CC BY
35
ORIGINAL PAPER
doi: 10.26794/2587-5671-2022-26-6-175-191 jelе6, е62
(CO ]
BY 4.0
Modern Financial Tools' Impact on Public Financial Management: The Case of Egypt
A.A.M.A. El-Saman
Cairo University, Giza, Cairo, Egypt
ABSTRACT
The purpose of this study is to examine the managerial impacts of applying modern public financial management (MPFM) tools in financial reform programs on the efficiency of public financial management (PFM) in developing countries, considering the case of the Egyptian reform program implemented during 2005-2015. Applying MPFM tools could improve the efficiency of PFM in developing countries if institutional factors are available to ensure their successful implementation in reform programs. The study adopted a descriptive-analytical method to describe the managerial impact of applying MPFM tools in the financial reform experiences in developing countries. It employed a case study approach on the Egyptian reform experiment to estimate the correlation between applying modern financial tools and the managerial efficiency of PFM assessed through three elements: operational efficiency, allocative efficiency, and financial discipline. The practical study used the IBM SPSS package and MS-Excel to process the data. The results found a positive correlation between the application of modern financial tools and the rate of improvement in the efficiency of PFM in the Egyptian reform program. The study developed a specific model for a deeper understanding of the impacts of MPFM tools on the efficiency of PFM. The model highlighted a strong positive correlation between the successful application of modern PFM tools and the efficiency of PFM and underscored that the availability of the required realtime financial information about governmental revenue and more control over public spending led to achieving financial discipline.
Keywords: modern public financial management tools; public financial management; financial reform programs; developing countries; Egypt; financial discipline; allocation efficiency; operational efficiency
For citation: El-Saman A.A.M.A. Modern financial tools' impact on public financial management: The case of Egypt. Finance: Theory and Practice. 2022;26(6):175-191. DOI: 10.26794/2587-5671-2022-26-6-175-191
ОРИГИНАЛЬНАЯ СТАТЬЯ
Влияние современных финансовых инструментов на управление государственными финансами (на примере Египта)
А.А.М.А. Эль-Саман
Каирский университет, Гиза, Каир, Египет
АННОТАЦИЯ
Цель данного исследования - определить воздействие применения современных инструментов управления государственными финансами (MPFM) в программах финансовых реформ на эффективность управления государственными финансами (PFM) в развивающихся странах на примере египетской программы реформ, реализованной в 2005-2015 гг. Применение инструментов MPFM может повысить эффективность PFM в развивающихся странах при наличии институциональных факторов, обеспечивающих их успешное внедрение в программы реформ. Использован описательно-аналитический метод для описания управленческого воздействия применения инструментов MPFM в ходе финансовых реформ в развивающихся странах. Для оценки взаимосвязи между применением современных финансовых инструментов и управленческой эффективностью PFM, оцениваемой через три элемента: операционную эффективность, распределительную эффективность и финансовую дисциплину, использован метод кейс-стади на примере египетского эксперимента по реформированию. В практическом исследовании использован пакет IBM SPSS и MS-Excel для обработки данных. Результаты показали положительную корреляцию между применением современных финансовых инструментов и темпами повышения эффективности PFM в египетской программе реформ. В ходе исследования была разработана специальная модель для более глубокого понимания влияния инструментов MPFM на эффективность PFM. Модель продемонстрировала сильную положительную корреляцию между успешным применением современных инструментов PFM и их эффективностью, а также показала, что наличие необходимой финансовой информации о государственных доходах в режиме реального времени и усиление контроля за государственными расходами приводит к достижению финансовой дисциплины.
© El-Saman A.A.M.A., 2022
Ключевые слова: современные инструменты управления государственными финансами; управление государственными финансами; программы финансовых реформ; развивающиеся страны; Египет; финансовая дисциплина; эффективность распределения; операционная эффективность
Для цитирования: El-saman A.A.M.A. Modern financial tools' impact on public financial management: The case of Egypt. Финансы: теория и практика. 2022;26(6):175-191. DOI: 10.26794/2587-5671-2022-26-6-175-191
introduction
Public financial management (PFM) efficiency is one of the main objectives for developing countries seeking financial stability. However, public finance management in these countries carries challenges owing to outdated financial systems, slow paper procedures, and legacy administrative tools. This leads to inefficiency in allocating and operating public financial resources and an imbalance of financial discipline. Therefore, these countries seek to apply advanced solutions to modernize PFM systems by implementing financial reform programs (FRPs) adopting modern methodologies and methods to achieve PFM efficiency.
Consistent with this approach, international financial institutions since the mid-1980s have developed new public financial management systems based on information and communication technology (ICT) to improve the PFM efficiency — modern public financial management (MPFM) tools. The most important of these were the Treasury Single Account System (TSA), Government Financial Management Information System (GFMIS), and Government E-Payment System (GPS) The World Bank (WB) and International Monetary Fund (IMF) have contributed significantly to designing and formulating these modern financial tools.
Since the mid-1990s, WB and IMF experts [1] have published many studies and research indicating that these modern tools are advanced technological systems that can create an appropriate administrative work environment. These systems facilitate the organization and flow of financial information on government activities and provide technological capabilities enabling governments to achieve the required efficiency in operating and allocating resources and conducting financial discipline that may lead to PFM efficiency improvement. Moreover, international financial institutions encouraged developing countries to apply FRP to implement MPFM tools and provided financial and technical support to use these tools, reform public finance, and improve PFM efficiency [2].
Following the multiple recommendations issued by international financial institutions regarding the advantages of MPFM tools, developing countries have responded diligently, applied FRP, and implemented MPFM. However, a literature review analyzing the
results of these countries' reform experiences indicates that the results varied and were inconsistent with these recommendations.
