Imagine being able to rewrite the rules of public finance. Imagine not having to cut social services or raise taxes to fill 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 who create high-quality, well-funded government services without leaving the taxpayers of tomorrow to foot the bill.
Or imagine you could rewrite the rules for public sector lending. Imagine if organizations that spend donor or investor money on public projects could accurately track in near real-time how that money was spent and generate data to demonstrate the impact it had. Imagine how much more confident donors or investors would be that their money is being spent effectively and efficiently – and the impact that confidence could have on our collective ability to do good in the world.
Is it too good to be true? Not anymore.
Effective management of public finances is always a top priority for governments. But in recent years – as demographic shifts and crises, including the Covid-19 pandemic, have boosted public spending and investment, while low growth has emerged as a feature of the modern global economy – many New budgetary pressures have increased the urgency to move forward in the way public finances are managed.
For decades, governments and public sector bodies have spent taxpayers’, donors’ and investors’ money as efficiently as they could. But the system was not perfect. It costs money to move funds through the government value chain, as they move from the central treasury or ministry of finance, through program departments, through delivery agencies and their partners, and on to the recipient final payment or service. And it’s the same for a development agency, because the money is allocated to a program and then makes its way through the chain of funding and delivery agencies to the final beneficiary.
But all of that is about to change. Today, digital technology – particularly blockchain – gives public finance managers the ability to dramatically reduce the cost of spending public money, improve control over that spending, and see, in near time real, the results obtained.
A blockchain solution can integrate financial and non-financial reporting across government. It reconciles and consolidates information within and between government and its external partners, and produces near real-time spending and performance reports and advanced analytics at both the aggregate and granular level.
Prysm Group, a specialist in the economics of emerging technologies, carried out research for the organization EY. Prysm Group studied the US federal government to explore the potential impact of using a digital technology-enabled approach to better manage public funds.
Their findings illustrate the potential administrative savings and added value of better spending allocation that this type of improvement in public finance management could achieve. An upcoming report by OMFIF and EY explores these results, which will also be presented at the launch event.
It’s an opportunity for governments to use the money more effectively – in ways that improve public services, boost economies, benefit communities and change lives. And it delivers responsible results to citizens and investors.
Public sector leaders who have the vision to embrace the new technology now have the opportunity to gain an unprecedented level of visibility, predictability and control over the use of public funds. They can realize the long-standing ambition of more efficient and effective public finance management.
Learn more about EY Blockchain for Public Finance.
Mark MacDonald is EY’s Global Head of Public Financial Management.
The views expressed in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms.
Register your interest for the next OMFIF – EY events:
Blockchain for Public Financial Management Report Launch
Blockchain and the future of ESG investing