Public Financial Management Reform: A complete history (abridged)

1. Public Financial Management Reform:A complete history (abridged) Reform Lessons, Capacity Building, TA, and WGA Bill Dorotinsky Fiscal Affairs Department IMF Whole-of-Government Approaches in Fragile States Conference Paris March 17-18, 2008

2. Distinction • Public finance policy • Rice subsidies • Public financial management (PFM) • Treasury system • Budget processes • Relations • Bad system likely to produce bad policy • Bad system cannot implement well good policy • Focus of remainder is on PFM

3. HIPC Expenditure Tracking2005 Results

4. HIPC Expenditure TrackingLessons • Realistic expectations of reform progress are needed. • Over-all the countries improved 10 percent over three years, or about 3 percent per year • The "basics" of PFM systems were still not right. • Basic PFM system operations were very weak, but fads remain popular • A holistic – systems – approach to PFM system analysis and reform development is needed. • The connections between various PFM system components are understood, but infrequently emphasized or included in reform measure development

5. Lessons (continued) • Country ownership of reforms is the critical variable for PFM system improvement. • Country action plan implementation best predictor of PFM system improvements. • Efforts to improve PFM systems must begin with country ownership – leadership – in assessing performance, setting the reform agenda and implementing reforms. • How PFM system assessments, reform actions, and implementation are undertaken is at least as important as assessment instruments. • Joint action planning between authorities and technical assistance providers can yield better results. • Narrowly focused action plans, reflecting clear reform priority setting, might improve reform impact and PFM system performance. • Donor coordination around a more limited set of reforms might help keep reforms focused and yield better results. • Customized reforms to country needs may yield better results • Rather than donor pre-packaged measures • Country’s pragmatic needs for managing resources, self-defined, may be the best place to start

6. Capacity-Building • Build PFM systems that meet country resource management needs • pragmatic, simple solutions fitting country circumstances • Emphasize country staff doing the work, versus doing work for them • Advisory/TA work is changing • Less on ‘what to do’, more on ‘how to do it’ • Needs change; flexible, fast response needed • Long-term • Critical mass, cohorts, generational • On-going engagement with increasing country assumption of tasks, task management, analysis, etc.

7. Country Systems-- donor financial arrangements reinforce or undermine country PFM system Similar entries for other aspects of country systems: Payment; Program Management; Internal Controls; Accounting; Financial Reporting; Record-keeping; Audit (internal and external); Procurement; Oversight

8. PFM TA modalities • Different modalities for different needs • Training • Generic, general out-of-country • Specific, in-country • On-the-job • Direct TA • Shorter versus long-term • Resident, regional, peripatetic, virtual • Peer-learning

9. On WGA • WGA supports capacity-building if it • Prioritizes, focuses donor support • Simplifies versus complicates • Brings more practitioner expertise where needed • Supports country needs, priorities • Helps solve practical problems, versus trying to re-create provider-country PFM system • WGA may work differently for PF Policy and PFM

10. Supplemental

11. Resource Mobilization, Budgeting Links Source: “Patterns of Budgeting.” Naomi Caiden in Perspectives on Budgeting, 2nd edition. Allen Schick, Ed. ASPA 1987. Pp. 15-26.