• 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