Public finance is a broad term used for all the different ways in which government uses financial resources to fulfill its objects or to influence the economy that it governs. It encompasses areas of government budgeting, taxation, borrowing, expenditure and income. Thus, it is a very wide subject and it may wonder many readers that how a very specialized financial certification like CFA(Chartered Financial Analyst) can be of use for Public finance professionals. Briefly stating, Chartered Financial Analyst (CFA) program is a postgraduate professional certification offered internationally by the US-based CFA Institute to investment and finance professionals.

CFA program teaches a wide range of subjects relating to advanced investment analysis—including business analysis, statistics, probability theory, fixed income, derivatives, economics, financial analysis, corporate finance, alternative investments, portfolio management, ethics applicable to the finance industry—and provides a generalist knowledge of other areas of finance. It is very important to understand that CFA is a skill based certification which focusses on training individuals with tools and skills that can be put to use to arrive at financially sound decisions. It is very different from recruitment exams like civil services which are more general in nature and do not confine themselves to nuances of finances. And this is why CFA program becomes a very relevant choice for public finance professionals to acquaint themselves with these tools to make financially prudent decisions.

Since examples can illustrate the things better. I am using examples just to illustrate how a certification like CFA can help in taking better decisions or in avoiding in financial fallacies. Sovereign gold bonds are the recent example in which government took an unhedged bet against gold and it has costed it dearly.A more professional approach would have been to hedge partial exposure either by buying gold or entering into forward contract on gold. Either of the options was not chosen and result is that it has left a big financial hole in government’s pocket.

Another example of poor financial decision-making is Unified Pension Scheme, it failed to capitalize on collapse of NPS by not moving to professional pension management approach by diversifying into asset classes like private equity , real estate etc. Currently, so many well established pension management models are available like Norway model of passive investing and Canadian model of active investing but rather than choosing more appropriate model, it has gone on to disown asset allocation by giving choice to investor who hardly has such financial expertise.

Again, the above examples are not a criticism but are definitely suggestive of a lot of professional thinking required in financial management in government. Another area, where CFA program can add lot of value, are public enterprises. Public enterprises are today experimenting with market driven capital structures and do a huge amount of financial appraisal for which tools like NPV and IRR can be very useful. Similarly, Public sector NBFC’s and Banks are natural habitat for CFA charter-holders.

In conclusion, no certification is a replacement for one’s own commitment to learning and professionalism but still it won’t be incorrect to say that CFA program’s curriculum is a beautifully curated finance curriculum which can take you from scratch to a level of a high expertise. It is undoubtedly a very competitive program and can be very exhausting but it is an exciting journey for those who love finance and want to enrich themselves with different facets of finance. Thus, those who are looking to specialize in finance or who see themselves occupying positions which deal with important financial decisions, CFA can be a great personal add-on which will get reflected in decisions you make and the connect which you establish with your audience in your communication on the subject.