Box 2.2 (continued)

Form versus function
In contrast to this idealized view of how the decision-making process should occur, various complications frequently arise:
  • Choosing reform activities on the basis of local demand sometimes entails tradeoffs. Getting the authorities to own and lead reforms is essential, but, if taken too far in some contexts, such leadership could prove risky and may involve PFM tradeoffs. Donors should reexamine more explicitly how far technical PFM considerations should be compromised to fit a country’s political economy context.

Others have advocated taking more radical approaches to questioning whether a particular PFM area can be reformed in certain circumstances and whether it is desirable to keep allocating resources if the required enabling factors are not in place. This questioning highlights both the capacity for reform and the ability to ensure that reform initiatives are implemented with the appropriate and optimum sequencing. Andrews, Pritchett, and Woolcock (2017) analyzed experiences with public sector reform, including PFM, based on case studies in eight countries in East Asia. These studies focused on three key areas that affect the success or failure of reform: design quality, political environment, and institutional capacity. This approach provides a useful basis for developing PFM reforms following a PEFA assessment and subsequent PFM reform dialogue.