2023-Public-Sector-Perspectives

Jeff Mounts Head of Global Foreign Missions Banking, Citi The Time is Right to Centralize MoFA Finances G overnments around the world are grappling with a wide range of financial challenges. In some parts of the world, COVID-19 continues to cause disruption: certainly, many countries are now coming to terms with the increases in spending and debt that it necessitated. At the same time, there are concerns about slowing global growth, accelerating inflation and high energy prices, which could require government support for companies and citizens. In such an environment, many governments are looking to make savings. Gary Schneider Head of NAM Public Sector, Citi One of the largest areas of non-domestic spending is the activity of ministries of foreign affairs (MoFAs) and embassies. MoFAs and embassies play a crucial role in representing governments overseas, supporting their citizens and promoting trade and tourism. Historically, embassies have exercised considerable local autonomy, both in terms of decision-making and managing their finances. But while many operational decisions continue to be taken on the ground, there is growing interest in centralization of cash management and related administrative processes. The United States has been a pioneer in consolidating and centralizing embassy cash management, payments and collections. But a growing number of governments in Europe, the Middle East, Latin America, Asia-Pacific and elsewhere in North America are now embracing opportunities to cut costs, improve efficiency and — crucially — enhance oversight and control. As the economic outlook in many countries becomes more challenging, and governments seek to direct resources to their priorities, the imperative to centralize MoFA and embassy financial activity can only grow. The disadvantages of decentralization MoFAs must maintain embassies in myriad countries around the world in order to execute on their government’s foreign policy objectives. While acting in accordance with their government’s overall goals, the ability to take decisions locally and respond to events in-country has long been an important principle for many governments’ MoFA activities. Local autonomy in relation to managing finances went hand-in-hand with this principle, and historically has also helped to maintain flexibility given widely varying financial systems and banking infrastructures. Citi Perspectives for the Public Sector 45