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A global study of government finance leaders has revealed shared priorities and challenges in an era of unpredictable geopolitics and rapid digital transformation.
The Future of the Finance Ministry study – published by Global Government Forum and sister title Global Government Finance – is based on interviews with 10 senior leaders from finance ministries around the world.
The interviews were led by John McCarthy, chief economist in Ireland’s Department of Finance, working with the editors of Global Government Forum and Global Government Finance. Microsoft is the knowledge partner for the report.
“In a world where ‘disorder is the new norm’, the traditional role of the finance ministry is undergoing a fundamental transformation,” McCarthy writes in the foreword.
Four key themes are identified in the report: the evolving role of the finance ministry in response to uncertainty; the shift to more flexible finance systems that support outcomes; digital transformation and the growth of artificial intelligence; and the battle for talent and trust.
This chapter extract focuses on the shift to more flexible finance systems.
Download the full report: The future of the finance ministry: Insights from government finance leaders around the world
From financial planning to delivering outcomes
Despite navigating complex global pressures and rapid change, the core responsibility of finance ministries remains the same: ensuring the allocation and flow of limited public resources.
However, as part of their broader stewardship role, interviewees emphasised the scale and intensity of the trade-offs finance ministries now face, as rising demands for investment, security, and societal outcomes collide with increasingly constrained fiscal envelopes.
Managing these trade-offs requires better ways to understand and prove the impact of spending.
Budgets and spending reviews remain crucial mechanisms
Traditionally, governments manage public finances through annual budgets and periodic spending reviews. Interviewees agreed that these fiscal events remain the key mechanism for aligning spending with government priorities, particularly at a time of fiscal squeeze driven by rising costs and constrained revenue growth.
However, the leaders we spoke to said that these reviews often fail to match spending allocations to the government’s priorities, and to transfer money to the most effective programmes.
Spending reviews need to be more “effective”, one said, adding: “I don’t think anybody in the world has done a really good job here… but it’s essential.”
Another leader shared their approach: “We identify between… 12 and 15 areas of public spending… and conduct a spending review that then feeds into the budgetary discussions.”
Others noted that, in practice, spending reviews often rely on periodic programme evaluations – typically conducted every four to seven years, limiting their usefulness in fast- changing fiscal environments.
The interviews suggest that while spending reviews remain a cornerstone of fiscal management, there is no single agreed model for how they should be used to drive strategic prioritisation under sustained pressure.
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Building – and rebuilding – fiscal buffers
Across jurisdictions, interviewees emphasised the importance of rebuilding fiscal buffers to preserve flexibility in an increasingly volatile world. Maintaining low deficits and debt was widely seen as essential to ensuring governments can respond to crises.
As one leader explained: “Our strategy is to go forward with low deficits and low debts, so you can be flexible in the situation.” Others stressed the need to reapply fiscal discipline after years of crisis-driven spending, arguing that governments “must not be afraid to stop doing things” where activities no longer deliver public value.
“Our strategy is to go forward with low deficits and low debts, so you can be flexible in the situation.”
Several interviewees cautioned that political decisions to reduce spending often rely on blunt tools such as across-the-board cuts. While relatively simple to implement, these approaches can also distort priorities as governments often lack the data needed to make more sophisticated reductions.
As one leader put it: “There is really no in-depth analysis [to inform us] whether we should cut back more [in one area than another]… It’s just easier for the government to do 5% for everybody.”
Webinar: The future of the finance ministry unpacked – and what it means for government – on 24 June 2026, focused on the research’s findings
Trade-offs amid growing demands and tight budgets
Controlling day-to-day spending can create fiscal headroom for investment, while investment can expand economic capacity and future revenues. In principle, this creates a virtuous cycle.
Some interviewees reported that having moved the public finances into balance, there was now greater scope for investment spending.
“The high-level plan is to have a stability fund to manage the kind of annual fluctuations that we expect, to build a sovereign wealth fund and to have some kind of infrastructure investment fund,” one said.
However, other interviewees consistently noted that achieving this positive cycle is politically and institutionally difficult.
One noted that: “It’s necessary to shift more consumption-related expenditure to investment-based expenditure. But we see the tension that politicians are mostly interested in short-term effect.”
This trade-off has become more acute as pressures around defence spending and demographic shifts, for example, collide with limited room for manoeuvre.