Research problem
Although many developing countries have followed the recommendations issued by international financial institutions, particularly from the WB and IMF, emphasizing the importance of applying MPFM tools in FRP and improving PFM efficiency, many developing countries have committed to using these MPFM tools since the beginning of this century. However, the results of the reform programs were varied and did not always succeed in applying or improving PFM efficiency. Conversely, developing countries faced many challenges and failures during the application and use of these MPFM tools. A discrepancy in the results emphasized why studying the application mechanism of MPFM in FRPs in developing countries more in-depth to identify the factors leading to successful application in some countries. Additionally, by building a more specific model that can enhance the mechanisms of applying these modern tools in the future, we hope this model can help to avoid the causes of failure experienced by other countries and benefit from these lessons.
study question
What are the impacts of the application of MPFM tools on FRP in developing countries on PFM efficiency considering its three elements — operational efficiency, allocative efficiency, and financial discipline — and how can the outcomes of this application be improved?
significance of the study
The study highlights the implementation of MPFM tools in FRP. It defines success and failure institutional factors in the application and lessons learned from application experiences in some developing countries. Additionally, the study introduced a model that may explain the relationship between applying a specific modern financial tool and a specific element of PFM efficiency. The model applied a field study on the Egyptian reform program applied during 2005-2015 to measure the impact of
the application and use of these modern tools on the FRP and PFM efficiency in Egypt.
literature review
We identify how studies and research addressed new concepts of MPFM tools and their applications in FRPs in developing countries and PFM efficiency. Here, the author monitored two main trends. The first trend is the literature focused on the concept of MPFM tools, while the second focused on how these tools are implemented in FRPs in developing countries. However, according to chronological order, the most important of these studies are the following:
A. Chowdhury [3] analysed the management of financial sector reform policies. They found some improvements in competition and efficiency due to the reform process. However, efficiency was lacking, and bias was present in the loan distribution and diversion of resources away from the rural sector and obstruction of loan recovery owing to political intervention. Our study concluded the importance of using MPFM tools to achieve efficiency in resource management by providing information that can earn equity and equality of distribution.
I. Pattanayak and S. Fainboim [1], studying the importance of applying new MPFM tools, highlighted the concept of TSA and described its features, discussed design issues, implementation conditions, and how can address fragmented government banking arrangements. Our study reached a group of results: fragmented governmental structures hindered cash management efficiency. TSA aims to ensure effective total control over governmental cash balances. Strengthening monetary resources by implementing TSA helps avoid governmental borrowing. Paying a substantial interest fee helps finance government agency expenses.
R. P. Jr. Beschel and M. Ahern [4] conducted extensive research for assessing the PFM reform process in the Middle East and North Africa region. They aimed to understand the type of fiscal reforms implemented during the first decade of the current century, specifically how these countries deal with PFM problems and the tools they used to manage FRP. They found that, in this region, it is the presence of individual leadership with a reform vision. This was key in the application of FRPs with MPFM tools. However, this success depended on the existence of this charismatic individual, and his capabilities enabled it to succeed.
A. Lawso [5] evaluated public financial management reform in Burkina Faso, Ghana, and Malawi in 20012010. Through a comprehensive assessment of the
FRP implemented in those countries by the African Development Bank, the Swedish Development Agency, and the Danish International Development Agency, they answered the following questions: Why and where do PFM reforms work? Where and how can donors support effective PFM reform contributing to the results? Our study concluded that financial reform results are good when strong commitment exists at the political and technical levels. Additionally, the reform application and design models are well designed to fit the context and use modern tools in the reform process.
A. Muhammed [6] sought to analyze the positive and negative aspects of reforming PFM in Ethiopia and Tanzania. It focuses on the systematic treatment of weaknesses in financial control. The study then found successful financial reforms in Ethiopia and Tanzania, and all reform paths were selective. Reform procedures in Ethiopia have focused on several aspects, such as reforming existing systems, focusing on the legal framework, reports, and budgeting, establishing strong manual controls on commitments of the procurement systems, and mechanization of operations. In Tanzania, FRP has focused on using ICT and MPFM tools.
S. K. Aitaa [7] examined the efficiency of GFMIS implementation and found that many institutions in Uganda use different financial transaction systems. Conversely, some financial transactions are performed outside the GFMIS. After implementing the system, the performance of financial management has improved, and the financial reporting process has improved timing and accuracy; the percentage of applying the system has increased from 47% to 50%. Although the system can solve some problems, concerns regarding plans that face many challenges in system implementation (e. g., frequent system and network downtime, insufficient training for users, power outages, and inefficient computers) are increasing. In addition to role the misallocation affecting the implementation of the operations of the GFMIS and the operational constraints of the system, the study found that the GFMIS in Uganda did not achieve the expected results entirely because of weak human resources technological capabilities.
W. A. Abdulaziz [8] highlighted the impact of the application of the GFMIS on the PFM efficiency in Egypt. This study sought to determine the reasons for poor PFM efficiency in Egypt attributable to traditional methods in public budget preparation that suffered from a lack of transparency and disclosure in governmental transactions. They concluded that the application of MPFM tools, such as the GFMIS, may help agencies and ministries conduct PFM functions efficiently by raising accuracy level in budget estimates,
improving self-control, taking preventive measures, controlling financial operations, and providing financial information related to the preparation of financial plans and budgeting.
Comments on Literature Review
The author produced the following results: confirming the hypothesis that the application of MPFM tools was not successful in all application experiences; however, its impacts vary based on country-specific conditions. To achieve success, it is imperative to consider key institutional factors. This study focuses on these institutional factors to clarify them. Most of the studies tackled the application of a single tool and its impact on only one element of PFM efficiency. Multiple tools have not been studied either holistically or simultaneously. Measuring impact and analyzing the results of MPFM tools was applied in general, without linking or determining the effect of a particular device on a specific dimension or element of PFM efficiency.
Realizing this dispersion in the measurement and analysis of the impact of MPFM tools on PFM, we present a new theoretical framework for the compound application of MPFM tools simultaneously and measuring its effects on the PFM efficiency. We designed a proposed model for the relationship between each of the three MPFM tools for each of the three dimensions of PFM efficiency in the application phase (implementation of FRP) and then in the use phase (managing PFM). Thus, it measures the direct impact of each specific modern financial tool on the related dimension concerned with the PFM efficiency, which is designed to achieve this particular goal. We aggregated the values of the averages of the results to estimate the total combined effect of the MPFM tools on the FRP and PFM efficiencies. The author has applied this proposed model to the experience of FRP implemented by Egypt during 2005-2015 to verify the validity of the model through a questionnaire completed by Egyptian Ministry of Finance employees who applied these MPFM tools in Egypt. This model attempted to measure the degree of correlation between the application of MPFM tools and PFM efficiency. Details of the model and field study results are obtained after presenting the theoretical framework of MPFM tools and how they are applied in FRP.
