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by Frans E Ronsholt
The set of five technical notes are the analytical pieces prepared as part of the PEFA Framework update process. These technical notes were commissioned by the EU in 2013 and served as a key analytical input to the update process, investigating “environmental changes” identified at the initial PEFA Stakeholder Workshop on September 25, 2012. The notes provide an insight on the extent of overall “environmental changes" (1) click here in the area of PFM good practices as well as deeper research on how the changes in good practices in transparency and accountability (2) click here, natural resource revenue (3) click here, fiscal planning beyond budgetary central government (4) click here and public investment management (5) click here feed into the update of the PEFA Framework.
by joint World Bank and IMF/PFTAC team, Tobias A. Haque, Richard Bontjer, Mary Betley, and Ron Hackett
This note is intended to inform Public Financial Management (PFM) reform in small Pacific Island Countries (PICs). PFM systems in PIC contexts are often very different from the sophisticated and comprehensive systems operating in larger, wealthier countries. Those working on PFM reform in such contexts must grapple with difficult questions: What needs to be done, when achieving across-the-board “good practice” standards is not feasible? What should be done immediately, and what can wait? How can reforms be effectively implemented and sustained with limited available capacity and financial resources? This guidance note is intended to help Government officials and donor agencies answer such questions.
Our start point is that creative approaches are sometimes needed to PFM reform in Pacific Countries because of the extent and duration of capacity constraints. We have two key messages. Firstly, PFM capacity should be prioritized to areas that matter most in achieving development outcomes, and reforms should be intended to address specific, identified, problems, rather than to achieve blueprint “good practice” standards. Secondly, with small numbers of staff and high staff turnover limiting potential for sustainable gains from standard capacity building solutions (such as training programs and workshops), broader options for meeting capacity gaps should be considered, including accessing ongoing support for specialized tasks or even the wholesale “outsourcing” of certain functions.
The three main sections of this note are summarized below. Based on experiences from the region, these sections discuss: i) how to plan PFM reforms, including through the development of PFM roadmaps; ii) how to prioritize limited PFM reform capacity to address the most pressing constraints to development; and iii) how to access additional capacity to implement and sustain required PFM reforms.
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by Tobias A. Haque, David S. Knight, and Dinuk S. Jayasuriya
Drawing on Public Expenditure and Financial Accountability assessment scores from 118 countries, this paper provides the first comparative analysis of public financial management performance in small Pacific Island Countries (PICs). It applies a Tobit regression model across the full cross-country sample of Public Expenditure and Financial Accountability scores and country variables to identify potential causes for the observed underperformance of Pacific Island countries relative to other countries of similar income.
First, the analysis finds small population size to be negatively correlated with Public Expenditure and Financial Accountability scores, with the “population penalty” faced by small Pacific Island countries sufficient to explain observed underperformance. Second, through application of a new capacity index of Public Expenditure and Financial Accountability dimensions, it finds strong evidence in support of the hypothesis that small population size impacts scores through the imposition of capacity constraints: with a limited pool of human capital, small countries face severe and permanent challenges in accessing an adequate range and depth of technical skills to fulfill all functions assessed through the Public Expenditure and Financial Accountability framework.
These findings suggest that approaches to strengthening public financial management in small Pacific Island countries should involve: i) careful prioritization of public financial management capacity toward areas that represent binding constraints to development; ii) adoption of public financial management systems that can function within inherent and binding capacity constraints, rather than wholesale adoption of “best practice” imported systems; and iii) consideration of options for accessing external capacity to support public financial management systems on a long-term basis, from regional agencies, the private sector, or donors.
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This study is aimed to draw broad lessons from assessments rolled out in the context of the PEFA (Public Expenditure and Financial Accountability) initiative, launched in December 2001 as a partnership between the World Bank, the European Commission, DFID, SECO, the French MoFA, the Royal Ministry of Foreign Affairs of Norway and the IMF. PEFA aims to enable countries and their technical and financial partners: i) to assess the performance of PFM systems and ii) to promote reforms implementation and capacity building measures. To achieve these objectives, a methodology for assessing the PFM performance has been developed.
As a result, the PEFA "Framework for measuring the performance of the public financial management." was released in 2005. This tool helps to track over time the progress of the PFM systems for countries at very different stages of development. Since it was launched, about 250 assessments, of which 70 of sub national entities, were rolled out in 134 countries.
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Strengthening public financial management (PFM) systems is a key area that development partners and the World Bank and IMF in particular seek to support in many post-conflict environments. As the World Bank intensifies its assistance to fragile and post-conflict countries, it is important to invest in learning what works, why and with what impacts in these environments with regards to PFM reforms.
A new comparative study [Strengthening PFM in Post-Conflict Countries] -- a joint product by the World Bank's PREM Public Sector Governance Unit and the WB’s Global Center for Conflict, Security, and Development in partnership with the Centre for Aid and Public Expenditure at the UK’s Overseas Development Institute (ODI) -- captures the experiences, successes, and challenges with PFM reforms in eight post-conflict countries. The review provides a systematic mapping of the PFM reform trajectories of eight cases over a period of 7 to 10 years and the achievements made to date, with the intention to complement the practitioner experience that PFM experts bring to bear in their work. The country cases include Afghanistan, Cambodia, the Democratic Republic of Congo, Kosovo, Liberia, Sierra Leone, Tajikistan, and West Bank and Gaza. Based on the cross-country findings, the review develops recommendations on supporting PFM in post-conflict countries in general, and more specifically with regards to the remaining challenges in the reviewed countries.
 Verena Fritz is Senior Governance Specialist with the PREM Public Sector Governance Unit of the World Bank. In her work, Verena focuses on PFM and other public sector reforms and on political econ