Public Financial Management (PFM): A ‘Discipline’ in Search of a Home

Posted by Tej Prakash.

Of which academic discipline is PFM a part of?  Is it economics, public administration/policy, accounting, management, or law? Or, none or all of the above.

PFM, as the name indicates, should deal with the management of both revenues and expenditures. But it does not. It deals only with public expenditures. Thus to begin with, the name itself is a bit of a misnomer.

The changing name of the division dealing with this subject within the IMF (Fund) is one indicator of how the subject has evolved. The Fiscal Affairs Department of the Fund has dealt with the subject almost since the beginning of the department. Initially, it was called the Budget Division (BD) and it covered all aspects of budget preparation and execution. After the breakup of the Soviet Union, one of the main activities of the BD was to provide technical assistance to the new member countries in moving them towards budget systems in market based economies. One of the main forms of TA provided during this period was in helping these countries establish a Treasury along the lines of the French or the UK Treasury. Around this time the name of BD underwent a change and it became Public Expenditure Management (PEM) Division.

The main focus of the division remained support of the Fund’s surveillance or financing work in all its aspects. Thus, gradually PEM’s involvement in other areas of fiscal policy and management increased. And over time, and it has come to include areas of fiscal decentralization, debt management, fiscal rules, accrual accounting and information technology based budget management solutions. The name of the division was changed again to Public Financial Management, perhaps because it was more comprehensive than expenditure management. There are however many skeptics who do not buy this argument regarding this name change.

Even as its interaction with other disciplines has increased, at its core, PFM has remained divided between public administration, accounting, management, and more ambitiously, economics. Indeed some of the most prominent academics come from public administration, although some significant work has been done especially in institutional aspects of budgeting by some economists. Thus, even as it evolves, it remains a discipline in search both of academic respectability and home.

Comments

[Christian Schiller]

A further aspect is that in addition there always has been an Expenditure Policy Division in FAD and a tension between the two devisions as to who covers what in terms of government expenditure issues, sometimes difficult to understand for an outsider.

[James McNulty]

In these fragile times, isn't there an argument to say that how PFM is classified as a discipline depends on the value placed on the public goods it delivers to the global community.

Here's a quote from 'Bottom Billion' author Paul Collier from a very recent article in the UK Guardian:

"We can learn from Paddy Ashdown's experience in Bosnia. He concluded that what he had needed were not doctors without borders, but accountants without borders. Where governance is inadequate, aid should only come with an army of accountants able to ensure that it is not captured. The missing piece of international architecture is an independent assessment of the integrity of budget systems"

[James McNulty]

Here's the article! http://www.guardian.co.uk/commentisfree/2009/jul/14/aid-obama-africa-accountants