mpfm tools
MPFM tools generally refer to automating the financial operations of the public budget, treasury, and payment units in PFM by implementing modern
and comprehensive technological applications, leading to the transformation of PFM paper-based work environments to electronic bases. MPFM was built based on work rules and procedures and developed by international financial institutions (e.g., WB and IMF). Moreover, they have been designed and established as foundations and business processes since the beginning of the 1980s.1
MPFM tools are vital in tracking financial events, recording all transactions, summarizing information, supporting reporting and policy decisions, and incorporating ICT elements, personnel, procedures, controls, and data. MPFM tools are generally built around a core treasury system supporting essential budget execution functions (e.g., accounts payable and receivables, commitment and cash management, general ledger and financial reporting, debt management, and public investment management modules). MPFM tools require a large technological project implementation in the form of FRP, which ends with the availability of these tools for PFM to achieve efficiency [9]. The essential MPFM tools and how they are implemented in FRP are as follows:
TSA is a unified structure of government bank accounts enabling consolidation and optimum utilization of government cash resources providing the government with a consolidated view of monetary resources. The country's financial resources are pooled with the central bank to demonstrate the true picture of the state balance of revenues and expenditures, with a careful and transparent follow-up of cash flows for achieving the rational management of the country's fiscal resources [1].
TSA advantages: IMF highlights that this financial tool is one of the most important MPFM tools. It is used to "improve the management of government resources in financial reform processes" and is critical for pooling and managing government cash resources. Therefore, in countries with multiple banking arrangements for government resources, implementing this tool should be prioritized in the financial reform agenda for their overall role in reducing borrowing costs and maintaining and managing limited financial resources efficiently and effectively. However, applying this system requires professional, technical, and political will in countries that have used traditional systems of financial reform for a very long time. Challenges and difficulties in technological infrastructure make it more difficult in developing countries. The planning and
1 International Monetary Fund. Fiscal Monitor — Public Expenditure Reform. Washington: Making Difficult Choices. 2014;11-17.
implementation of TSA are also some of the essential factors in application success [10].
GFMIS is a set of solutions to automate public financial operations. Moreover, it unified and integrated accounting and information systems linking all governmental organizations to support informed decision-making. The system considers the ERP or back-office system for the government; it is not in direct contact with citizens, but is used by governmental employees for internal transactions and budgeting processes. Moreover, it assists in prioritization, implementation, and reporting expenditures and monitoring and reporting revenues, leading to PFM efficiency and equity [11]. GFMIS can also be identified as a set of process mechanization solutions that enable governments to plan, implement, and monitor the budget.
Advantages of GFMIS: Countries can acquire many benefits from implementing GFMIS. According to the United States Agency for International Development
The essential advantages of system implementation are the following [12]:
• Inclusiveness: All government financial transactions were recorded. Moreover, it allows tracking economic events and presents them in a normative form.
• Flexibility: Customized to work according to the needs and specifications of the government environment wherein it is installed.
• Integration: By combining all the needs of government financial information into a single integrated platform.
GFMIS components: The system comprised of two main components: the core systems, a set of modules that must exist to make the system functioning, and called treasury systems or budget execution systems. The general ledger system represents the heart of the system. It records all the accounting processes and restrictions conducted on the system and contains a chart of accounts, which is its backbone. Sub-Systems: It is the other modules that may be part of the system or exist in an external autonomous system but require an interface to the GFMIS through a process of integration, such as collection, debt management, and asset management systems [13].
GPS: Payment system is the set of means, procedures, and rules for transferring funds between members participating within the system following an agreement between all members participating in the system and the system operator. Transfer of funds using a technical infrastructure should be done following the agreed technology. Modern economies currently have three types of payment systems. In the banking
payment system, banks make payments. The nonbanking payment system uses public networks, such as the Internet or private networks of payment providers. The government e-payment system, a system newly introduced by the WB and IMF, is a new government channel for collecting revenues and paying government liabilities to the beneficiaries [14].
Advantages of GPS: Governments implementing GPS accelerate payment and collection operations in budget units, facilitate the management of transfers to budget units and vice versa for budget operations, reduce cash in circulation and provide advanced channels for the government to collect revenues and pay its obligations securely. GPS is critical as it created an integration that was missing between government strategic plans at the MoF and the real cash balances available in government accounts. Moreover, it enhanced the efficiency of government financial information, wherein each payment to or from the government accounts is recorded with a unique identification number [15].
FRP is a specific plan with a time frame based on scientific rules, designed by setting clear goals to be implemented according to an identified period before initiating implementation. The extent to which the plan achieves, what has been targeted, is monitored to ensure that the required activities are implemented in specified times and at the estimated cost and to work on correcting any deviations that may occur for any reason. FRPs typically have specific goals or goals, such as reducing the public budget deficit at the end of the program to 3% of GDP. There must be a mechanism to measure the extent to which the program achieves the goal (objectives) for which it was implemented. FRP's importance originates from the potential to drive economic growth, and evidence indicates that if FRP succeeds in achieving its goals (e.g., financial discipline), it leads to better economic outcomes. Many studies have highlighted that the FRP could raise economic growth by about three-quarters of the percentage point in developed countries, particularly in the ten years following FRP [16].
Challenges of applying FRP in developing countries
Typically, developing countries face many challenges due to their historical circumstances when applying FRP. Therefore, studies have asserted that the fundamentals of reform should be established. A "preparation process" for the reform climate must be implemented well before applying FRP based on MPFM tools. The rush to implement MPFM tools in an undeveloped environment often fails the reform process. The application process and reform
program being implemented are likely subject to the risk of political volatility, which may affect the reform process outcome. Conversely, studies analyzing the results of the reform experiments in developing countries over a quarter-century found that completing the basic requirements is crucial [17].
On the other hand and according to C. Dener et al. [11], FRP must be implemented through a long-term strategic framework for a comprehensive financial reform state strategy and not a government program. At the same time, N. M. Alsharari and M.A.E.-A. Youssef [18] found that the long period of the reform program implementation must be subject to and followed up by independent bodies directly (e.g., state audit and control) to ensure continuity of application over time the event of political changes. The pavement of the legal environment for FRPs is crucial, and developing countries must adopt the necessary laws to support the reform process.
applications of mpfm tools in international experience
These applications are evident from the analysis of some incidents of applying MPFM tools in developing countries that can produce several lessons for benefiting both successful backgrounds and failure experiences in either way, which will be presented in the following examples.
