ADB and India sign $50-million loan to boost Bengal’s financial management reforms

• The loan has been granted to West Bengal to improve its PFM procedures and operational efficiencies.


• Public Finance Management (PFM) refers to the set of laws, rules, systems and processes used by sovereign nations (and sub-national governments), to mobilise revenue, allocate
public funds, undertake public spending, account for funds and audit results.

• Public finance reforms include fiscal reforms, regulatory reforms, Expenditure Management, Public Debt Management, Process Improvement, Management Information System, Capacity Development, Institutional Strengthening etc.

Objective of PFM:

• Aggregate levels of tax collection and public spending are consistent with targets for the fiscal deficit.

• Public resources are allocated to agreed strategic priorities.

• Operational efficiency is achieved, in the sense of achieving maximum value for money in the delivery of services.

Significance of PFM:

• It will help generate fiscal savings that could help the state augment growth-enhancing development financing.

• Helps to deliver services more effectively and equitably and regulate markets more efficiently and fairly.

• Help prevent corruption and foster aid effectiveness.

• Also, World Bank is supporting Chhattisgarh for its PFM reforms with the support of a $25.2m loan.


Mains Paper 3: Economy

Prelims level: Public Finance Management

Mains level: Objectives and significance of the Public Finance Management

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