Developing countries ‘lack basic building blocks for economic reforms’

25 May 18

Developing countries need to have the “basic building blocks” in place before they can make sustainable reforms, the president of a global financial management body has said.

Jim Wright, the president of the International Consortium on Governmental Financial Management, told PF International that developing countries do not yet have the capacity to get the basics right, such as cash-based accounting.  

He said: “There are some basic building block elements that are missing.

“It’s really education, professional training and capacity that is critical [in developing countries] for any of these reforms to be sustainable over time.”

Technology also plays a big role in public financial management and there is new potential in blockchain and artificial intelligence, said the president of the global organisation, which brings together public entities across the world interested in financial management.

However, emerging economies’ highest priority is still getting to grips with cash accounting and the basics of financial management, he added, in an interview following the ICGFM’s in Miami.

“Hearing about this cutting-edge technology can seem a little bit overwhelming and far off in the future.”

He added that “moving towards these innovative technologies is beside the point because you have to have the ability first”.

This includes the ability to move to accrual-based accounting, Wright said, as this requires technical knowledge that developing countries do not always have.

“Sometimes, countries are trying to over-engineer these influences when really the nuts and bolts are required in getting started,” he said.

The International Federation of Accountants, which also works to improve capacity in developing countries, called on governments and organisations to do more to ensure accountants are trained to common international standards, in a report earlier this month.

But Wright said that developed countries should grab the opportunity of new technology, rather than taking a “wait and see” approach.

He said: “You will see the public sector lack a little behind the private sector, but there is a tremendous amount of potential.” 

“There’s kind of ‘wait and see’ that happens in the public sector to wait for these solutions to become a little more cost effective.”

Particularly in areas like auditing, AI can play a big role improving efficiency.

Wright said “it doesn’t make auditors purposeless” but instead improves the way they work and enables them to be more thorough.

“It creates a lot of benefit in that way, in terms of the power of these technologies to supplement the work that was traditionally done in labour intensive ways,” he added.

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