Applying MPFM tools in Iraq
Iraq applied FRP based on MPFM tools on two occasions. The first in 2003 was when USAID implemented MPFM tools in Iraq to attempt to modernize Iraq's PFM and comply with IMF requirements so that Iraq could qualify for IMF assistance and cancel debts from the Paris Club by May 2007. GFMIS was implemented in 132 nationwide spending units, accounting for more than 80% of government spending. In June 2007, USAID ended the program after five civil service consultants were abducted, among other difficulties encountered in adapting the systems for the Iraqi government. Despite applying MPFM tools in FRP, the first FRP failed to achieve real reform of the PFM. This reform experience was not completed due to several political problems encountered during the reform process and systems application. However, with the persistent imbalance in the public expenditure structure favouring operating expenses, Iraq was forced in 2014 to eliminate technical aid from the WB to start a new reform program with MPFM tools. To avoid the failures of 2003, a supportive environment
was created through the Government of Iraq's commitment to prepare and implement the GFMIS, updating TSA. A step toward modernizing public investment management systems and operating public procurement to create a more transparent and efficient government system that can provide better services while creating a viable environment by laying the groundwork before beginning the financial reform process and enhancing a sense of real ownership the project. Although the second FRP is still ongoing, it faces many challenges due to Iraq's current political circumstances.2
Applying MPFM tools in South Africa
At the beginning of 2005, applying MPFM tools became a unified financial and administrative system in nine South African regions. According to C. J. Hendriks [19] MPFM tools took seven years before application, and the project was finally implemented as a priority initiative led by the National Treasury Authority to review and develop information technology. The project was aimed to enhance government expenditure management integrity and provide performance reports to ensure effective service and PFM efficiency. FRP began by implementing GFMIS with the modernization and interdependence of existing financial management systems. South Africa was guided by reasoning and rationality in the application, especially in choosing the "application approach". Our choice was between a phased implementation or comprehensive application of all system components once and debugging regularly, compared to an extensive application system with high risks that can lead to complete project failure. South Africa adopted a phased approach, which improved PFM efficiency.
Applying MPFM tools in Guatemala
In 1997, Guatemala launched three FRPs with the World Bank's support to enhance PFM efficiency. The first financial reform modernization project was established under the "Integrated Public Financial Reform Program", or SIAF I. Following the implementation of two additional reform programs under SIAF II and SIAF III. Our reform aimed to integrate all government units of the
2 World Bank. Iraq Public Expenditure and Institutional Assessment, Volume 2: Public Expenditure and Financial Accountability Assessment, Public Financial Management Report. Washington, D.C.: The World Bank. 2008;15-25. URL: http://elibrary.worldbank.org/doi/book/10.1596/28210 (accessed on 02.12.2022).
new system and add new capabilities to increase budget cycle efficiency, enhance transparency and accountability, and automate the collection of basic information at various government levels. The main principle of the system focused on the transition to centralized control and the development of basic budget and treasury functions. Guatemala's MoF developed a management unit called SIGES for supporting entities in implementing administrative processes (e. g., purchasing goods and services, recording inventory movements, and debt management). Guatemala's fiscal reform programs are implemented through an internal national strategy based on a combination of local cadres and capabilities and international expertise only as a consultant, especially in project management and organization of work procedures. This reform approach has prevailed in most FRPs in Latin American countries [9].
Lessons learned from applying MPFM tools in international experiences
After two decades of financial reforms in developing countries using MPFM tools, targeted improvement in PFM has not been successful in all the reform experiences implemented despite a commitment by applying modern tools. Moreover, this failure may result from all or some of the following factors [8]:
• The application of MPFM tools was partial and dispersed.
• The implemntation was conducted in a sequential rather than a parallel manner.
• Missing the integration mechanism in the scope of the project.
• A particular tool was applied to fix a specific financial defect without considering the integrated implementation of a comprehensive FRP based on MPFM.
field study for egyptian frp 2005-2015
To identify how MPFM tools affect the efficiency of FRP and PFM, practically and more thoroughly, the author conducted a field study for Egyptian FRP using MPFM tools implemented during 2005-2015. The study sought to measure the degree of correlation between the application of MPFM tools and efficiency of FRP and PFM in the Egyptian case, particularly on the following details of the field study:
Study hypothesis
From a literature review, the author found that there are two basic stages in the reform process, as follows [21]:
• Application phase: This stage implements new technological systems within the FRP framework leading to improved FRP efficiency.
• Usage phase: After completing FRP implementation and using MPFM tools in PFM, which improves PFM efficiency.
Study model
The following relationship between the study variables was also monitored (Fig.):
• The Independent variable is the "application of MPFM tools" implemented independently to improve FRP efficiency. Within the scope of the study, it includes three tools: TSA, GFMIS, and GPS.
• The dependent variable is the "PFM efficiency", which is affected by the use of MPFM tools that have been implemented in FRP. The PFM efficiency can be identified by measuring the improvement in the following three dimensions or three dependent PFM sub-variables as follows [20]:
• Operational efficiency means providing a specific level of public services with the least financial resources while achieving the best possible services.
• Allocative efficiency: This refers to the allocation of public revenues according to public priorities and the efficiency of government programs, and the continuation of funding government activities of the highest priority in light of any decline that may occur in government flows and liquidity.
• Fiscal discipline: This generally means that total government spending does not exceed its amount in the general budget. The fiscal deficit does not exceed a certain percentage of GDP.
Field study questions
To what extent did the application of MPFM tools improve the efficiency of FRP and the PFM efficiency in Egypt?
Branching off from the main question, the following three sub-questions:
• How did the application of TSA improve the results of FRPs and achieve the operational efficiency of public financial resources in Egypt?
• To what extent did the implementation of GFMIS improve the results of the FRP and achieve the allocation efficiency of financial resources in Egypt?
• What is the impact of applying GPS on the results of FRPs and on achieving government financial discipline in Egypt?
