Develop and prioritize PFM reform initiatives
WHICH INITIATIVES CAN BRING ABOUT THE DESIRED OUTCOMES?
Stage 4 involves the design specific reform initiatives aimed at achieving the desired outcomes. Each reform initiative or action should include a brief description of the intended result of that action, the intended impact on (or progress toward) the desired outcome, an initial time frame for completing the action (and any milestones to be reached over the short, medium, and longer term, depending on the nature of the reform), and the allocation of responsibility within the government for implementation
Continuing with the handbook’s matrix example, a first priority may be to develop reforms aimed at improving the reliability of budget estimates by reducing the gap between budget allocations and actual expenditures. This step may require better macroeconomic modeling and fiscal forecasting, stronger rules on limiting spending decisions made after the budget has been approved, or implementation of commitment control to reduce arrears. In turn, strengthening macrofiscal forecasting may require improvements in the national accounts, development of new economic models, or the elimination of political interference in forecasting.
It is important to note that alternative desired outcomes may lead to different reform priorities and initiatives. For example, the government may identify improving service delivery outcomes as its main priority. This priority may require improvements in the reliability of budget allocations and other initiatives that affect fiscal discipline, but it also may require improvements in the capture of performance information or better understanding of the availability of resources to service delivery units.
WHAT ARE THE MOST IMPORTANT REFORMS, AND HOW DO WE SEQUENCE THEM?
When a PEFA report highlights a significant and wide range of PFM weaknesses, the challenges may seem overwhelming. Worse, countries and development partners may try to adopt allencompassing, comprehensive reform plans that are beyond both the implementation capacity of the country and the resources of development partners.
Despite some attempts to agree on sequencing in planning PFM reforms, a consensus among PFM experts has not emerged. Nevertheless, as a starting point, consideration should be given to the feasibility and desirability of adopting a basics-first approach. Such an approach stresses the importance of “getting the basics right” when undertaking reform.