Sound fiscal management and financial systems are vital to a country's sustainable economic development. If these systems collapse, the impact on people's assets and livelihood as well as on economic activities in the private sector would be devastating. The breakdown of the system may lead to a decline in the provision of government services and in financial intermediary functions, and inflation. In addition, all kind of support assistance for developing countries is more effective with sound fiscal and financial systems and economic stability as its underpinning. However, foundations of the economy in many developing countries are fragile and economic management unstable.
Many ASEAN countries suffered from the loss of their assets and employment in the Asian financial crisis that hit in 1997, causing enormous economic loss. Vulnerability in ASEAN countries' financial systems was cited as one of the main factors behind the crisis. The global financial and economic crises of 2008 reconfirmed the need to bolster financial systems.
It is essential to utilize limited financial resources effectively and efficiently in public financial management, such as by properly managing income and expenditures, allocating funds to priority areas of development based on a budget, and efficiently implementing plans that have budget allocations. However, such initiatives have not been adequately implemented in many developing countries.
JICA's support in this sector is aimed at fundamentally strengthening the structure of developing countries to handle fiscal and financial matters.