Study methodology
This study utilized a descriptive-analytical methodology to describe the general information and analyze the
Fig. study model depicting hypothesized relationships among variables
Source: author's original design.
responses of the study sample members regarding whether efficiency was achieved in managing FRP due to the application of MPFM tools and their perceived level of achieving efficiency PFM. We calculated the averages and standard deviations and compared the average responses of the sample members. Their assessment of the efficiency level achieved compared to the default average was [3] degrees (average of Likert scale five). The impact of applying each financial reform axis in FRP on PFM was analyzed and presented separately. The combined effect of using the three MPFM tools on the efficiency of FRP and PFM was then calculated. The degree of correlation was measured between the application of MPFM tools and the PFM efficiency.
study limitations and data collection tool design
The questionnaire form used the five-point Likert scale in the questionnaire and included the following parts (Table 1):
The first part included seven phrases addressing the sample demographic characteristics.
The second part included thirty phrases to collect data from the study population on their opinion regarding the application and use of MPFM tools.
The study sample included employees of the Egyptian Ministry of Finance (2600 employees), and data were collected from July 11, 2021 to October 27,
2021 (Table 2, 3). Our sample was calculated according to the following formula [22]:
x2 NP (1 - P)
n =-----=
D2 (N -1) + ^2P (1 - P)
= (1.96)2 x 2600 x 0.5 x(1 -0.5) = (0.05)2 x(2600)+(l.96)2 x0.5x(l-0.5) '
Here, n is the sample size, N is the size of the study population, P is the percentage of the maximum availability of characteristics to be studied in any community, D is the degree of accuracy reflected in the allowable error, and X2 is the standard degree (the value of the Ka2 test) corresponding to the confidence coefficient, which is 95% at a degree of freedom = 1. Hence, the corresponding standard degree is 1.96.
Data analysis methods: The author used the following statistical methods:
• Cronbach's alpha coefficient was used to estimate the stability of the internal consistency of the study tool.
• Frequencies and percentages: Learn about the distribution of respondents, depending on demographic factors.
• Averages and standard deviations: To obtain the answers of the sample respondents on passages for the study tool.
Table 1
Distribution of degrees, percentages, estimation, and ranking of the five-point Likert scale
Degree Percentages Evaluation Rank
From 1 to less than 1.8 From 20% to less than 36% Do not agree entirely Very low
From 1.8 to less than 2.6 From 36% to less than 52% Do not agree Low
From 2.6 to less than 3.4 From 52% to less than 68% Neutral Average
From 3.4 to less than 4.2 From 68% to less than 84% Agree High
From 4.2 to 5 From 84% to 100 Highly agree Very high
Source: prepared by the author.
Table 2
Sampling method and determining study sample size and response rate
Random probability sampling method Sampling method
Simple random sample Sample type:
335 single Sample volume:
350 forms Number of questionnaire forms distributed:
327 forms Number of survey forms retrieved:
93.4% Response rate
307 forms Number of valid questionnaire forms:
Egyptian MoF Towers - Headquarters Sampling location:
July 11, 2021, till October 27 2021 Time frame of the study:
Source: prepared by the author.
Table 3
Distribution of respondents depending on demographic factors
Item Level Redundancy Percentage
Qualifications Bachelor's degree 219 71%
High diploma 9 3%
Master's degree or MBA 64 21%
PhD 15 5%
Total 307 100%
Position Researcher C 73 24%
Researcher B 67 22%
Researcher A 97 32%
General manager 70 23%
Total 307 100%
Years of experiences Less than 10 years 73 24%
From 10 to 20 years 134 44%
More than 20 years 99 32%
Total 307 100%
Source: prepared by the author based on SPSS V. 26 output.
• Pearson's correlation coefficient determines
the nature and strength of the relationship between the independent and dependent variables.
Stability of the study tool: To ensure validity and reliability of the questionnaire and reach a high level of internal honesty in the study and identify the ability of the questionnaire to measure these variables and test their suitability for collecting data and information. The author has subjected the study tool to several tests, including Cronbach's alpha coefficient for internal consistency. Table 4 shows that the stability coefficients by Cronbach's alpha ranged for TSA between 0.744 and 0.854, for GFMIS 0.739-0.858, and GPS 0.794-0.856 to the phrase.
The stability of the questionnaire's axes was also ensured by the split-half and Getman methods in the following table. Table 5 shows the axial stability coefficients by the Cronbach's alpha, the split-half, and the Getman. Moreover, it shows that the values of the stability coefficients using the alpha Cronbach and split-half methods are high (greater than 0.8), indicating the stability of the scale.
findings
Impact of application MPFM tools on Egyptian FRP 2005-2015 efficiency
The following three (Tables 6-8) present the responses of the study sample to the impact of applying TSA, GFMIS, and GPS on Egyptian FRP efficiency (2005-2015), while (Table 9) presents aggregate responses of the study sample as follows:
The total arithmetic mean value of the axes of applying MPFM tools in Egyptian FRP has reached (4.43 out of 5) with a 0.640 standard deviation (Table 9). This average falls within the fifth category of the five-point Likert scale (4.2 to 5). There is a high percentage of agreement among the sample members that the application of MPFM tools in Egyptian FRP 20052015 has achieved very good results and achieved high efficiency FRP results. This category refers to a highly available option, and this percentage indicates that study sample responses were very high.
Impacts of usage of MPFM tools on the efficiency of Egyptian PFM
The following (Tables 10-12) show the responses of the study sample to the impact of the usage of TSA, GFMIS, and GPS on the use of MPFM in PFM in Egypt after FRP.
Answer on the main study question
To what extent has the application of MPFM tools improved the efficiency of FRP implemented in
Egypt from 2005 to 2015 and then achieved PFM efficiency? The total arithmetic mean value of the axes of using MPFM tools in PFM reached (4.22 out of 5), with a 0.650 standard deviation (Table 13). This average falls within the fifth category of the five-point Likert scale (4.2 to 5). This category refers to a highly available option. There is a high percentage of agreement among the sample members that use MPFM tools in PFM has achieved very high efficiency. This percentage indicates that the responses of the study sample were very high.
Answer to the sub-questions
• How did applying TSA improve the results of FRPs and achieve the operational efficiency of public financial resources in Egypt? TSA succeeded in achieving the operational efficiency of public financial resources by 82.8% by providing the required information in real-time, increasing its ability to control resources, improve investment returns, reduce expenses, improve government liquidity management, improve oversight, and correct operations errors immediately.
