EMERGING ROLE OF AI-DRIVEN FINANCIAL GOVERNANCE SYSTEMS IN PUBLIC SECTOR INSTITUTIONS: OPPORTUNITIES & RISKS FOR DEVELOPING ECONOMIES

Artificial intelligence is increasingly becoming a core component of public financial management. Governments are adopting automated analytics, predictive models, and AI assisted monitoring tools to strengthen budgeting, improve expenditure control, and modernize audit functions. This article reviews how AI driven financial governance systems can be applied in developing economies, synthesizing evidence from digital governance, audit analytics, and public finance literatures. It evaluates opportunities such as enhanced transparency, automated risk detection, continuous auditing, and improved forecasting. It also examines critical challenges including data quality and interoperability, algorithmic bias, cybersecurity, organizational resistance, and capacity constraints. The paper proposes practical policy measures and implementation steps for governments and international donors, including national AI strategies for public finance, robust data governance frameworks, targeted capacity building, pilot testing, and regulatory safeguards to ensure accountability. The analysis shows that AI has strong potential to improve institutional effectiveness in public finance, but success depends on coordinated institutional reform, ethical oversight, and sustained investment in skills and systems.