political commitment and the country’s economic development strategy. Policy makers and reformers should therefore examine overall PFM performance and prioritize improvement of weaknesses in the context of specific country circumstances and priorities.
The dialogue on PFM reform that is generated by then PEFA report is a crucial step towards identifying the needs and priorities for measures to improve PFM system performance. These could be formalized in a new or revised PFM reform strategy or action plan in the light of weaknesses identified by the PEFA assessment. The dialogue would be expected to include discussion of other relevant information and focus on the reform priorities, the need for a comprehensive and integrated strategy and reform program, and how such a reform program agenda could be financed and supported.
The length of the dialogue process will depend on the depth and nature of the PFM weaknesses identified in the PEFA assessment report, and the political, legal, institutional and capacity constraints to implementing reform measures. The process may be conducted within the government or may include external stakeholders, such as civil society organizations/representatives and development partners.
Additional guidance on developing and prioritizing PFM reforms following a PEFA assessment is provided in Volume IV of the PEFA Handbook: Using PEFA to Support PFM Reform.
9.1 Key issues for the reform dialogue
The dialogue would be expected to focus on the PFM strengths and weaknesses and problems identified by the report and address whether there is a need for further analysis of the underlying causes of identified PFM weaknesses. Much can be learned from understanding what is behind areas of strength, including areas of improvement from one PEFA assessment to another. Also, some of the PEFA indicators and dimensions cover only a slice of the relevant aspects of a given aspect of the PFM cycle. While the PEFA reports may provide some insight on
the causes for performance levels, further analysis is sometimes required to gain a better understanding of the technical and non-technical causes. Understanding the causes is essential for designing the appropriate reform response as well as monitoring the effectiveness and impact of the reforms.
Findings and recommendations of other broad PFM diagnostic tools (e.g. FTE, OBI etc.) or technical assistance reports may be used. The application of other PFM diagnostic tools that focus on individual elements of PFM such as TADAT, DemPA, MAPs etc. may be helpful in providing more detail on the technical aspects of strengths and weaknesses. Some of these tools may have been applied prior to the PEFA assessment, and relevant data and analysis reflected in the PEFA report. At other times, governments may see a need to apply one or more of these diagnostic tools after a PEFA assessment depending on the nature and significance of the weaknesses identified. Countries also rely on their own assessments of underlying issues, such as those issued by think-tanks, fiscal councils, supreme audit institutions, NGOs, or others.
9.2 Managing the dialogue
The oversight team may or may not facilitate the process of PFM reform dialogue and planning following the completion of the assessment. Sometimes a separate dialogue will be initiated, led by a senior representative of a central government agency, for example, ministry of finance or president’s or prime minister’s offices. In circumstances where there is little or no commitment to a formal dialogue, less formal lines of communication within and between government and other stakeholders could be initiated. Such discussions may be at a technical level addressing specific issues or problems that are limited in scope, often focusing on more specific, piecemeal reform initiatives. While the dialogue involves various stakeholders – including senior government officials, development partners and other key stakeholders - it is the government that should be responsible, and
Phase Four: PFM Reform Action