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Managing and Controlling Extrabudgetary Funds

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  • Mr. Dimitar Radev
  • Mr. Richard I Allen

Abstract

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

Suggested Citation

  • Mr. Dimitar Radev & Mr. Richard I Allen, 2006. "Managing and Controlling Extrabudgetary Funds," IMF Working Papers 2006/286, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:2006/286
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    References listed on IDEAS

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    1. Mr. Rolando Ossowski & Mr. Steven A Barnett & Mr. James Daniel & Mr. Jeffrey M. Davis, 2001. "Stabilization and Savings Funds for Nonrenewable Resources," IMF Occasional Papers 2001/004, International Monetary Fund.
    2. Ken Gwilliam & Ajay Kumar, 2003. "How Effective Are Second-Generation Road Funds? A Preliminary Appraisal," The World Bank Research Observer, World Bank, vol. 18(1), pages 113-128.
    3. Mr. Sanjeev Gupta & Ms. Catherine A Pattillo & Ms. Smita Wagh, 2006. "Are Donor Countries Giving More or Less Aid?," IMF Working Papers 2006/001, International Monetary Fund.
    4. Sanjeev Gupta & Catherine Pattillo & Smita Wagh, 2006. "Are Donor Countries Giving More or Less Aid?," Review of Development Economics, Wiley Blackwell, vol. 10(3), pages 535-552, August.
    5. James M. Buchanan, 1963. "The Economics of Earmarked Taxes," Journal of Political Economy, University of Chicago Press, vol. 71(5), pages 457-457.
    6. Gwilliam, Ken & Shalizi, Zmarak, 1999. "Road Funds, User Charges and Taxes," The World Bank Research Observer, World Bank, vol. 14(2), pages 159-185, August.
    7. Mr. Barry H Potter, 1997. "Dedicated Road Funds: A Preliminary View on a World Bank Initiative," IMF Policy Discussion Papers 1997/007, International Monetary Fund.
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    Cited by:

    1. Ms. Daria V Zakharova, 2008. "Fiscal Coverage in the Countries of the Middle East and Central Asia: Current Situation and a Way Forward," IMF Working Papers 2008/111, International Monetary Fund.
    2. Sophia Gollwitzer & Eteri Kvintradze & Mr. Tej Prakash & Luis-Felipe Zanna & Ms. Era Dabla-Norris & Mr. Richard I Allen & Irene Yackovlev & Victor Duarte Lledo, 2010. "Budget Institutions and Fiscal Performance in Low-Income Countries," IMF Working Papers 2010/080, International Monetary Fund.
    3. Mihaela Grubisic & Mustafa Nusinovic & Gorana Roje, 2009. "Towards Efficient Public Sector Asset Management," Financial Theory and Practice, Institute of Public Finance, vol. 33(3), pages 329-362.
    4. Hemming, Richard, 2013. "The Cyclical Characteristics of Universal Social Insurance," IDB Publications (Working Papers) 4538, Inter-American Development Bank.

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