUTCOME 1: Improved quality and frequency of macroeconomic surveillance and policy/ research available for policymaking Technical assistance No bilateral technical (1) The macroeconomic and fiscal impacts will support an IMF Support climate assistance has been of climate change risks are quantified and Fiscal Affairs FSM LTX change policy provided by the monitored (Apr. 20). (2) Macroeconomic Department's Climate assessment. macroeconomics and fiscal risks arising from climate change Change Policy program. are managed (Apr. 21). Assessment. (1) Medium-term fishing revenue Methodology to forecast projections are produced jointly by The seminar will be Seminar on managing Kiribati, fishing revenues started ministries of finance and marine authorities joint with PFM and LTX and forecasting fishing Tuvalu to be developed in (Apr. 20). (2) Fishing revenues are built on the regional revenues. Tuvalu. managed within a medium-term fiscal workshop. framework (Apr. 21). (1) An economic indicator database is set Develop GDP GDP forecasts are up and maintained (Apr. 20). (2) GDP Technical assistance Palau LTX forecasting currently produced by the forecasts are independently produced (Apr. will be supplemented methodology. U.S. Graduate School. 21). (3) Economic and fiscal forecasts are with attachments. consistent (Apr. 21). The course will be Fiscal reforms are being delivered jointly by (1) Discussion of current and medium-term implemented in public PFTAC and the Papua New fiscal performance in budget documents LTX Fiscal course. financial management, Singapore Training Guinea and monetary policy statements is improved revenue generation, and Institute (STI). (Apr. 19). fiscal reporting. Training will be tailored to PNG. The Marshall Islands Fiscal Model (MI-FM) produces medium-term (1) Advice on tax reform is empirically Support empirical RMI LTX projections for the current based (Apr. 20). (2) Analysis of tax reform analysis of tax reform. tax system. Some options is published (Apr. 20). preliminary analysis for tax reform has started. Upgrades of the Central Bank of Solomon Islands (1) GDP forecasting methodology is and the Ministry of Solomon Review and enhance reviewed and updated following the LTX Finance and Treasury's Islands GDP forecasting. rebasing of GDP (Jul. 19). (2) Economic macroeconomic and fiscal forecasts are consistent (Jul. 19). programming frameworks are almost complete. (1) GDP forecasts are independently GDP forecasting Support GDP produced and published (Dec. 20). (2) Tuvalu LTX methodology has been forecasting. Economic and fiscal forecasts are developed. consistent (Dec. 20). Review of GDP GDP is forecast using a (1) GDP forecasting methodology is Vanuatu STX forecasting bottom up and a top down reviewed and updated following the methodology. approach. rebasing of GDP (Apr. 20). (1) Participants identify priority areas for prudent management of fishing revenues (Aug. 19). (2) Medium-term fishing revenue A workshop on managing Workshop on projections are produced jointly by and forecasting fishing The workshop will be Regional LTX managing fishing ministries of finance and marine authorities revenues was facilitated joint with PFM. revenues. in 3 out of 9 countries (Apr. 20). (3) Data in February 2018. are shared between ministries of finance and marine authorities in 3 out of 9 countries (Apr. 20).

84 | Section III Annual Report 2019 | PFTAC

Beneficiary Mode Activities Current Position Expected Outcomes Comments/ Risk

Workshop on (1) Participants recognize the importance of The workshop will be facilitating effective The extent of data sharing sharing data (Jul. 19). (2) Priority actions Regional LTX joint with Revenue exchange and use of varies across the region. are identified to enhance data sharing (Jul. and RSS. administrative data. 19). Support will be provided offsite. (1) Research papers are peer reviewed PFTAC will Support and advise on Research is currently (Apr. 20). (2) At least two working papers participate in the Regional LTX empirical analysis and undertaken in four- are published by Pacific central banks and / annual South Pacific research. member countries. or ministries of finance (Apr. 20). Central Banking Research Conference. Support will be (1) A regional database is set up with the provided offsite. Support the assistance of development partners (Apr. Input will be sought compilation of a No progress has been 20). (2) The database is published on a from the IMF Regional LTX regional database of made. PFTAC member country's website (Apr. Statistics Department indicators used for 20). (3) The PFTAC member maintains and and the Secretariat of forecasting. publishes the website (Apr. 21). the Pacific Community. OUTCOME 2: Ready public access to key monetary, fiscal and financial soundness information (1) Budget documents include a section on current and medium-term macroeconomic The quality of budget and fiscal performance (Apr. 21). (2) The workshop will be Workshop on budget Regional LTX documentation varies Budget documents include an annex with joint with PFM and documentation. across the region. fiscal and economic statistics for the last 10 UNDP. years, the current year, and the next 3 years (Apr. 21). (1) GFS balance sheet data is produced in Workshop on Data availability is 2 out of 10 countries (Apr. 21). (2) Debt The workshop will be government finance Regional LTX constraining debt sustainability analysis is included in joint with GFS and statistics and debt sustainability analysis. macroeconomic programming frameworks STI. sustainability. (Apr. 21). Contingent liabilities are (1) Participants identify fiscal risks (Apr. 20). Workshop on fiscal not yet included in The workshop will be Regional LTX (2) Contingent liabilities are quantified and risks. countries' macroeconomic joint with PFM. reported on (Apr. 20). programming frameworks. OUTCOME 3: Sound medium-term macroeconomic framework (1) The Cook Islands macroeconomic and Capacity is high in Cook fiscal framework continues to be used in Cook Support prudent fiscal LTX Islands. Staffing can be a budget preparations (Jun. 19). (2) Forecast Islands management. constraint. methodology continues to be enhanced (Apr. 20).

