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The PEFA Indicators – How are they being used. Actionable Governance Indicators Course - April 29 th , 2010. Frans Ronsholt PEFA Secretariat. Content. Characteristics and roll-out of the PEFA / PFM Performance Measurement Framework What may PEFA Assessments be used for?.
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The PEFA Indicators – How are they being used Actionable Governance Indicators Course - April 29th, 2010 FransRonsholt PEFA Secretariat
Content • Characteristics and roll-out of the PEFA / PFM Performance Measurement Framework • What may PEFA Assessments be used for?
PEFA indicators characteristics • PFM Performance Measurement Framework • 28 performance indicators + 3 donor indicators • Evidence based, rated on 4-point ordinal scale • PFM Performance Report with standard format • Launched in June 2005 – multi-agency initiative • Application is decentralized • Country teams/stakeholder groups decide if, when and how to implement the assessment work • PEFA Secretariat • Neutral body - supports users, monitors application
PFM Links to Development Goals MDGs, PRSP, Political Manifesto Other influencing factors Dev Goals Budget deficit, Sector allocations, Investment, Debt ratio, Tax burden etc Fiscal / Exp Policy Goals Fiscal discipline, Strategic allocation, Operational efficiency Budgetary Outcomes PEFA Framework PFM system performance
Regional Coverage of PEFA Assessments April 2010
PEFA Framework adoption • Data coverage • 175 assessments done in 110 countries • 31 repeat assessments in 27 countries • Increasingly used for Sub-National government • 27 SN assessments in 14 countries • Wide stakeholder involvement • WB & EC leading 85% of assessments, 25 other agencies involved • Government leadership/self-assessment increasing, but not yet norm • Public access to reports • Only 56% of final reports in public domain • Links provided at www.pefa.org
Assessment in HICs & MICs - examples • OECD/HICs • Norway (national), Switzerland (Canton/state) • Large Upper MICs • Brazil, Turkey, Belarus, (Russian Federation), South Africa • Large Lower MICs • India, Kazakhstan, Ukraine, Morocco, Egypt, Thailand, Philippines, Indonesia, Colombia, Peru
What can countries use the PEFA assessments for? • Harmonize information needs for all stakeholders • Inform PFM reform formulation • Monitor results of reform efforts • Aid allocation and operational decisions • Cross-country comparison
Harmonize information needs • Create a shared view of PFM system performance among all major stakeholders at country level – for various purposes • Reduce transactions costs of analytical work • Provide a starting point for subsequent, collaborative work on PFM reform and capacity building
Coverage of PFM-PR in Reform Cycle Implement PFM reforms High level performance overview Formulate PFM reform program PFM-PR Identify main PFM weaknesses Recommend PFM reform measures Recommend PFM reform measures Identify main PFM weaknesses Investigate underlying causes
Inform PFM reform formulation (1) • PEFA report is one of several inputs • Identification of main strengths and weaknesses – and potential impact on budgetary outcomes • Other factors: political economy, culture, constitution/legal, resources, capacity at entry • Ownership means government decisions on priorities • Government to consider all factors in deciding priorities • Allow ample space for government’s prioritization in the reform dialogue with International Agencies • Do not use Indicator scores simplistically • A low score is not sufficient justification for reform • Other factors: relative importance of subject, complexity /timeframe for improvement, interdependence with other elements
Inform PFM reform formulation (2) • Complementary analysis to PEFA may be required • Detailed analysis of underlying causes needed for formulation of detailed action plan • Limit such analysis to priority areas • Drill-down tools – some exist, others under development • Guidance on using reports for reform formulation • How to establish if a reform program is ‘credible’ • Challenge to develop general approach and toolkit to help government/donor teams identify priorities/sequencing • Such an approach could strengthen country ownership of reform and coordination of donor support • Work in progress
Monitor results of reform efforts • Schedule full repeat assessments – every 3-5 years • Select a few indicators to monitor more frequently • Incorporate into the M&E component of the PFM reform program (Kenya, Zambia) • Incorporate as monitoring tool in CAS (Bangladesh) • PEFA indicators being used for PFM reform program evaluations (IEG, Multi-donor evaluations)
Aid allocation & operational decisions • Help to define main system weaknesses & related safeguards for use of country systems • PEFA indicators used by many agencies as input to • fiduciary risk assessments (WB/CIFA, DFID, KfW, AFD) • aid allocation instruments (WB/CPIA, NL track record) • Do not use PEFA performance ratings as conditionality for disbursements • activity indicators may be more suitable • such measures to be under direct government control
Cross-country comparison • Regional peer learning events • Eastern Europe, West Africa, Caribbean, Pacific • Suitable for countries that share key characteristics • Often arranged in collaboration with IMF TACs • Research • AFTFM/Brookings study identifying regional performance characteristics and reform trends • ODI/diRenzio study – correlating country characteristics to PFM performance
Issues in country comparison • Comparison of two countries must be done very cautiously: • Technical definitions may be different • Need to carefully read each report to understand performance differences behind the scores. • Consider country context, ensure comparison of like with like • Comparing the scores alone can be misleading
Comparing groups of countries • Aggregation requires three decisions • Conversion from ordinal to numerical scale • Weighting of indicators (generally and country specific) • Weighting of countries (for country cluster analysis)
Comparing groups of countries • No scientifically correct or superior basis for deciding conversion and weights exists • Each user takes those decisions on individual opinion • PEFA program does not endorse any particular method • In case aggregation is desired: • Be transparent on aggregation methods used • Discuss reasons for choice • Sensitivity analysis to illustrate impact on findings