Stage 3
Agree on desired PFM reform outcomes
WHAT ARE THE GOVERNMENT'S DESIRED OUTCOMES OF PFM REFORM?
Once the underlying causes of the weaknesses are understood, the government should decide the outcomes it wishes to achieve through PFM reforms (see table 2.4). Identifying the desired outcomes of reform helps to guide how the government prioritizes and sequences its reform efforts. By doing this, the government is better able to focus on and prioritize initiatives that will help to achieve the desired outcomes.
Table 2.4 PFM reform matrix example: Desired PFM outcomes
| Performance indicator or dimension | PEFA score | Main strengths and weaknesses | Underlying causes | Desired outcomes |
|---|---|---|---|---|
| PI–1 | D | Aggregate expenditure outturns exceed original budget by more than 20% in the last three years | Overly optimistic economic and fiscal projections Unavailable economic and fiscal forecasting models Lack of capacity in economic and fiscal forecasting Political involvement in setting fiscal projections | Stronger fiscal discipline through greater adherence to fiscal targets Improved predictability of budget allocations to service delivery ministries |
| PI–2.2 | D | Significant variation in budget composition by function undermines the predictability and availability of budget allocations to key service delivery agencies. |
In identifying the desired outcomes of PFM reform, it may be useful to draw on any policy object ives contained in national development strategies or plans and or relevant sector strategies and objectives. This comparison makes it possible to align the reforms with national objectives. Similarly, a comparison of the problem analysis with the national development goals and objectives will also help to identify or clarify the desired PFM outcomes. This process will strengthen the case for reform and its relevance to the government concerned.
Returning to the matrix example, the government’s priority outcome may be, at this stage, to strengthen fiscal discipline. The government may consider this the key for improving budget reliability and ensuring that resources are allocated to spending agencies in a predictable manner that supports service delivery and the achievement of its policy goals.
