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January 11, 2013

New Guidance for Sub-National PEFA Assessments

Posted by Greg Horman

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The PEFA Program earlier this week released new guidelines for applying the PEFA framework to sub-national governments.

Of the nearly 300 PEFA assessments carried out to-date, more than 70 have been at the sub-national level. Sub-national governments are highly diverse across the world in terms of administrative tradition, functions and responsibilities, the degree of discretion in running their operations independently of the central government, and the role of inter-governmental fiscal transfers. The populations, budgets, and economies of some sub-national entities are far larger than those of other entire countries. So PFM outcomes at the sub-national level matter.

The guidelines provide practical advice for assessing individual indicators and interpreting the findings at the sub-national level. Recognizing that transfers from the central government can be an important, if not the largest, source of financial resources available to a sub-national entity, the guidelines introduce a new indicator—HLG 1— which examines the predictability of transfers from a higher level of government. Another innovation is a template for identifying and taking account of key features of the institutional context and inter-governmental structures that shape the political, administrative, and fiscal environment of the sub-national authority. The guidelines also propose adjustments to the standardized performance report and note that the summary assessment needs to distinguish those areas that can be improved through decisions and actions by the sub-national government in its own right from those where it is bound by regulations made by the central government.

Note: The posts on the IMF PFM Blog should not be reported as representing the views of the IMF. The views expressed are those of the authors and do not necessarily represent those of the IMF or IMF policy.

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