• To what extent did implementing GFMIS improve the FRP results and achieve the allocation efficiency of financial resources in Egypt? GFMIS represented a quantum leap in achieving the allocative efficiency of public financial resources by 84.6% by recording all expenditure items in the budget of the system. Moreover, it allowed classification according to their importance and allocating the resources to items of strong importance while providing flexibility in responding to emergencies.
What is the impact of applying GPS on the results of FRPs and on achieving government financial discipline in Egypt? GPS succeeded, with an 86.2% success rate in improving in the most important element of financial discipline, wherein total government spending does not exceed the amounts specified in the budget. GPS controlled public spending completely; hence, units may not spend any amount unless it is included in the budget.
Analysis of the correlation degree between the study variables
A strong (positive) correlation relationship with statistical significance exists between the independent (using MPFM tools) and dependent variables (PFM efficiency) at the macro level (Table 14), as well as at the sub-axis level and dimensions. Table 14 shows the Pearson correlation matrix between each ax of MPFM tools and the
Table 4
Reliability coefficients (Cronbach's alpha) for all study paragraphs
1st Axe: TSA 2nd Axe: GFMIS 3rd Axe: GPS
Item Number (Cronbach's alpha) coefficient Item number (Cronbach's alpha) coefficient Item Number (Cronbach's alpha) coefficient
1 0.S54 10 0.S03 21 0.S02
2 0.S44 11 0.S13 22 0.S47
3 0.S02 12 0.S10 23 0.S39
4 0.S43 13 0.S09 24 0.794
5 0.767 14 0.S04 25 0.S56
6 0.S05 15 0.S27 26 0.S46
7 0.S17 16 0.S4S 27 0.S17
S 0.S39 17 0.S31 2S 0.S44
9 0.744 1S 0.739 29 0.S54
19 0.S5S 30 0.S24
20 0.S16 21
Source: prepared by the author based on SPSS V. 26 output and MS-Excel.
Table 5
Axial stability coefficients by Cronbach's alpha, split-half, and Getman
MPFM No of Alpha Split half Getman's stability
Axes Phrases stability coefficient coefficient coefficient
1st Axe: TSA 9 0.S69 0.S14 0.S97
2nd Axe: GFMIS 11 0.S77 0.S13 0.S97
3rd Axes: GPS 10 0.S71 0.S15 0.S97
Total stability 30 0.SS7 0.S2S 0.906
Source: prepared by the author based on SPSS V. 26 output and MS-Excel.
corresponding dimension in PFM. This correlation ranged between (0.521 and) at its minimum and (0.826) at its maximum values, respectively. Therefore, the greater the success rate of applying MPFM tools during the implementation of FRP, the greater the improvement rate in the PFM efficiency.
conclusion
The application of MPFM tools in FRP forms the most recent trends in PFM reform practices in developing countries. It has many benefits, such as automating work procedures and effective control over public finances, enhancing transparency and accountability, transforming the work environment
from paper- to electronic-based, and automating the business process. This allows financial policymakers to centralize government spending and good management of public financial resources and maintain financial discipline, which achieves PFM.
The technical implementation of MPFM tools is challenging and requires the development of country specific solutions to meet a number of functional and technical requirements associated with the FRP vision. If reforms were assessed properly and a time action plan was developed with realistic sequencing of reform activities tend to produce more effective results in FRP.
The success of applying MPFM tools requires the provision of a set of basic factors, including laying
Table 6
Responses of the study sample to the impact of applying TsA on Egyptian FRP efficiency 2005-2015
Phrase No. Phrase Mean standard deviation Percentage Rank
8 TSA application led to the provision of sufficient information in real time on government financial revenues 4.23 0.748 84.60 V. High
9 TSA application led to an improvement in the ability of MoF to control disbursement from government accounts and control budget units 4.21 0.727 84.20 V. High
10 TSA applications have reduced the need to maintain cash reserves 4.06 0.743 81.20 High
11 TSA application led to improved control during budget execution and flexibility in change in expenditure items according to urgent changes 4.18 0.740 83.60 High
12 TSA application led to a reduction in implementation errors and the possibility of correction 4.17 0.723 83.40 High
Overall average of the impact of applying TSA on Egyptian FRP efficiency 4.17 0.730 83.40 High
Source: prepared by the author based on SPSS V. 26 output and MS-Excel.
Table 7
Responses of the study sample to the impact of applying GFMis on the efficiency of Egyptian FRP
2005-2015
Phrase No. Phrase Mean Standard deviation Percentage Rank
17 GFMIS application led to the provision of sufficient information, which raised the level of accuracy in the estimates of the budget 4.47 0.561 89.40 V. High
18 GFMIS application led to efficient financial resource allocation decisions according to its relative importance 4.35 0.647 87.00 V. High
19 GFMIS application resulted in saving time and effort in the regulation of government financial revenues 4.34 0.683 86.80 V. High
20 GFMIS application led to raising the efficiency of monetary planning 4.27 0.662 85.40 V. High
21 GFMIS application led to regulation of government procurement and the rationalization of public spending 4.02 0.720 80.40 High
Overall average of the impact of applying GFMIS on the efficiency of Egyptian FRP 4.29 0.550 85.80 V. High
Source: prepared by the author based on SPSS V. 26 output and MS-Excel.
Source: prepared by the author based on SPSS V. 26 output and MS- Excel.
Table 9
Aggregate responses of the study sample to the three-axis phrases related to the impact of the application of MPFM tools on Egyptian FRP 2005-2015
Table 8
Responses of the study sample to the impact of applying GPS on the efficiency of Egyptian
FRP 2005-2015
Phrase No. Phrase Mean Standard deviation Percentage Rank
28 GPS application led to the rapid collection of government fees and dues 4.30 0.612 86.00 V. High
29 GPS application led to the efficient collection government revenues 4.22 0.731 84.40 V. High
30 GPS application reduced the difference between the book proceeds and the actual government revenue proceeds 4.23 0.721 84.60 V. High
31 GPS application enabled the inclusion of government revenues in the government account on the same value working day 4.36 0.612 87.20 V. High
32 GPS application achieved accuracy and speed in paying government dues to beneficiaries and suppliers using transfers 4.12 0.668 82.40 High
Overall average of the impact of GPS application on FRP 4.23 0.660 84.92 V. High
Axes of applying MPFM tools in FRP Mean Standard deviation Percentage Valuation
1st Axe: TSA 4.17 0.730 83.40 V. High
2nd Axe: GFMIS 4.89 0.550 97.8 V. High
3rd Axe: GPS 4.23 0.660 84.80 V. High
Total MPFM impact 4.43 0.640 88.66 V. High
Source: prepared by the author based on SPSS V. 26 output and Microsoft Excel.
the foundations of reform, creating a suitable climate for reform, and providing the necessary resources, especially human resources. The fundamental causes of failure are political changes that occur during the application. Further, obstacles such as a lack of capacity, commitment, and institutional and technical challenges pose a risk to the successful implementation of MPFM tools.
The most important value that MPFM tools have achieved is providing detailed and immediate "information and data" about financial operations. Using this structured information led to the identification of input quantity, the measurement of an output quantity,
and the adjustment of using ratios to prevent wastage of financial resources. Thus, controlling the inputs and outputs and identifying and measuring the extent to which they have achieved an efficiency in PFM is possible [23].
The application and use of MPFM tools in Egyptian cases led to a high-efficiency rate in managing Egyptian FRP 2005-2015. Additionally, a high improvement rate in the PFM efficiency reaches 84.5%. These ratios are particular for the Egyptian case FRP 2005-2015. The rate of improving PFM efficiency differs per country depending on the circumstances and environment of the application and the context of reform.
Table 10
Responses of the study sample to the impact of TsA usage in PFM
Phrase No. Phrase Mean standard deviation Percentage Rank
13 TSA usage led to improved efficiency of government payments and reduced idle government balances in commercial banks 4.19 0.703 83.80 High
14 TSA usage led to reduced commissions and interest paid by government and its bodies for its accounts side of the commercial banks 4.10 0.804 82 High
15 TSA usage led to improving financial settlements efficiency and reducing outstanding restrictions, which reduced the risks of operations 4.09 0.708 81.80 High
16 TSA usage significantly improved government cash management through the concentration of dispersed balances in one bank account at the central bank 4.19 0.704 83.80 High
Overall average of the impact of using TSA on Egyptian PFM 4.14 0.720 82.8 High
Source: prepared by the author based on SPSS V. 26 output and MS- Excel. Table 11 Responses of the study sample to the impact of the usage of GFMIs
Phrase No. Phrase Mean standard deviation Percentage Rank
22 GFMIS usage succeeded in raising efficiency of budget preparation and implementation process through the automation of work procedures 4.42 0.590 88.40 V. High
23 GFMIS usage helped expedite the preparation of the final account for the general budget 4.28 0.605 85.60 V. High
24 GFMIS contributed to raising financial claim payment efficiency to beneficiaries and suppliers on their due dates 4.10 0.702 82.00 V. High
25 GFMIS led to improvement of self-monitoring and reduced errors 4.16 0.676 83.20 V. High
26 GFMIS promoted transparency by providing data. Statistics on the budget for all concerned parties 4.21 0698 84.20 High
27 Generally, GFMIS usage has resulted in enhanced institutional performance in PFM 4.25 0.685 85.00 V. High
Overall average of the impact of using GFMIS on the PFM efficiency 4.23 0.650 84.73 V. High
Source: prepared by the author based on SPSS V. 26 output and MS- Excel.
Table 12
Responses of the study sample to the impact of GPS usage
Phrase No. Phrase Mean Standard deviation Percentage Rank
33 GPS usage has led to improving government cash management and reducing the risk of moving the money 4.43 0.557 88.60 V. High
34 GPS usage contributed to reducing government transactions cost 4.21 0.610 84.20 V. High
35 GPS has succeeded in improving managing government liquidity and reducing the need to borrow 4.22 0.587 84.40 V. High
36 GPS usage has improved the ability of the MoF to control and monitor the disbursement of government dues 4.37 0.584 87.40 V. High
37 Integrate GPS with TSA led to more efficiency and effectiveness in the government finance department 4.35 0.592 87.00 High
Overall average of the impact of using GPS on PFM 4.31 0580 86.30 V. High
Source: prepared by the author based on SPSS V. 26 output and MS- Excel.
Table 13
Aggregate responses of the study sample to the three axes phrases related to using of MPFM tools on
Egyptian PFM efficiency
Impact of using MPFM tools on Egyptian PFM Mean Standard deviation Percentage Valuation
Operational efficiency 4.14 0.720 82.80 V. High
Allocation efficiency 4.23 0.650 84.73 V. High
Financial discipline 4.31 0.580 86.30 V. High
Total MPFM impact 4.22 0.650 84.40 V. High
Source: prepared by the author based on SPSS V. 26 output and MS- Excel. Table 14 Pearson correlation matrix between the use of each axes of MPFM tools and the correspondent dimension in PFM
Study variables Dependent variable
Operational Efficiency Allocation Efficiency Financial Discipline PFM efficiency
Independent variable TSA 0.807"" 0.509"" 0.521"" 0.610""
GFMIS 0.617"" 0.826"" 0.722"" 0.720""
GPS 0.525"" 0.609"" 0.771"" 0.630""
Source: prepared by the author based on spss v26 output and microsoft excel. (**) indicates that the correlation is significant at the significance level (a = 0.01).
Limitations and future scope
Given the scope of the article and the nature of the data available, it is not possible to address the many important questions about the MPFM tool implementation in developing countries. The analysis is limited to the data and information
within the Egypt case study, not without recognizing the importance of other country experiments. To that end, future studies might usefully explore the significantly higher failure rate for financial reforms using MPFM in the Middle East and Africa.
acknowledgments
We would like to thank Editage (www.editage.com) for English language editing.
