Good financial governance for sustainable development

Project description

Title: Good financial governance
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ)
Country: Global
Overall term: 2019 to 2022

Context

In the field of public finance, German development cooperation pursues the integrated and value-based approach of good financial governance (GFG). This is based on the conviction that a functional public finance system promotes sustainable development. 

This approach covers three dimensions and their mutual interactions: first, the principles of good governance, such as transparency, gender neutrality and the rule of law; second, the political structures and interests; and third, the technical processes and tools of public financial management.

The approach is intended to help partner countries generate additional domestic revenue by their own efforts and structure their budget processes in a fair and transparent manner. This is designed to ensure that public funds are used appropriately for the common good and help to reduce poverty. Structuring the public financial system in a fair and transparent manner will improve the rule of law, fosters citizens’ trust in the Government and increases their willingness to pay taxes.

Objective

Partner countries generate higher domestic revenues and use public funds for the common good. The rule of law is improved, while citizens have greater confidence in the Government and are increasingly willing to pay taxes.

Approach

The project supports the German Federal Ministry for Economic Cooperation and Development (BMZ) in making a wide range of contributions to good financial governance. It promotes fair, efficient and transparent domestic revenue mobilisation and budgeting systems, as well as effective financial oversight in order to reduce poverty and foster sustainable development.

The activities focus on four fields of action:

Positioning German development cooperation 
The project conducts background research and analyses, prepares status reports on selected topics and processes, and organises expert discussions. This makes it possible to develop positions for German development cooperation, for example for the Addis Tax Initiative or in the context of the EU Council Presidency. 

Strengthening the capacities of German technical cooperation
For this purpose, the project develops and pilots new practical tools, for example for analysing gender-specific inequalities in public budgets.

Communicating the results of good financial governance
The project prepares evidence of results for political communication and develops learning and dialogue formats.

International networks and initiatives in the area of taxation
The International Tax Compact (ITC) is part of the project. The platform aims to increase the capacities of the partner countries to finance themselves through fair, efficient and transparent tax systems. The ITC acts as a secretariat for three international initiatives in the area of taxation and development: the Addis Tax Initiative (ATI), the Network of Tax Organisations and the Domestic Revenue Mobilisation (DRM) Innovation Fund.

Results

The advisory services provided by the project have enabled BMZ to adopt a well-founded position in national and international debates and contribute to expert discussions. Such contributions have been relevant, for instance, for the classification of domestic revenue mobilisation as a separate support area at the Organisation for Economic Co-operation and Development (OECD).

In addition, the project has developed numerous tools and guidelines for addressing the concerns of marginalised groups. They include the Equity Budgeting Tool (EBT) and the guidelines for gender-sensitive budget planning. In Burkina Faso, the pilot phase of the EBT has led to a participatory debate and to adjustments in the budgeting process. Moreover, the project has played a role in establishing the Africa Academy for Tax and Financial Crime Investigation in Kenya.

The International Tax Compact has developed a system for monitoring ATI (Addis Tax Initiative) commitments, set up a worldwide network of revenue organisations and established a fund to promote innovative projects in the area of self-financing capacities in Africa. A newly created online portal provides access to information from development partners and partner countries in the field of taxation.