Imagine you could rewrite the rules of public finances. Imagine not having to cut social services nor raise taxes to close that damaging hole in your budget. Imagine building more schools and training more doctors without having to borrow money, raise taxes or cut other budgets to pay for them. Imagine being the generation of public service leaders that creates high-quality, well-funded government services without leaving tomorrow’s tax-payers to pick up the tab.
Or imagine you could rewrite the rules of public sector lending. Imagine if organisations that spend donor or investor money on public projects could accurately, and in near real time, track how that money was spent and generate data to demonstrate the impact it made. Imagine how much more confident donors or investors would be that their money was being spent effectively and efficiently – and the impact this confidence could have on our collective capacity to do good around the world.
Is this too good to be true? Not anymore.
Effective public financial management is always a top priority for governments. But in recent years – as demographic change and crises, including the Covid-19 pandemic, have driven public spending and investment, while low growth has emerged as a feature of the modern global economy – renewed fiscal pressures have increased the urgency for advances in the way public finances are managed.
For decades, governments and public sector agencies have been spending tax-payers’, donors’ and investors’ money as effectively as they could. But the system hasn’t been perfect. It costs money to move funds through the government value chain, as they make their way from the central Treasury or finance ministry through the programme departments to the delivery agencies and their partners, and to the ultimate payment or service recipient. And it’s the same for a development agency, as money is allocated to a programme and then makes its way through the chain of funding and delivery agencies towards the ultimate beneficiary.
But all this is about to change. Now, digital technology – specifically blockchain – gives public finance managers the opportunity to vastly reduce the cost of spending public money, to improve control over that spend and to see, in close to real time, the outcomes it achieves.
A blockchain solution can integrate financial and non-financial reporting in government. It reconciles and consolidates information within and across government and its external partners, and produces near real-time spend and performance reporting and advanced analytics at both an aggregate and granular level.
Prysm Group, specialists in the economics of emerging technologies, has carried out research for the EY organisation. Prysm Group studied the US federal government to explore the potential impact of using a digital technology-based approach to better manage public money.
Their findings illustrate the potential administrative savings and value added from better allocation of spending that this kind of improvement in public financial management could achieve. A forthcoming report published by OMFIF and EY explores these findings, which will also be presented at the launch event.
This is an opportunity for governments to use money more effectively – in ways that improve public services, boost economies, benefit communities and change lives. And it provides accountable outcomes for citizens and investors.
Public sector leaders who have the vision to adopt the new technology now have the opportunity to gain an unprecedented level of visibility, predictability and control over the use of public money. They can realise a long-held ambition of more efficient and effective public financial management.
Discover more about EY Blockchain for Public Finance.
Mark MacDonald is the EY Global Public Finance Management Leader.
The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organisation or its member firms.
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Blockchain for pubic finance management report launch
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