благодарности
Авторы благодарят компанию Editage (www.editage.com) за редактирование английского языка.
references
1. Pattanayak I., Fainboim S. Treasury single account: An essential tool for government cash management. Washington, DC: International Monetary Fund; 2011. 23 p. URL: https://www.imf.org/external/pubs/ft/ tnm/2011/tnm1104.pdf
2. Diamond J., Khemani P. Introducing financial management information systems in developing countries. OECD Journal on Budgeting. 2006;5(3):97-132. DOI: 10.1787/budget-v5-art20-en
3. Chowdhury A. Politics, society and financial sector reform in Bangladesh. International Journal of Social Economics. 2002;29(12):963-988. DOI: 10.1108/03068290210447003
4. Beschel R. P. Jr., Ahern M. Public financial management reform in the Middle East and North Africa: An overview of the regional experience. Washington, DC: The World Bank; 2012. 224 p. URL: https://documents1. worldbank.org/curated/en/769021468036251773/pdf/684930PUB 0EPI007926B 009780821395295.pdf
5. Lawso A. Evaluation of public financial management reform in Burkina Faso, Ghana and Malawi 2001-2010. Stockholm: Swedish International Development Cooperation Agency; 2012. 126 p. URL: https://www.oecd. org/derec/afdb/publicmanagementregorm.pdf
6. Muhammed A. A critical analysis of public financial management reform in Ethiopia and Tanzania. Developing Country Studies. 2014;4(9):130-142. URL: https://core.ac.uk/download/pdf/234681666.pdf
7. Aitaa S. K. The effectiveness of the integrated financial management system in Uganda. Study report. Kampala: Ministry of Finance and Economic Development; 2015. 62 p.
8. Abdulaziz W. A. The impact of implementing government financial management information system (GFMIS) on the efficiency of public financial management in Egypt. Master's theses in economics. Cairo: Institute of National Planning; 2017. 420 p. URL: http://repository.inp.edu.eg/xmlui/ handle/123456789/4440 (In Arabic).
9. Hashim A. Piatti-Fünfkirchen M. Lessons from reforming financial management information systems: A review of the evidence. World Bank Policy Research Working Paper. 2018;(8312). URL: https://openknowledge. worldbank.org/bitstream/handle/10986/29222/WPS 8312.pdf?sequence=5&isAllowed=y
10. Williams M. The treasury function and the treasury single account. In: Allen R., Hemming R., Potter B. H., eds. The international handbook of public financial management. London: Palgrave MacMillan; 2013:355-373. DOI: 10.1057/9781137315304_17
11. Dener C., Watkins J. A., Dorotinsky W. L. Financial management information systems: 25 years of World Bank experience on what works and what doesn't. A World Bank study. Washington, DC: The World Bank; 2011. 166 p. URL: https://documents1.worldbank.org/curated/en/485641468139212120/pdf/61640-REVISED-PUBLIC-WB-Study-FMIS-ENGLISH.pdf
12. Rodin-Brown E. Integrated financial management information systems: A practical guide. Washington, DC: USAID; 2008. 44 p. URL: https://purl.fdlp.gov/GPO/LPS 120861
13. Garbade K. D., Partlan J. C., Santoro P. J. Recent innovations in treasury cash management. Current Issues in Economics and Finance. 2004;10(11):1-11. URL: https://www.newyorkfed.org/medialibrary/media/research/ current_issues/ci10-11.pdf
14. Weerakkody V., Irani Z., Lee H., Osman I., Hindi N. E-government implementation: A bird's eye view of issues relating to costs, opportunities, benefits and risks. Information Systems Frontiers. 2015;17(4):889-915. DOI: 10.1007/s10796-013-9472-3
15. Pessoa M., Williams M. Government cash management: Relationship between the treasury and the central bank. Washington, DC: International Monetary Fund; 2012. 27 p. URL: https://www.imf.org/external/pubs/ ft/tnm/2012/tnm1202.pdf
16. Abdel Moneam H., Ismail M. The role of economic reform in supporting the growth in the Arab countries. Abou Dhabi: Arab Monetary Fund; 2018. 75 p. URL: https://www.amf.org.ae/sites/default/files/ publications/2021-12/role-economic-reforms-supporting-growth-arab-countries.pdf (In Arabic).
17. Fritz V., Verhoeven M., Avenia A. Political economy of public financial management reforms: Experiences and implications for dialogue and operational engagement. Washington, DC: The World Bank Group; 2017. 134 p. URL: https://www.pefa.org/sites/pefa/files/resources/downloads/121436-15-11-2017-18-52-15-NTDofPFMReformsReportWeb.pdf
18. Alsharari N. M., Youssef M. A.E.-A. Management accounting change and the implementation of GFMIS: A Jordanian case study. Asian Review of Accounting. 2017;25(2):242-261. DOI: 10.1108/ARA-06-2016-0062
19. Hendriks C. J. Integrated financial management information systems: Guidelines for effective implementation by the public sector of South Africa. South African Journal of Information Management. 2012;14(1):529. DOI: 10.4102/sajim.v14i1.529
20. Badawi A. General budget reform programs in Arab states — efforts and challenges. Abu Dhabi: Arab Monetary Fund; 2011. 32 p. URL: https://www.amf.org.ae/sites/default/files/publications/2022-01/public-budget-reform-programs-in-the-arab-countries-efforts-and-challenges.pdf (In Arabic).
21. Beschel R. P. Jr., Yousef T. M., eds. Public sector reform in the Middle East and North Africa: Lessons of experience for a region in transition. Washington, DC: Brookings Institution Press; 2021. 280 p.
22. Kirby A., Gebski V., Keech A. C. Determining the sample size in a clinical trial. The Medical Journal of Australia. 2002;177(5):256-257. DOI: 10.5694/j.1326-5377.2002.tb04759.x
23. Muhammad D. Concepts of efficiency and effectiveness, and methods of their measurement in public organizations: Study in the evolution of administrative thought. PhD thesis in public administration. Cairo: Faculty of Economics and Political Science, Department of Public Administration, Cairo University; 2015. 123 p. (In Arabic).
about the author / информация об авторе
Atef Ahmed Mohamed Ahmed El-Saman — PhD, Researcher, Department of Public Administration, Faculty of Economics and Political Science, Cairo University, Giza, Cairo, Egypt
Атеф Ахмед Мохамед Ахмед Эль-Саман — PhD, кафедра государственного управления, факультет экономики и политических наук, Каирский университет, Гиза, Каир, Египет https://orcid.org/0000-0001-5995-9345 atef.saman@gmail.com
Conflicts of Interest Statement: The author has no conflicts of interest to declare. Конфликт интересов: автор заявляет об отсутствии конфликта интересов.
The article was submitted on 09.02.2022; revised on 28.02.2022 and accepted for publication on 27.04.2022. The author read and approved the final version of the manuscript.
Статья поступила в редакцию 09.02.2022; после рецензирования 28.02.2022; принята к публикации 27.04.2022.
Автор прочитал и одобрил окончательный вариант рукописи.
ёШ
