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This paper considers the impact of changes in the payment discipline of governments on the private sector. We argue that increased delays in public payments can affect private sector liquidity and profits and hence ultimately economic growth. We test this prediction empirically for European Union countries using two complementary approaches. First, we use annual panel data, including a newly constructed proxy for government arrears. We find that payment delays and to some extent estimated arrears lead to a higher likelihood of bankruptcy, lower profits, and lower economic growth. However, whil

Many citizens of the land of the free are hooked on government checks.

Governments, regardless of their country's stage of economic development, make payments to, and collect payments from individuals and businesses. Financial resources are also transferred between the various government agencies. These flows cover a wide range of economic sectors and activities, and in most cases the overall amount of such flows is significant, for example in terms of the gross domestic product (GDP). Improvements in government payment programs that lead to higher levels of efficiency, safety and transparency can have a significant impact in the economy as a whole. Moreover, due to their scale and nature, government payments programs can also become an effective tool in the pursuit of other public policy objectives, such as the modernization of the national payments system or to promote financial inclusion for certain population segments. Despite the relative importance of government payment programs, there is no systematic set of references to guide governments and other relevant stakeholders in assessing the challenges associated with the effective development and day-to-day operation of these programs. This report aims at filling this gap by presenting a set of comprehensive Guidelines that can assist governments and other stakeholders in developing and operating safe and efficient government payment programs.

This paper considers the impact of changes in governments' payment discipline on the private sector. We argue that increased delays in public payments can affect private sector liquidity and profits and hence ultimately economic growth. We test this prediction empirically for European Union countries using two complementary approaches. First, we use annual panel data, including a newly constructed proxy for government arrears. Using panel data techniques, including methods that allow for endogeneity, we find that payment delays and to some extent estimated arrears lead to a higher likelihood of bankruptcy, lower profits and lower economic growth. While this approach allows a broad set of variables to be included, it restricts the number of time periods. We therefore complement it with a Bayesian VAR approach on quarterly data for selected countries faced with significant payment delays. With this second approach, we also find that the likelihood of bankruptcies rises when the governments increase the average payment period: (C) 2015 Elsevier Inc. All rights reserved.

This paper considers the impact of changes in governments' payment discipline on the private sector. We argue that increased delays in public payments can affect private sector liquidity and profits and hence ultimately economic growth. We test this prediction empirically for European Union countries using two complementary approaches. First, we use annual panel data, including a newly constructed proxy for government arrears. Using panel data techniques, including methods that allow for endogeneity, we find that payment delays and to some extent estimated arrears lead to a higher likelihood of bankruptcy, lower profits, and lower economic growth. While this approach allows a broad set of variables to be included, it restricts the number of time periods. We therefore complement it with a Bayesian VAR approach on quarterly data for selected countries faced with significant payment delays. With this second approach, we also find that the likelihood of bankruptcies rises when the governments increase the average payment period.

This note documents the experience of several countries that leveraged these tools under the Financial Inclusion Support Framework (FISF) program. FISF is a World Bank Group initiative that aims to accelerate and increase the effectiveness of reforms and other country-led actions to achieve national financial inclusion goals. In this context, FISF has supported, to varying degrees, the digitization of government payments in Côte d'Ivoire, Indonesia, Mozambique, Vietnam, and Zambia. The rest of the note is structured as follows: Section II covers a survey of retail payment costs conducted in Pakistan. Section III documents the government payment mapping exercise undertaken in Côte d'Ivoire, while section IV discusses the resulting roadmap for implementation. Section V presents some implementation challenges and learnings in digitizing government payments in FISF countries.