Its aim is to avoid overly ambitious attempts to establish PFM international best practices in countries that lack the capacity to operate basic processes. An example is ensuring that the legal environment exists and that sufficient capacity is built before embarking on capital-intensive automated systems.
Lessons from experience and academic research lead to the conclusion that appropriate design and optimum sequencing of the reform program, including what constitutes the basics as well as the capacity development needs and priorities, are specific to a country based on its unique political, institutional, and capacity characteristics.
Cost also needs to be considered in setting reform priorities. Reform plans need to take account of available financial resources. For example, the government may consider the implementation of a new financial management information system (FMIS) to be a high priority, but the cost of development, implementation, and capacity development may be prohibitive for the time being. Some of the gains from a new FMIS could be achieved through the adoption of less expensive improvements in processes, regulations, and classification. Similarly, particularly where the level of government commitment and ownership is less than desirable, government officials may wish to consider less complex reforms that could provide quick wins on PFM reform and help to build momentum for further reform. Box 2.1 offers an example of how PEFA findings on budget credibility and fiscal discipline are used to prioritize and sequence PFM reform. Costs are further discussed in stage 6, as reform initiatives and plans are further developed.