(1) Consistent economic and fiscal forecasts are produced, i.e. methodology is developed to map data between calendar and fiscal years (Apr. 20). (2) The Develop the fiscal macroeconomic and fiscal framework is sector in the Fiji Monthly fiscal data are used in budget preparations (Jul. 20). (3) Fiji LTX macroeconomic needed to map between The macroeconomic and fiscal framework is programming fiscal and calendar years. used in monetary policy settings (Apr. 20). framework. (4) The fiscal sector in the macroeconomic and fiscal framework produces internationally comparable data, i.e. it adopts official GFS methodology (Aug. 21).

(1) The MFF Model is used in monetary policy settings (Apr. 20). (2) The MFF Support the use of the Analysis and forecasting Model is used in budget preparations (Dec. PNG Monetary and tools will require updating PNG LTX 19). (3) The MFF Model is used for Fiscal Forecasting as official statistics sustainability analysis (Apr. 20). (4) The (MFF) Model. continue to be enhanced. fiscal sector is reported in GFS for general government (Apr. 20).

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Beneficiary Mode Activities Current Position Expected Outcomes Comments/ Risk

(1) The MI-FM continues to be used in Support the use of the Assistance will be budget preparations (Oct. 19). (2) The MI- Marshall Islands Fiscal provided jointly with Additional documentation FM is used for policy analysis including to Model (MI-FM) in the PFM Advisor. RMI LTX and staff training are develop a medium-term fiscal framework budget preparations Technical assistance needed on the MI-FM. (Apr. 20). (3) Quarterly GFS and outturns and policy analysis and will be supplemented compared to forecasts are reported on (Apr. document the model. with attachments. 20). (1) The SERF Model continues to be used Support the use of the The balance of payments in budget preparations (Jun. 19). (2) The Samoa Economic and Samoa LTX needs completing in the SERF model is used to undertake Revenue Forecasting SERF Model. sustainability analysis of policy scenarios (SERF) Model. (Apr. 20).

(1) The Ministry of Finance and Treasury's macroeconomic programming framework Complete the Solomon Islands is the continues to be used in budget preparations upgrades of the only member where the (Dec. 19). (2) The Central Bank of Solomon Solomon Islands' central bank and ministry Solomon Islands' macroeconomic LTX Islands macroeconomic of finance both have a programming framework continues to be programming macroeconomic used in monetary policy settings (Apr. 20). frameworks. programming framework. (3) The frameworks are used to undertake sustainability analysis of policy scenarios (Apr. 20).

(1) The GDP forecasting framework continues to be used in budget preparations Support the use of the Revenue forecasts need (Jun. 19). (2) The Tonga projection model Tonga LTX Tonga macroeconomic reviewing. continues to be used in budget preparations and fiscal framework. (Jun. 19). (3) Fiscal forecasting is enhanced (Apr. 20). Support the use of the (1) The MOVE is used in monetary policy Model of the Vanuatu settings and policy analysis (Apr. 19). (2) Economy (MOVE) and The monetary sector The national framework for revenue Vanuatu LTX the national framework needs to be forecast. forecasting is used in budget preparations for revenue (Dec. 19). (3) Documentation on the MOVE forecasting. is publicly available (Apr. 20).

86 | Section III Annual Report 2019 | PFTAC

I III

MACROECONOMIC STATISTICS

The macroeconomic statistics program that comprises sub-programs for GFS and Real Sector Statistics (RSS) with a small component for External Sector Statistics (ESS) works towards one broad objective:

• Objective 1: Strengthen compilation and dissemination of data on macroeconomic and financial statistics for decision making according to the relevant internationally accepted statistical standard, including developing/improving statistical debt statistics guide for compilers and users Data are compiled and disseminated using infrastructure, source data, 2013 (PSDSG 2013). the coverage and scope of the latest serviceability and/or metadata. guidelines. The majority of PFTAC member AT THE REGIONAL LEVEL, one regional countries that receive bilateral assistance GOVERNMENT FINANCE STATISTICS GFS training workshop is planned for have adopted the internationally accepted

FY2020. However, country-specific TA will statistical standard, the GFSM 2014 for The PFTAC GFS program enters it final still represent most of PFTAC’s support with compilation and dissemination of GFS. TA year of funding under Phase V, and unless advisory in-country missions and remote in FY2020 will continue to work with there is a change of plan and funding, the support. country counterparts to improve the resident advisor position will end April 30, standards and methodology implemented. 2020. A new GFS PFTAC Advisor will join IN TERMS OF COUNTRY ACTIVITIES, PFTAC in April 2019 focused on the same bilateral missions and workshops are Data are compiled and disseminated using themes as FY2020 including compilation planned to provide TA coverage to 14- appropriate statistical techniques, and dissemination using appropriate member countries. Like the real sector and including to deal with data sources, and/or statistical techniques, higher frequency external sector statistics programs, the GFS assessment and validation of intermediate data and concurrently expanding coverage; program works to share effective, functional data and statistical outputs. Collaboration updating and releasing of metadata; and guidance on managing people and projects between various disciplines will take place developing customized solutions and to increase the likelihood that technical to assist in the financial programming methods for compilation and dissemination developments come to timely fruition. framework as part of the macroeconomic guided by the internationally accepted These objectives and related milestones and fiscal framework initiatives in the statistical standard, the GFSM 2014. related to planned missions and activities region. The framework adopts the GFS are summarized below and detailed in the methodology, which produces Increased assistance will focus on how to FY2020 workplan. internationally comparable fiscal data and compile PSDS guided by the public-sector are particularly useful for debt sustainability analysis. Cross collaboration

Annual Report 2019 | PFTAC Section III | 87 and technical support between GFS and REAL SECTOR STATISTICS PFM programs will ensure that the national Country activities concentrate on increasing staff capacities, the release CoA and its linkages to the bridge tables The real sector and external sector of metadata and the documentation of derive appropriate GFS that can be used statistical CD needs of the PFTAC business processes, the use of up-to- as input into the financial programming member states varies significantly. These date concepts, definitions and framework. These efforts in turn will include countries embarking on the classifications, data coverage and improve and strengthen the compilation of rebasing of GDP estimates to incorporate scope and the use of adequate source budget documentation and medium term the latest and most comprehensive survey data. fiscal frameworks aligned to the GFSM data. This will be a key target of the RSS requested to support BoP compilations in 2014 statistical or an equivalent standard. program. respect of capturing correctly FDI and external debt issues. GFS is compiled and disseminated for the AT THE REGIONAL LEVEL, a national

BCG and GG and its subsectors with accounts regional workshop intends to Kiribati plans to improve their BoP higher frequency, timeliness, and improve the usability of administrative data coverage concerning the financial accuracy. Several PFTAC member by various methods of quality control. account. countries have started the compilation of Different approaches for outlier detection annual GG GFS. Assistance in FY2020 and correction, and the treatment of FSM’s GDP calculation is challenged by a will continue to focus on improving the missing values will be presented, and their restriction to access tax data. PFTAC will compilation and dissemination methods limitations discussed. support an agreement about future data and processes to derive reconciled GFS sharing. PFTAC’s work will otherwise time series for the GG. Several member In recent years, PFTAC member countries continue training staff to independently countries have not yet fully implemented have become more aware of data privacy calculate national accounts. the Classifications of the Functions of issues. While this is understandable, some

Government (CoFoG) who serves as a statistical offices are reporting problems in Due to severe staff capacity constraints, very important input and measure for GDP accessing administrative data. Such data PFTAC will support Nauru with four weeks calculation and defining government is typically inexpensive and reflects a high of national accounts missions to resume spending by purpose and social-economic degree of compliance with the needs for GDP compilation and publication. activity. COFOG deserve focused national accounts statistics. To respond to attention to make progress in the near-to- this adverse development, PFTAC plans a In Niue PFTAC work in FY2020 medium term. Assistance in expanding workshop at the regional level in FY2020 concentrates on incorporating the latest PSDS to include the scope of stocks of all to bring together administrative data HIES 2015/2016 results in national debt liabilities of general government and providers with representatives of statistical accounts. public corporations and their classification institutes. This forum will discuss aligned to the PSDSG 2013 will be problems, potential solutions and best In Palau and RMI, PFTAC pursues its provided. practices for data sharing in member efforts to put their statistical offices in the countries. position to compile national accounts Metadata released have been independently. strengthened consistent with the dataset IN TERMS OF COUNTRY ACTIVITIES, in to enhance interpretation and analysis. FY2020 the RSS program will scale back Together with the statistical office in Work with member countries to ensure up to an extensive program after the Tonga, PFTAC will assist with a rebase of that comprehensive sources and methods deceleration in FY2019 given the national accounts to 2016/2017. are documented, updated and changeover of resident advisors. There disseminated regularly, inclusive of IMF are 17 missions planned to 13 PFTAC In Tuvalu the number of statistical guided dissemination standards, like member countries, including two on compilation staff is expected to be special data dissemination standards external sector topics to Fiji and Tuvalu increased. PFTAC will continue to train the (SDDS), general data dissemination respectively. new staff members. system (GDDS) and enhanced general data dissemination system (e-GDDS). In the Cook Islands, analysis on imports The priorities of PFTAC’s technical Five countries in the region are now – especially capital products – has to be assistance program in FY2020 for participating to the e-GGDS initiative by pursued in order improve value added Vanuatu concentrate on the elaboration of releasing statistics through the National estimations of industries. a business process documentation for Summary Data Page (NSDP), Fiji, FSM, improving their statistical resilience. The Samoa, and Timor-Leste. For Fiji the resumption of work on calculation of livestock and fishery output quarterly national accounts is regarded as is a further important goal. the main target for coming FY2020. Furthermore, missions have been

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TABLE 17. FY2020 WORK PROGRAM SUMMARY: MACROECONOMIC STATISTICS (GOVERNMENT FINANCE STATISTICS)

Beneficiary Mode Activities Current Position Expected Outcomes Comments/ Risk

STRATEGIC OBJECTIVE 1: STRENGTHEN MACROECONOMIC AND FINANCIAL STATISTICS COMPILATION AND DISSEMINATION

OUTCOME 1: Data are compiled and disseminated using the coverage and scope of the latest manual/guide Remote technical A mission in September assistance should 2017 started work on support the efforts to Compile the institutional Sectoral coverage is used to institutional unit complete the institutional unit table for the public include all units of the public classification, but due to unit classification. Local Nauru Remote sector and investigate sector and to compile and source data gaps the staff shortages and source data for GFS disseminate GFS for policy making classification was not source data gaps may compilation purposes. and surveillance (Apr. 20). completed. Further work is continue to pose required. challenges and risks in making progress. Finalize the list of Progress have been made Staff resources and institutional units in order in defining and classifying Public sector GFS for internal use, availability of data is Tonga LTX to compile and units of the public sector policy making and surveillance sufficient to complete the disseminate full public- during the February 2019 (Apr. 20). task. sector accounts. mission. OUTCOME 2: Data are compiled and disseminated using appropriate statistical techniques Recent missions completed a review to determine reasons for Results of corrections Refine compilation statistical discrepancies. are dependent on the techniques for using Cook Discrepancies have been Reconciled statement of work external consultants LTX various administrative Islands narrowed down with the operations (Sep. 19). are performing on data sources to reduce main reason for clearing inconsistencies statistical discrepancies. discrepancies in the net in nonfinancial assets. investment of nonfinancial assets. The CoA and financial Dependent on skilled Bridge tables facilitate the management information GFS is automated in the financial resources and the compilation of budgetary Fiji LTX system reforms were management information system success is reliant of central government (BCG) initiated and progress was to compile reports (Aug. 20). sufficient staff training GFS. made. and awareness. Ensure that all Data series review National Statistics staff transactions of general conducted during the require continued PFTAC government and public previous GFS TA and Reconciled statement of Kiribati Expert support to improve corporations are included adjustments made to the operations (Dec. 19). techniques and in the coverage, inclusive data. Further review and methodologies. of donor contributions. improvements required. The process was initiated in the September 2017 External professional Mapping the national mission but the mapping GFS is automated in the financial technical support be Nauru Remote chart of accounts (CoA) to results need to be management information system available to assist with GFS. incorporated as part of the to compile reports (Aug. 20). the updates and the financial management migration. information system. Assistance required from Statement of operations external systems continue to present vendors to update the imbalances. Stocks and Imbalances using various management information flows in financial balance data sources to compile Reconciled statement of reporting systems. Timor-Leste Remote sheet creates GFS are investigated and operations (Dec. 19). Coordination between discrepancies as well as resolved. internal stakeholders unreconciled source data may be improved to derived from various achieve common systems. solutions. Reforms on the CoA and financial management Dependent on skilled Mapping the national information systems was GFS is automated in the financial resources and the Tonga LTX chart of accounts (CoA) to impacted by key staff and management information system success is reliant of GFS. management changes. to compile reports (Aug. 20). sufficient staff training Limited progress was and awareness. made.

Annual Report 2019 | PFTAC Section III | 89

Beneficiary Mode Activities Current Position Expected Outcomes Comments/ Risk Stakeholders from all Statement of operations three reporting agencies Imbalances using various continue to present (Treasury, Reserve Bank data sources to compile imbalances. Stocks and Reconciled statement of of Vanuatu and Vanuatu Vanuatu LTX GFS are investigated and flows in the balance sheet operations (Dec. 19). National Statistics office resolved. creates discrepancies to need to coordinate be resolved. efforts in resolving data discrepancies. Regional workshop on Trained staff for improved GFS All PFTAC member Regional LTX/Expert government finance compilation and dissemination countries will attend and statistics. (Aug. 19). be trained. OUTCOME 3: Higher frequency data is compiled and disseminated Compile, review and 1) Data compiled and disseminate data to the disseminated for the annual GFS IMF Statistics database, internal policy decision Department. Complete Provided that staff Annual data for general making, surveillance and use for Cook FY2018 for general resources are on LTX government completed up fiscal forecasting (Nov. 19). Islands government (GG). Start to strength and that source to FY2017. Quarterly GFS (Sep. 19). 2) PSDS produce quarterly GFS for data is readily available. submitted to the World Bank for FY2019. Compile and publication and used into debt disseminate public sector sustainability analysis (Apr. 20). debt statistics (PSDS). Compile, review and 1) Data compiled and disseminate data to the disseminated for the annual GFS Annual data for BCG Given that source data is IMF Statistics database, internal policy decision completed up to FY2017. readily available. Department. Complete making, surveillance and use for Unconsolidated GG data Unresolved classification Fiji LTX BCG for FY2018 and fiscal forecasting (Nov. 19). 2) completed up to FY2015. issues with BCG data will expand the coverage for PSDS submitted to the World Expanding coverage to the result in no progress with GG. Resolve inconsistent Bank for publication and used into public sector was initiated. GG consolidation. classifications of historical debt sustainability analysis (Apr. data. 20). Data compiled and disseminated Annual data for BCG and for the annual GFS database, Compile, review and 4 state governments were internal policy decision making, Provided that staff disseminate data to the sustained. Data was surveillance and use for fiscal resources are on FSM LTX IMF Statistics completed up to FY2017. forecasting (Nov. 19). 2) PSDS strength and new staff is Department. Expanding coverage to the submitted to the World Bank for fully trained. public sector was initiated. publication and used into debt sustainability analysis (Apr. 20). Data compiled and disseminated for the annual GFS database, Annual data for general National Statistics staff Compile, review and internal policy decision making, government completed up require sustained training disseminate data to the surveillance and use for fiscal Kiribati Expert to FY2017. Expanding and assistance in the IMF Statistics forecasting (Nov. 19). 2) PSDS coverage to the public compilation and Department. submitted to the World Bank for sector was initiated. dissemination of GFS. publication and used into debt sustainability analysis (Apr. 20). Data compiled and disseminated for the annual GFS database, Annual data for was Compile, review and internal policy decision making, Provided that staff sustained. Data was disseminate data to the surveillance and use for fiscal resources are on Palau LTX completed up to FY2017. IMF Statistics forecasting (Nov. 19). 2) PSDS strength and new staff is Expanding coverage to the Department. submitted to the World Bank for fully trained. public sector was initiated. publication and used into debt sustainability analysis (Apr. 20). Compile, review and Data compiled and disseminated Department of Treasury disseminate data to the Annual data for BCG was for the annual GFS database, staff capacity sufficient to IMF Statistics sustained. Data was internal policy decision making, produce annual and Department. Assist in the completed up to FY2017. surveillance and use for fiscal quarterly BCG. PNG LTX verification and revisions Expanding coverage to the forecasting (Nov. 19). Data are Concerted efforts are of the COA mapping and public sector was not published for International needed to produce associated compilation initiated due to size of data Financial Statistics and increased audited financial procedures for quarterly source gaps. timeliness and frequency for statements to compile reporting. surveillance (ongoing). public sector GFS. Data compiled and disseminated for the annual GFS database, internal policy decision making, Annual data for BCG was Compile, review and surveillance and use for fiscal Provided that staff sustained. Data was disseminate data to the forecasting (Nov19). Data are resources are on RMI LTX completed up to FY2017. IMF Statistics published for International strength and new staff is Expanding coverage to the Department. Financial Statistics and increased fully trained. public sector was initiated. timeliness and frequency for surveillance (ongoing). 2) PSDS submitted to the World Bank for 90 | Section III Annual Report 2019 | PFTAC

Beneficiary Mode Activities Current Position Expected Outcomes Comments/ Risk publication and used into debt sustainability analysis (Apr. 20).

Data compiled and disseminated for the annual GFS database, internal policy decision making, surveillance and use for fiscal Annual data for general Compile, review and forecasting (Nov. 19). Data are Bureau of Statistics staff government completed up disseminate data to the published for International capacity sufficient to Samoa Remote to FY2017. Expanding IMF Statistics Financial Statistics and increased produce annual and coverage to the public Department. timeliness and frequency for quarterly BCG. sector was initiated. surveillance (ongoing). 2) PSDS submitted to the World Bank for publication and used into debt sustainability analysis (Apr. 20). Data compiled and disseminated for the annual GFS database, Annual data for BCG was internal policy decision making, Compile, review and Central Bank staff sustained. Data was surveillance and use for fiscal Solomon disseminate data to the capacity sufficient to Remote completed up to FY2017. forecasting (Nov. 19). Data are Islands IMF Statistics produce annual and Expanding coverage to the published for International Department. quarterly BCG. public sector was initiated. Financial Statistics and increased timeliness and frequency for surveillance (ongoing). National Statistics Office Data compiled and disseminated A time series of data was is at full strength, for the annual GFS database, completed for the BCG however strong Compile, review and internal policy decision making, (FY2013-16), however the commitment needed disseminate data to the surveillance and use for fiscal Tuvalu LTX data was not submitted for from the authorities in IMF Statistics forecasting (Nov. 19). 2) PSDS the annual GFS database disseminating data, Department. submitted to the World Bank for nor used for internal policy sustain compilation and publication and used into debt and decision making. using data for policy and sustainability analysis (Apr. 20). decision making. Annual data for BCG was sustained. Data was Data compiled and disseminated Capacity are sufficient in completed up to FY2017. for the annual GFS database, the Treasury to compile Compile, review and Expanding coverage to the internal policy decision making, and disseminate GFS, disseminate data to the public sector was initiated, surveillance and use for fiscal however concerted Vanuatu LTX IMF Statistics however progress is forecasting (Nov. 19). 2) PSDS efforts are needed Department. limited due to incomplete submitted to the World Bank for reconcile statistical and infrequent completion publication and used into debt discrepancies to make and audit of financial sustainability analysis (Apr. 20). progress. statements. OUTCOME 4: Macroeconomic data sets used by policy makers have been made more intersectoral consistent Prepare a reconciliation Complete, balanced statement of and include data for the Provided that all Reconciliation process operations with narrowing down financial balance sheet stakeholders contribute PNG LTX initiated for financial the statistical discrepancies and all and public-sector data to in providing and balance sheet. macroeconomic datasets are the monetary statistics reconciling source data. harmonized. and balance of payments. OUTCOME 5: A new dataset has been compiled and disseminated internally or to the public Assistance in the verification and Improved GFS and Assist in the verification improvement of GFS data macroeconomic statistics for PNG LTX and revisions of data compilation processes is internal policy and decision compiled for GFS. ongoing with the support making and surveillance. of PFTAC. OUTCOME 6: Metadata released internally or to the public have been strengthened consistent with the dataset to enhance interpretation and analysis Country counterparts A comprehensive sources started the documentation Business process documentation Staff resources are LTX and methods document is processes and are now completed and available. Fiji committed to regular Mission disseminated and updated participating in the e- Associated metadata produced to updates and publication. regularly. GDDS by publishing support fiscal data time series. updates through the

Annual Report 2019 | PFTAC Section III | 91

Beneficiary Mode Activities Current Position Expected Outcomes Comments/ Risk National Summary Data Page.

Update current business Enhanced methodology and processes and include the Business process Staff resources are national guidelines are available Kiribati Expert compilation documentation does exist, committed to regular for GFS compilation and methodologies for public but need updating. updates and publication. dissemination. corporations.

TABLE 18. FY2020 WORK PROGRAM SUMMARY: MACROECONOMIC STATISTICS (REAL SECTOR STATISTICS)

Beneficiary Mode Activities Current Position Expected Outcomes Comments/ Risk

STRATEGIC OBJECTIVE 1: STRENGTHEN COMPILATION AND DISSEMINATION OF DATA ON MACROECONOMIC AND FINANCIAL STATISTICS

Reclassify ESS data correctly Some ESS data lacks ESS data correctly reflects Cook Availability of STX concerning foreign aid and comprehensiveness and the correct data on foreign aid and Islands necessary source data loan funded development data valuation loan funded development

More timely and regular As access to VAT data Cook Improve timeliness of quarterly Quarterly GDP estimates are STX publication of quarterly has been regained Islands GDP estimates published infrequently GDP estimates risks are low Compile expenditure side GDP As resources are Rebased productions side GDP has Rebased expenditure side Fiji LTX in line with rebased production available non- been published GDP is published side performing risk is low Discrepancies between GDP Discrepancies between Still no new Production side and expenditure by expenditure, income and GDP by expenditure, government statistician Fiji LTX side of GDP show considerable production resolved via income and production in office for deciding differences balancing decreased about priorities Still no new Fresh up training in QNA and Production side GDP is government statistician Fiji LTX start with compilation of Training took place two years ago published on a quarterly in office for deciding production side GDP basis about priorities Improve BoP coverage Certain components are missing in Financial account in the Availability of Kiribati STX concerning the financial the BoP statistics BoP is exhaustive necessary source data account. Improve the model for Value added and output The access to Construction industry model does Kiribati STX estimation of value added and estimates of construction construction permit not include construction permit data output of construction industry industry are more reliable data is not granted yet. Value added and output As access to VAT data Develop capacities and to start GDP is calculated by Graduate for three industries are has been denied, a Micronesia LTX with independent GDP School USA calculated by end of MoU is necessary to estimates FY2020 start work Emerged severe staff capacity Number of staff has not Resume GDP compilation and Publication of 2017 GDP Nauru LTX constraints jeopardize GDP increased to minimum publication estimates compilation operational level Collection of improved More reliable value-added Access to quality Estimates are based on weak Nauru LTX construction, house rental and estimates for construction source data and assumptions financial service data and the financial industry adequate staff number Rebase of national accounts to Latest HIES 2015/2016 Success depends on New HIES 2015/2016 are available Niue STX reflect latest HIES 2015/2016 results are reflected available staff but not yet incorporated in GDP results national accounts resources Value added and output Develop capacities and to start Success depends on GDP is calculated by Graduate for three industries is Palau LTX with independent GDP available staff School USA calculated by end of estimates resources FY2020 Investigate/resolve Methodologically data/methods concerns Draft GDP calculation agreed with Staff capacities are PNG LTX improved version of GDP highlighted via previous GDP MoF are available adequate estimation published release Training staff on analysis and Staff capable of Number of staff is Solomon STX dissemination of GDP Basic training had been provided independent GDP adequate so current Islands estimates calculation risk is low

