Based on the seven-stage approach, the reform dialogue is intended to lead to a set of desired public financial management (PFM) outcomes around which the government’s reform priorities can be agreed and initiatives can be developed to address weaknesses identified in the PEFA report, supplemented by further analysis as required. What happens next will depend largely on the country context. Box 3.1 offers two examples of approaches related to country context, while box 3.2 presents similarities in PFM reform projects.

Box 3.1

Country context shapes the approach to reform

Comprehensive program

In some cases, it will make sense to develop a comprehensive program of reform initiatives that is formalized into a new (or revised) PFM reform strategy or action plan. More comprehensive reform strategies or action plans are most appropriate in circumstances where the government has had previous experience successfully developing and implementing reforms, where existing capacities are good, or where the government has established an agreed-upon PFM capacity development program with development partners.

More open-ended, less structured

In other cases, a more openended, less structured and iterative approach to reform focused on specific high-priority problems may be more appropriate. This approach might be appropriate where reform action plans have been developed in the past without any impact, where commitment to reform has been variable over time, and where the causes of unsatisfactory performance and progress are poorly understood. In these cases, smaller, less ambitious iterative reform initiatives with a focus on continuous feedback and learning may be more effective.

Many experienced practitioners tailor reforms to country circumstances or apply a system of trial and error in reform design and implementation, focusing on reforms that address the government’s main problems and priorities and that can be implemented. Andrews, Pritchett, and Woolcock (2017) propose a similar approach referred to as Problem Driven Iterative Adaptation (PDIA). However, for many countries, governments and development partners often prefer a comprehensive reform strategy over a more iterative approach. This decision often leaves countries weighed down with multiple reform initiatives that strain their capacity, undermine political commitment, and often result in reform fatigue. Nevertheless, even in settings where an iterative approach is more appropriate, there are benefits to setting out initiatives in a structured, albeit simplified, agenda.