When mission teams from the International Monetary Fund visit countries for either surveillance
or program work, one person is usually designated as the "fiscal economist." This economist's
duties extend over both the revenue and expenditure sides of the fiscal accounts.
Traditionally, economics training in public finances has focused more on tax than expenditure
issues, and within expenditure, more on policy considerations than the more mundane matters of
public expenditure management. Thus, many economists participating in their first IMF mission
may have relatively little experience of practical issues in public expenditure management;
typically, they face questions that are more about accounting and institutional structures than
economic theory or policy.
For many years, the IMF's Public Expenditure Management Division has answered specific
questions raised by fiscal economists on such missions. Based on this experience, these
guidelines arose from the need to provide a general overview of the principles and practices
observed in three key aspects of public expenditure management: budget preparation, budget
execution, and cash planning. For each aspect of public expenditure management, the guidelines
identify separately the differing practices in four groups of countries--the francophone systems,
the Commonwealth systems, Latin America, and those in the transition economies.
Following the preparation of an internal document for training and guidance purposes in early
1998, it was suggested that this document might be made more widely available to the public.
This publication is thus intended for a general fiscal, or a general budget, advisor interested in the
macroeconomic dimension of public expenditure management.
The authors wish to acknowledge the contributions from other members and former members of
the Public Expenditure Management Division of the Fiscal Affairs Department, particularly
Taryn Parry, José-Luis Ruiz, Véronique Bédague, and Ian Lienert. In
addition, comments from G.A. Mackenzie, Sanjeev Gupta, and Adrienne Cheasty on earlier
versions were especially helpful in assisting the authors in the preparation of the final text.
Special thanks are due to Theresa Garrison for her patience and diligent production of many
drafts of this manuscript and her editorial suggestions. Jeff Hayden of the External Relations
Department edited the manuscript and coordinated its production.
The budget as approved by the legislature for a line item of spending. The budget law gives the
executive branch the authority to incur obligations, which become due during the budget year up
to a specified amount for specified purposes within a financial period (usually one fiscal year).
These are below the line drawn to establish the deficit between revenues and expenditures;
correspondingly, above-the-line items comprise expenditures and revenues. Below-the-line items
thus normally relate to the financing of the deficits.
The amount of appropriation proposed or approved for a line item or for a higher aggregate set of
line items, such as a subprogram, program, sector, etc.
The placement of a purchase order or signing of a contract or other agreement for the provision
of goods or services.
A small portion of the total budget that is set aside for expenditures on unexpected needs or
emergencies, not appropriated in other budget lines.
Any spending program where expenditure is open-ended (usually transfer/grant payments) and
where recipients must be paid or given transfers/grants, if they meet certain criteria. Some
common examples are found in social security programs, unemployment programs, and poverty
Accounts held by government bodies but not included in the governmental budget; expenditures
from such accounts are often financed by earmarked revenues or user fees and charges.
Organic budget law
A law specifying the schedule and procedures by which the budget should be prepared, approved,
executed, accounted for, and final accounts submitted for approval.
Actual revenues and outlays on expenditures.
Authorization for payment against a bill or invoice made by officials of line ministries, the
ministry of finance, and others.
A small portion of total planned budget expenditure that is (notionally) set aside by the ministry
of finance before the budget is formulated, and then allocated to budget line items by the cabinet
according to perceived policy priorities on individual sectors, programs, etc.
Legislation that permits an expenditure to get under way before the actual budget appropriation,
without any further authorization procedures. This is most commonly used at the start of the
fiscal year (e.g., when the legislature has not yet finalized the budget).
Activities of the central bank (or possibly other state-owned financial or nonfinancial enterprises)
that are in nature similar to fiscal actions pursued by the government. Although undertaken at the
direction of the government, they are usually financed by the banks or state enterprises but not
included in the government's budget. Examples include credit to commodity boards (or other
entities) at below-market interest rates, and central bank expenditures on the bailout of failing
Usually, the process of checking payment orders issued by a government agency against actual
payments according to bank statements; (reconciliation can also apply to other stages of the
expenditure process, such as commitments made and payment orders issued).
Accounts recording transactions of an "exceptional" character that are made outside the normal
procedures for expenditure approval and recording; many refer to temporary accounts (such as
advances), or to transactions whose authority is questionable or to the accounts of formal
extrabudgetary funds or "below-the-line" accounts.
Usually similar to extrabudgetary funds, but sometimes refer to funds financed by earmarked
revenues/user charges that are within the government's budget.
Legislation passed during the budget year to provide for expenditures additional to the original
A type of special temporary account used to record balances, or correct mistakes in amounts, that
have not yet been "posted" to the relevant line item. Such transactions often include payments of
adjustable advances, until the final amount chargeable is known.
Once a bill for goods or services has been received, the relevant line ministry/spending agency
must confirm that the bill is correct and that the goods or services have in fact been received. At
this point, the bill becomes a liability of the public sector; in accrual accounting terms, an
expenditure is recognized even though the bill has not yet been paid.
The process of transferring expenditure provision from one line item to another during the budget
year. To prevent misuse of funds, spending agencies must normally go through administrative
procedures to obtain permission to make such a transfer.
A release of all, or more commonly a part, of the total annual appropriation on a quarterly or
monthly basis that allows a line ministry or spending agency to review commitments.