92 | Section III Annual Report 2019 | PFTAC

Beneficiary Mode Activities Current Position Expected Outcomes Comments/ Risk

A user friendly and Review and documentation of Partially completed, but should be transparent Number of staff is Solomon STX annual business survey done within a comprehensive review documentation of annual adequate so current Islands imputation methods of the survey strategy business survey is risk is low published

2016 Household Income and Preparation of the new rebase Expenditure Survey, 2015 National accounts data Number of staff and TA Tonga STX round of national accounts to Population and Housing Census, published in 2020 reflects sources are adequate 2016/2017 and the 2015 Agricultural Census latest census data so current risk is low are available

The operational Output and value-added Livestock data is based on many reliability of the new Improve livestock and fishery estimations for agriculture Vanuatu LTX assumptions which have to be electronic data output calculation and fishing are more proved. Fishery data is incomplete collection system at reliable harbor fish markets Workshop on the improvement Broad participation of of the usability of In planning status, no venue and Regional LTX Completion of Workshop PFTAC member administrative data by various date agreement reached countries methods of quality control MoUs between Workshop on the improvement Workshop participation In planning status, no venue and administrative data Regional LTX of accessibility and usability of of high level Ministries date agreement reached providers and statistical administrative data of Finance staff offices are signed

Annual Report 2019 | PFTAC Section III | 93

SECTION III FINANCIAL SECTOR SUPERVISION

F

Under the FSS CD work program for FY2020, efforts will contribute towards two core objectives to:

• Objective 1: Develop and strengthen banking regulations in line with international standards; and

• Objective 2: Implement a risk-based supervision (RBS) system and upgrade other supervisory processes.

Under the proposed FY2020 workplan, focus on the four major projects of the expanded in FY2020 to also assist 19 missions/activities are planned versus FSS program: Kiribati to develop a banking an expected outturn of 15 missions, a 26 regulatory framework; percent increase over FY2019. However, 1. Supervision Framework fewer TA field days are needed for Enhancement Program, with Cook 3. Insurance Regulatory Reform FY2020 at 236 (65 LTX and 171 STX), Islands, PNG, Solomon Islands project, with Fiji, Samoa and Tonga. down 22 percent from 302 in FY2019 (67 and Vanuatu. The FY2020 The FY2020 Workplan includes LTX and 235 STX) because of the Workplan include missions to the follow-up missions to all three lengthy multi-country STX contracts used Cooks Islands on financial analysis countries under the project to finalize to support insurance reforms in FY2019. and finalizing prudential standards regulatory drafts and support and on-site examination reform; to stakeholder consultation; and AT THE REGIONAL LEVEL, PFTAC will PNG on on-site examination and continue to organize multi-topic developing prudential standards; to 4. Supervision Framework workshops in FY2020 including on the Solomon Islands on financial Development project with Tuvalu. Effective Regulation of Cross Border analysis and developing prudential The FY2020 Workplan includes a Banking and Sound Governance; and standards; and to Vanuatu on mission to develop prudential support the AFSPC Annual Meeting to be financial analysis and developing reporting. held in Tonga. The IMF’s Singapore prudential standards; and Training Institute (STI) with the Legal Other planned activities in FY2020 Department will hold a course on Anti 2. Banking Regulatory Reform project, include two missions to Timor Leste to Money Laundering (AML)/ Countering with Palau, RMI and FSM. The finalize draft credit risk regulations and Financing of Terrorism (CFT) in June FY2020 Workplan includes follow-up review the banking law. 2019. mission to all three countries to finalize draft legislation and IN TERMS OF COUNTRY ACTIVITIES, regulations and support stakeholder TA and training in FY2020 will continue to consultation. This project will also be

