The PEFA Secretariat in collaboration with Nathan Associates Inc. launched the new research report “Analyzing the Link between PFM System Strength and Public Investment Performance”.
The webinar event on 23 June, launching the report, discussed the empirical research study based on PEFA data from 2011 Framework Assessments, and implications of this findings. The event was chaired by Manal Fouad, Assistant Director, Fiscal Affairs Department, International Monetary Fund. Jens Kromann Kristensen, Practice Manager, World Bank; Michelle Stone, International Monetary Fund; Dr Daniel Mullins, Ernst & Young and Adenike Oyeyiola, Practice Manager, World Bank spoke at the event and provided insights on global trends.
How can we best understand the relationship between PFM and PIM outcomes? How to design PFM programming that best lead to impact on PIM?
There is a confluence of factors that makes it difficult to disentangle the different relationships when assessing the progress of PFM and its linkages to higher level outcomes, particularly quantitatively. “Part of this is a belief, that improved PFM leads to improved governance and better social outcomes and faith in the process of PFM”, noted the Dr Mullins. “There are uncertainties directly to quantify them.”
A key message that Jens Kromann Kristensen conveyed, and that aligns with the study’s findings, is the importance of the environment where PFM operate: first there is a need to consider the desired functionality behind a reform, rather than its form, and then consider the institutional reform that should come with it.
This highlights the importance of the overall development context and considering factors such as political commitment, political economy, and the nuances of different reforms at the national and more importantly at the subnational level – PFM as a system - both in research, as well as in PFM program design and implementation.
A focus may also helpful on certain aspects of the PFM systems like medium-term fiscal frameworks or public investment management that have direct links to PIM. From the IMF experience on using Public Investment Management Assessment (PIMA) tool in 65 countries, the experience is that project appraisal and preparation are done relatively weakly, and there is room to improve infrastructure governance in all country income groups, explained Michelle Stone.
Please access the video recording below:
The paper was authored by Tim Robinson, Joseph McGrann, Adam Kadir, Inés Jiménez-Ontiveros and Uzma Ashraf Barton from Nathan Associates Incl. This paper is a product of the PEFA sponsored Research Competition that focused on PFM and service delivery. This research product is coordinated by Tia Elise Raappana and Richard Anthony Sutherland from PEFA Secretariat.
Public investment in key infrastructure projects can promote economic growth, improved public investment performance and service delivery. The impact of Public Investment Management (PIM), however, critically depends on its efficiency that varies widely across the countries. Demand from countries for addressing this is high.
The paper “Analyzing the Link between PFM System Strength and Public Investment Performance” examines the link between the strength of country PFM systems, improved PIM, and public investment performance.
While overall the results of the analysis have variable statistical significance, the study finds some evidence of a positive linkage between improved PFM performance and improved public investment performance. One of its key findings is that the link between quantifiable PFM performance improvements (e.g., adherence to approved budgets) and public investment and infrastructure-related outcomes is stronger than between qualitative PFM improvements (e.g., commitment controls are in place) and those same outcomes.
Click on the image to see the Research Report:
Click on the Presentation below to open it: