The literature unfortunately provides very little practical guidance on how a government should decide which areas of PFM it should prioritize in preparing its PFM reform strategy. The most concrete advice on getting the basics right focuses more on horizontal sequencing than on vertical sequencing (Schick 1998, 2015). The literature, however, has largely drawn a blank about the issue of selection—what a country should choose to do first, second, and third and what criteria are relevant. Should improving cash management be given priority over establishing a treasury single account, or vice versa? Should eliminating spending arrears be given priority over building capacity in macrofiscal forecasting and analysis? What degree of priority should be given to upgrading the legal framework for public finance and budgeting? These are important questions on which many different answers can be (and often have been) given, most of them based on loose or missing criteria.

This guidance provides general guidelines and criteria that may help to narrow down the possibilities and organize the subsequent dialogue, by bringing together the seven key stages set out in chapter 2. It does not establish a rigorous analytical framework for prioritizing and sequencing reform.

Stage 1

Analyzes the latest PEFA assessment report and identifies the areas of weak performance. While a mechanical approach to selecting areas of weak performance based on a simple ranking of the PEFA scores should be eschewed—for reasons well rehearsed in the literature—useful information can be derived. The assessment should be compared with previous PEFA reports (if available) to establish whether a consistent pattern of relatively weak-performing areas emerges. Comparisons with other frontline diagnostic assessments, such as Tax Administration Diagnostic Assessment Tool (TADAT), Fiscal Transparency Evaluation, and Public Investment Management Assessment (PIMA) reports, as well as relevant technical assistance reports from the International Monetary Fund, the World Bank, and other credible sources should also be made where these are available.

Stage 2

Draws on assessing the causes of poor performance. In many cases, an indicator is underperforming for several reasons (for example, PI–14, Macroeconomic and fiscal forecasting) that could be linked to technical capacity, lack of suitable information technology systems to produce economic modeling, or political override. Existing diagnostic analyses of the country may not provide sufficient information to assess the causes of inferior performance in all cases, and, where this is the case, the guidance recommends further analysis. Having a better understanding of the underlying causes will enable countries and their development partners to identify which of these causes can be addressed and in what time frame. Some of the underlying causes (technical or process oriented) may be resolved quickly. Others, particularly long-standing political constraints, may take significantly longer or, as discussed in chapter 2, may be impossible to overcome in the short or medium term.