One leader described the challenge as “how we cope with the huge defence expenditure… which is here to stay”, while another warned of a growing “crowding out” effect as security needs displace other priorities within fixed fiscal envelopes.
“It’s necessary to shift more consumption-related expenditure to investment-based expenditure. But we see the tension that politicians are mostly interested in short-term effect.”
Some countries are maintaining defence spending at 5% of GDP and are making fiscal space for this at a time when the overall budget is constrained. Others have seen a marked shift in defence and intelligence agencies’ spending towards this benchmark, which is requiring rapid budgetary reorganisation in many countries.
Several interviews highlighted that rising defence pressures have pushed sustainability and decarbonisation investments down the political priority list.
“It [investment in decarbonisation] was popular a couple of years ago, but not anymore,” one leader said, noting that such projects are increasingly “left now to the private sector”.
Conversely, another interviewee flagged that if asked a year ago, they would have said sustainability was becoming less important in the eyes of the government but that there has since been a shift back towards prioritising it.
Others highlighted that public funding for net zero is shifting from mitigation toward adaptation, reflecting growing concern about the immediate impacts of climate change.
While action on sustainability might have fallen down the agenda in many countries, a good proportion remain committed to achieving net zero carbon emissions – many by 2050. There will be several political cycles between now and then, and – as the effects of climate change become increasingly pronounced – finance ministries will need to be ready to understand and re- prioritise sustainability.
Beyond immediate budget pressures, interviewees also highlighted ageing populations as a major structural driver of long-term spending growth.
“The demographic transition is here,” one leader said. “You’re seeing it in the data now. And so, we are faced with a very rapid increase in pensions and associated welfare…we’re facing really strong pressures on the health system.”
Read more: Emerging tech’s potential for public financial management examined in IMF paper
Measuring spending impact
Alongside setting budgets, finance ministries play a central role in assessing the ongoing effectiveness of public spending. However, interviewees consistently highlighted a gap between controlling spending and understanding what it delivers.
Finance ministries ask departments to provide analysis of the impact of spending in different policy areas, with interviewees highlighting the need for departments to estimate savings when submitting bids for new IT spending, for example.
The role of finance ministries in “making sure that we are making a good investment” is crucial, said one leader, while another stressed the need to “critically assess what is being spent” when budgets are tight.
“We’ve been very, very bad at assessing public policies…we’ve had no targeting, no baseline for measuring the results of policy.”
However, many believe finance ministries must increasingly go further. “I think we’ve done a really good job in terms of fiscal control and expenditure control, but a much less good job in terms of: ‘What are we actually getting for that? Is this spending good value for money?’,” one leader said.
The concern that governments are not effective at evaluating spending impact was shared across many of the interviews. As one interviewee put it: “Are we just constantly adding more spending on top of previous spending, or are we creating an environment where we critically assess what is being spent at the moment and what programmes have been successful, or particularly the ones that have been unsuccessful?”
Another leader was blunter: “We’ve been very, very bad at assessing public policies… we’ve had no targeting, no baseline for measuring the results of policy.”
There are real opportunities for governments to improve this process, and one leader shared how their thinking is developing in this area. They are part of a working group on methodology for socioeconomic assessments of investments, which takes into account factors such as environmental benefits and health, as well as time saved. “We should have [more of] this kind of thinking,” they said.
Read more: AI’s displacement of workers necessitates ‘ambitious fiscal innovation’, says US think tank
Wellbeing metrics
Some – though by no means all – of those interviewed for this study have begun to embed broader wellbeing goals into their evaluation of spending.
These metrics look at a range of factors, including subjective wellbeing, as defined by citizens; material wellbeing based on per capita financial calculations; measures of health wellbeing; understanding work satisfaction and leisure time; and measures of community safety, housing tenure security, and the environment.
These are intended to assess sustainable wellbeing across economic, natural, human and social capital.
As one leader put it, using a wider range of evaluation processes is “the core of good economics”, and considering additional measures such as wellbeing is simply a way to better understand the impact of spending.
This work also forms part of the finance ministry’s systemic leadership role with the aim of understanding and examining the interactions between different policy areas.
This includes looking at population health, to avoid having what one leader called a situation where “we have a healthy financial situation, but we have unhealthy people”.