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TABLE 19. FY2020 WORK PROGRAM SUMMARY: FINANCIAL SECTOR SUPERVISION

Beneficiary Mode Activities Current Position Expected Outcomes Comments/ Risk

STRATEGIC OBJECTIVE 1: DEVELOP AND STRENGTHEN BANKING REGULATIONS IN LINE WITH INTERNATIONAL STANDARDS

Assistance in finalizing draft Draft suite of prudential Final suite of prudential Cook Islands STX Prudential Standards following standards being finalized standards formally issued stakeholder consultation Assistance in developing Draft suite of prudential LTX/ Gaps in current suite of PNG comprehensive suite of Prudential standards ready for STX prudential standards Standards stakeholder consultation Assistance in developing Draft suite of prudential Solomon LTX/ Gaps in current suite of comprehensive suite of Prudential standards ready for Islands STX prudential standards Standards stakeholder consultation Assistance in developing Draft suite of prudential Gaps in current suite of Vanuatu LTX comprehensive suite of Prudential standards ready for prudential standards Standards stakeholder consultation Finalize draft legislation and Revised draft legislation Revised legislation and PFTAC requires Palau STX regulations and support and regulations being regulations finalized for assistance of IMF Legal stakeholder consultation developed issuance Department. Finalize draft legislation and Revised draft legislation Revised legislation and PFTAC requires RMI STX regulations and support and regulations being regulations finalized for assistance of IMF Legal stakeholder consultation developed issuance Department. Finalize draft legislation and Revised draft legislation Revised legislation and PFTAC requires FSM STX regulations and support and regulations being regulations finalized for assistance of IMF Legal stakeholder consultation developed issuance Department. PFTAC requires Assistance in developing draft Kiribati STX Currently no banking law Draft banking law developed assistance of IMF Legal banking legislation Department. Assist in finalizing insurance PFTAC requires Draft insurance law being Insurance law finalized for Fiji STX regulatory drafts and support assistance of IMF Legal developed stakeholder consultation stakeholder consultation Department. Assist in finalizing insurance Insurance law and regulations PFTAC requires Draft insurance law and Samoa STX regulatory drafts and support finalized for stakeholder assistance of IMF Legal regulations being developed stakeholder consultation consultation Department. Assist in finalizing insurance Insurance law and regulations PFTAC requires Draft insurance law and Tonga STX regulatory drafts and support finalized for stakeholder assistance of IMF Legal regulations being developed stakeholder consultation consultation Department. Assist in finalizing draft credit risk Draft regulations being Draft regulations finalized for Timor Leste STX regulations developed stakeholder consultation PFTAC requires Review and revise banking Gaps in current banking Revised draft legislation Timor Leste STX assistance of IMF Legal legislation legislation developed Department. STRATEGIC OBJECTIVE 2: IMPLEMENT A RISK-BASED SUPERVISION (RBS) SYSTEM AND UPGRADE OTHER SUPERVISORY PROCESSES Draft enhancements to on- Enhancements to on-site Finalize on-site examination Cook Islands STX site examination process examination process reform developed embedded Assistance in developing a Current financial analysis Draft enhancement to Cook Islands LTX financial analysis process that process is compliance financial analysis process effectively identifies risk based developed Draft enhancements to on- Enhancements to on-site LTX/ Finalize on-site examination PNG site examination process examination process STX reform developed embedded Assistance in developing a Current financial analysis Draft enhancement to Solomon LTX financial analysis process that process is compliance financial analysis process Islands effectively identifies risk based developed Assistance in developing a Current financial analysis Draft enhancement to Vanuatu LTX financial analysis process that process is compliance financial analysis process effectively identifies risk based developed Banks do not submit Prudential reporting process Tuvalu LTX Develop prudential reporting periodic prudential returns in place

Annual Report 2019 | PFTAC Section III | 95

2018 PFTAC Steering Committee Meeting, Fiji, March 2018

SECTION IV

PFTAC STAFF

Annual Report 2019 | PFTAC Section IV | 105

Coordinator

PUBLIC FINANCIAL MANAGEMENT

David Kloeden (Since February 2017) Celeste Kubasta (Since June 2018)

David joined PFTAC in February 2017. David is an Celeste Kubasta joined PFTAC as a Public Financial Australian national, and prior to coming to PFTAC served Management (PFM) Adviser in June 2018. With over thirty as Coordinator of CARTAC – the IMF’s Caribbean years of experience, she has worked on implementation of Regional Technical Assistance Center based in Barbados. PFM reforms in policy formulation and implementation, With 20+ years as an IMF tax administration specialist, he budget preparation and execution, and financial reporting has extensive Domestic Revenue Mobilization experience. processes. She also has experience in auditing, IT system He is a CPA, has an undergraduate degree in information implementation, and teaching courses in accounting and technology and post graduate degrees respectively in public policy. From 2013 to 2018, Celeste provided technical financial management, tax law, and economics. assistance for CARTAC within the Caribbean and has worked internationally providing technical assistance since Resident Advisors 2006 in Africa, the Middle East, and the Caribbean. She was formerly employed by the State of North Dakota as the Deputy Budget Director. Celeste is a Certified Public FISCAL AFFAIRS DEPARTMENT Accountant with a BS Accounting and MS Management. REVENUE ADMINISTRATION

Georg Eysselein (Since November 2018) Richard Neves (Since October 2016)

Georg joined PFTAC in November 2018 and is a South African National. Georg worked for the South African Revenue Service for more than 30 years in various senior Richard joined PFTAC in October 2016. Richard is an positions. His international career started by working for Australian who has worked in the budget areas of the the IMF and the European Delegation in Macedonia, Australian Department of Finance and the ACT Treasury. followed by DFID, USAid and World Bank funded projects Richard has also worked in Timor Leste for five years as the in Afghanistan and Somalia. Georg was closely involved lead budget advisor and was the Cook Islands Financial with the implementation of the post-graduate Tax Secretary from 2011 to 2015. Professional Qualification in South Africa for tax practitioners in the private sector and taxation auditors ASIA PACIFIC DEPARTMENT working for the Revenue Service. MACROECONOMIC PROGRAMMING AND ANALYSIS

Iris Claus Stanley Shrosbree (Since February 2015) (June 2014 – June 2018)

Iris joined PFTAC in February 2015. Iris has dual German Stan joined PFTAC in June 2014. Stan is South African and Canadian nationality. Before joining PFTAC she held and started his career in the South African Revenue policy and research positions at the Asian Development Services before joining the IRD in New Zealand. He later Bank, the New Zealand Inland Revenue, the New Zealand served as Advisor to the Directorate General Taxation in Treasury, the Reserve Bank of New Zealand, and the Bank Indonesia. Since joining the IMF in 2006, he has been of Canada. She is on the editorial boards of the Journal of involved in tax reform initiatives in South Eastern Europe. Economic Surveys and Asian Economic Papers and is a Senior Fellow at the University of Waikato, New Zealand.

