Strengthening Budget Institutions for Effective Climate Action

Green Public Financial Management (Green PFM) can be a key enabler of an integrated government strategy to combat climate change. Green PFM integrates climate change perspectives into the budgeting framework, systems, and processes, supporting fiscal policies that are responsive to climate change and enhance economic and financial resilience. Green PFM is about working out how the existing system can be reformed to better support the design and implementation of green policies, and the achievement of green objectives.

From July 11 to 14, 2023, an IMF team brought together officials from Ministries of Finance of Albania, Bosnia and Herzegovina, Kosovo, Montenegro, and North Macedonia, to speak about the key Green PFM principles, the development of a climate budget tagging tool, and the recognition of the entry points for climate budgeting considering their specific systems and characteristics.?

This workshop was funded by the European Union and the State Secretariat for Economic Affairs of Switzerland, and organized with the support of the Center of Excellence in Finance (CEF), in Ljubljana, Slovenia.

The adoption of a Green PFM framework is a gradual and tailor-made process, and Ministries of finance should be the primary driver of the green PFM reforms. While these reforms should associate a wide range of stakeholders, including ministries of environment and climate who have expertise on climate change, ministries of finance are best placed to coordinate the distribution of new green PFM practices across all stakeholders.

The momentum for implementing green budgeting has been growing worldwide and results have been encouraging, with greater awareness and an increase in expenditure in national budgets that contribute to achieving climate objectives. There is still much to do, but understanding concepts, recognizing drivers, and learning about ways to cope with challenges are the starting point for setting strong building blocks of an ambitious reforms.

The IMF thanks its development partners, the European Union and the State Secretariat of Economic Affairs of Switzerland, for supporting this important work to strengthen human capital and budget institutions in Southeast Europe.?

The team comprised in person and virtual presentations from Almudena Fernandez, Yasemin Hurcan, Louis de Crevoisier, Ken Cleary, Tjeerd Tim and Lauren Keating. The presentations covered a broad range of green PFM topics, including implementation examples from countries with strong expertise on climate budgeting, such as France and Ireland, practical exercises on climate budget tagging, analysis on the entry points of green PFM in the participants’ countries and jurisdictions, and climate-related risks.??