These measures take a variety of forms. One of the governments interviewed has a living standards framework, while more than one administration has developed public value assessment tools or performance budgeting frameworks.
One interviewee explained that the objective of such initiatives is to better align “strategic planning with budgeting… [which] allows ministers to prioritise resources based on that public value assessment”.
Another said that a public service performance report was one of the ways that the ministry attempts to better understand and map government inputs and activities to outputs – and then to outcomes and impacts.
This performance report looks horizontally across government and requires the type of collaborative working structure that several Global Government Forum research studies have found are both crucial to driving effective outcomes and highly challenging.
“We cannot just add continuously to the programmes that we use public money on, so we try and identify individual programmes that are not as successful as we might have expected them to be.”
The approach in one government involves working to understand the impact of different aspects of government policy, linked to metrics set across different programmes, with departments contributing an analysis of the activities funded by that expenditure, and the associated outcomes.
One leader explained: “We try and evaluate, on an annual basis, the impacts of the programmes that are undertaken. We cannot just add continuously to the programmes that we use public money on, so we try and identify individual programmes that are not as successful as we might have expected them to be.
“If additional funding needs to go there, there has to be a trade-off somewhere else – something else has to be discontinued or funded in a different way. Those aspects of wellbeing – and of equality budgeting and green budgeting – are overlaid by that performance reporting and assessment.”
Such an approach could be of interest to other administrations. As one leader concluded, governments need to be more transparent about processes and figures: “I think we really need to demonstrate to people what the outcomes are of what we’re doing.”
However, despite an increase in the range of measures governments use for evaluation, fiscal parameters still dominate budget allocation decisions.
Read more: NAO identifies ‘weaknesses in getting basics right’ in UK government annual accounts
Future of the finance ministry
While finance ministries retain strong control over overall spending, they face growing challenges in prioritising, adapting, and demonstrating impact. Traditional tools remain essential but are increasingly stretched by the scale and speed of modern pressures. As a result, many finance ministries lack timely insight into what spending delivers.
The leaders acknowledged that they are not yet able to reach this level of understanding due to constraints on resources and the availability of timely, consistent data.
“We don’t have that [information],” one leader said. “We have some targets – but most of the agencies don’t take that too seriously.”
As a result, many governments remain in a testing phase, rather than having systems that can demonstrate, in one interviewee’s words, “that we are getting the results in our public policies that we are supposed to be having”.
Another leader noted that real-time monitoring mechanisms are not in place, with assessments typically conducted on an annual basis and aligned to budget cycles rather than ongoing performance.
One interviewee added that consolidating government spending into annual accounts remains a “Herculean” task, reflecting inconsistent data standards across agencies, which must be addressed before impacts can be properly understood.
However, a clear emerging trend is the move toward shorter budget cycles, with some governments shifting from annual to quarterly allocations to improve the responsiveness of spending decisions.
Finance ministries have a significant opportunity to generate more timely insight into both spending and outcomes.
The most advanced finance ministries are particularly focused on creating centralised platforms for data to improve analysis of public policy.
One interviewee said their department is building the foundations for automated data collection and better future data sharing. “Agility will have to come from improvement in how we share data across different agencies and different parts of the government,” they said.
Writing in the afterword, Valentina Ion, public finance and social services global lead at Microsoft, said: “Shorter budget cycles are essential to ensure funds are not ‘blocked’ in underperforming programmes but are reallocated to where the need is greatest. This agility is only possible through data collaboration across government departments to reduce fraud, waste, and abuse while enforcing the security of public spending.”
Interviewees for the study were: Lai Chung Han, permanent secretary, Ministry of Finance, Singapore; Carlos Guberman, secretary of the Treasury, Argentina; John Hogan, secretary general, Department of Finance, Ireland; Andrew Lai Chi-Wah, permanent secretary for financial services and the Treasury, Hong Kong; Struan Little, chief strategist, Treasury, New Zealand; Chidozie Ofoego, financial secretary, Government of Bermuda; Dorothée Rouzet, chief economist in France’s Treasury; Merike Saks, secretary general, Ministry of Finance, Estonia; Bas van den Dungen, secretary general, Ministry of Finance, The Netherlands; and Matt Yannopoulos, secretary, Department of Finance, Australia.