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STATISTICS DEPARTMENT Administration GOVERNMENT FINANCE STATISTICS

SENIOR ADMINISTRATIVE ASSISTANT Marcus(ACCOUNTING/ Scheibl OPERATIONS)ecker Barend De La Beer (Since October 2018)

(March 2017 – November 2018) Maria Nina Samuela Marcus joined

Barend joined PFTAC in March 2017. Barend is both a South African and a New Zealander. Many PFTAC MarcusSENIOR ADMINISTRATIVE Scheiblecker ASSISTANT members will already be familiar with Barend, as he has (INFORMATION / OPERATIONS) been working with the IMF as an STX in the Japanese- (SinceElenoa October Bogiwalu 2018) sponsored project on GFS capacity building in the Pacific

since 2013. Previously, Barend worked as a senior Marcus joined financial analyst with the Auckland Council, and, from PFTAC in 1997-2011, with the National Treasury of South Africa. October 2018. He TEAM ASSISTANT

REAL SECTOR STATISTICS Rusila Bituwaqa

Marcus Scheiblecker

(Since October 2018) LOGISTICS ASSISTANT Josaia Nakete Marcus joined PFTAC in October 2018. He is an Austrian national with extensive knowledge and expertise in Real Sector Statistics and experience in compilation of national accounts. Prior to coming to the Pacific, Mr. Scheiblecker held various positions including as deputy director at the ECONOMIC ANALYST Austrian Institute of Economic Research where he acted Shane Prasad as an advisor to Eurostat for seasonal adjustment and on financial statistics and national accounts for Statistics Austria.

MONETARY AND CAPITAL MARKETS DEPARTMENT FINANCIAL SECTOR SUPERVISION

Ben Stefanou (Since July 2016)

Ben joined PFTAC in July 2016, and is an Australian national. Ben has extensive experience both as a bank supervisor with the Australian Prudential Regulatory Authority (APRA), the Australian bank regulator, and working in the commercial banking sector. He previously worked with the IMF as a TA advisor in the Caribbean.

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ANNEX

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109

ANNEX 1. MACROECONOMIC DEVELOPMENTS OF PFTAC MEMBER COUNTRIES

In 2018, Pacific island countries (PICs) as For 2019, growth in the region is projected New Zealand economies experience a group experienced relatively slow to pick up to just under 4 percent as the significant spillovers from Asia. growth, of around 0.9 percent. While some PNG economy recovers. Risks are tilted to countries experienced good growth, the downside, however. As seen in Macroeconomic vulnerabilities in the supported by continuing strength in previous years, new natural disasters can region are also edging upwards as public tourism and fisheries sectors, weather- dramatically cut growth in individual debt-to-GDP ratios have been rising. related disasters hampered growth in countries and across the region. In Although debt ratios remain, in general, some PICs, notably Tonga, while a major addition, global growth momentum has below those seen in many other small earthquake in Papua New Guinea reduced been easing, and trade in Asia has slowed island economies, the vulnerability of the its growth to zero. Inflation in the region sharply in recent months. If sustained, the region to natural disasters underscores the remained low, reflecting exchange rate slowing of growth in Asia could dampen need to maintain significant fiscal space to stability and weak import prices. tourism earnings in the region, as well as cope with such disasters. slow growth indirectly if the Australian and

Small states growth generally improving in 2019 Country by Country the outlook is mostly positive

Real GDP Growth Projections - 2019 compared to 2018 (In percentage point) 5 4 3 2 1 0 -1

-2

Fiji

Palau

Nauru

Tonga

Tuvalu

Samoa

Kiribati

Vanuatu

Micronesia

Timor-Leste

Marshall IslandsMarshall

Solomon Solomon Islands Papua NewPapua Guinea Note: 2019 projected growth minus 2018 growth estimates. Sources: WEO.

Tourism is an important driver of growth in the region Tourism is an important driver of growth in the region

Visitor Arrivals in Selected Pacific Island Countries Share of Visitor Arrivals, by Source Markets (In thousands of persons) (In percent of Total Arrivals) 1,600 14 100% Arrivals Y-o-y percent change (rhs) 1,400 12 80% 10 1,200 60% 8 1,000 40% 6 800 20% 4 600 2 0%

400 Fiji

0 PNG

Palau

Tonga

Samoa

Islands

Islands Vanuatu 200 Marshall -2 Solomon

Australia New Zealand Timor-Leste 0 -4 China Japan 2012 2013 2014 2015 2016 2017 Pacific Island Markets Other Markets Note: Includes Fiji, Samoa, Palau, PNG, Solomon Islands, Tonga and Vanuatu. Source: South Pacific Tourism Organisation (SPTO). Sources: South Pacific Tourism Organisation (SPTO).

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However, fiscal positions are projected to weaken And fishing revenues have been buoyant with higher spending

Outlook on Fishing Revenue in the Pacific Change in Overall Balance as a percent of GDP between 2018 and 2019 (Fishing revenue in percent of GDP) (In percentage point) 100 Positive Overall Balance in 2019 Negative Overall Balance in 2019 Kiribati Tuvalu Nauru Micronesia Marshall Islands 15 90 10 80 5 70 0 60 -5 50 -10 40 -15 30 -20

20 Fiji

10 PNG

Palau

Nauru

Tonga

Tuvalu

Samoa

Kiribati

Islands

Islands

Vanuatu Marshall

0 Solomon Micronesia

2011 2012 2013 2014 2015 2016 2017 2018 Timor-Leste proj. Note: 2019 projections minus 2018 estimates. Sources: Countries authorities, and IMF staff projections. Source: WEO.

Debt has been rising…although… The pattern of debt differs across countries

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112 | Section IV Annual Report 2019 | PFTAC

PFTAC

Reserve Bank Building, Level 7, Pratt Street, GPO Box 14877, Suva, Fiji T. +(679) 330 4866 F. +(679) 330 4045 www.pftac.org www.facebook.com/FijiPFTAC/

INTERNATIONAL MONETARY FUND Institute for Capacity Development Global Partnerships Division

700 19th Street, NW Washington, DC 20431 USA T. +(1) 202.623.7636 F. +(1) 202.623.7106 [email protected]