IMF Technical Assistance: Positive Impact on the Ground

Posted by Camille Karamaga

Country leadership has been essential to the past and on-going success in implementing public financial management reforms in Liberia. But the IMF technical assistance seems to have played an important role, as acknowledged by the Liberian authorities in a video featured on the IMF external web.

Well coordinated assistance has been, and continues to be, provided by the IMF Fiscal Affairs department (FAD) and other development partners. FAD’s assistance, which is currently funded by the Swedish Development Agency (Sida) and the EU, relies on a resident advisor who provides intensive on-the-job capacity building and day-to-day guidance to support the ownership and sustainability of the reforms, in addition to regional activities funded by the Japanese government and routine visit from headquarters staff.

One of the lynchpins of the ongoing economic governance reforms has been the passage in 2009 of a new public financial management law, which along with its associated financial regulations, has re-established the legal basis for public financial transactions in Liberia, as portrayed in a recent blog post. As Minister Augustine Ngafuan stresses in the video, since 2007 FAD has assisted the authorities in designing and putting in place a modern legislative framework that will help Liberia manage its public finances for years to come.

Certifying PFM Systems for Donor Budget Support to Fragile States – Professor Collier’s Proposal

Posted by Tej Prakash

 

In a recent op-ed (later also presented at an Overseas Development Institute (ODI) meeting), Prof. Paul Collier has put forward the argument that where donor aid is allowed to flow through the budget system of a fragile state, it has largely failed to deliver the results promised. The reasons given for this failure, range from incompetence to corruption. And, it is suggested that in the near future, there seems to be little chance of any meaningful improvement in these outcomes. He argues that the governance system in many of these countries is broken, and its focus is by no means primarily to provide services to the citizens. It is suggested that budget systems of these countries are extremely ‘leaky’ (‘looting of the public purse”) and that donors do not have, by and large, either the information or the technical expertise, to prevent misuse of aid money.

Collier makes a distinction between aid given for critical operations and for more general budget support operations. For critical operations he recommends using ‘imported administrative capacity’ to manage all spending, including donor funds through specific project support arrangements. His proposal relates only to donor budget support and does not address existing parallel project based arrangements operated by many donors. He does suggest that it is possible to improve the ‘technical’ aspects of donor flows. The focus of technical improvements would not be to introduce policy ‘conditionalities’ through a back door, but to enforce the country’s own laws. He cites the insight of Tinbergen that to implement any objective, there should be a distinct instrument with its distinct effect. Hence, the two main objectives: meeting the need for funds (how much) and ensuring their effective use (on what), should be managed by two different instruments.

Global Aid Transparency Movement: A Call for Action?

Posted by Florence Kuteesa, former budget director of Uganda

 
A global aid transparency movement, bringing together several initiatives with a shared vision[1], has received increasing interest and attention since the 2005 Paris Declaration for Aid Effectiveness. The main thrust of the movement is to make information about aid spending easier to access and understand by promoting public disclosure of regular, detailed, and timely reports on volume, allocations, and, where available, results of aid spending.

The movement is premised on the understanding that joint commitment from both donors and recipient governments is required to enforce global aid transparency. The International Aid Transparency Initiative (IATI) advocates for one gateway to access information from different sources by setting up an online registry that records the location of information. Publish What You Fund conducted an assessment of donor transparency levels whose findings were published in the 2010 Aid Transparency Assessment Report and discussed below. A joint initiative[2] is underway to formulate common standards to determine what information participating donors will publish and formats in which it will be presented.

Daniel Kaufmann (Brookings): Can Corruption Adversely Affect Public Finances in Industrialized Countries?

Posted by Michel Lazare

PFM Blog readers will remember that we published two previous posts on Daniel Kaufmann's blogs. The first one when Daniel created his own blog (Warm Welcome to "The Kaufmann Governance Post") and the second when he started posting on the Work Bank's blog Governance Matters (Another Warm Welcome to Daniel Kaufmann Who Does It Again).

Nowadays, while keeping his personal blog quite active, Daniel is a Senior Fellow at the Brookings where he does research and publishes on governance and anticorruption.

One of latest articles is a well-crafted piece titled: Can Corruption Adversely Affect Public Finances in Industrialized Countries? in which Daniel "departing from traditional “developing country” focused studies of corruption, [asks] whether corruption may adversely affect public finances in industrialized countries. With recent data, [he explores] the link between corruption (and other governance variables) and the public budget deficit of industrialized countries.

Assessing Health Sector Support in Africa– EU Court of Auditors Only Partly Satisfied

Posted by Duncan Last.

The 2008 Court of Audit assessment of the European Commissions (EC) health sector support to Sub-Saharan Africa raises some important issues in its recommendations, for the broader development community to consider, and, more importantly, beneficiary countries to take note of. The audit found that health sector funding as a proportion of total EC funding has remained unchanged since 2000, indicating a disconnect between the stated objectives of achieving MDGs (where the health sector is one of the priorities) and the actual year-to-year allocation of available funds.

How Effective are Aid Agencies?

By Tej Prakash

During the past decades, the total amount of external aid going to developing countries has increased greatly, and a great deal more has been committed in the coming years as a part of the Millennium Development Goals. The effectiveness of this aid depends upon many factors: the absorptive capacity in the recipient countries, their governance and managerial systems, and the effectiveness of their institutional framework. There is much literature on this subject. However, there is another side to the story that has not been explored as much: how much of the blame or credit goes to the aid giving agencies; can any lessons be learnt from the experience so far, both from the policy and the practice of giving aid.

Two related papers, one by Easterly and Pfutze (Easterly, William, and Tobias Pfutze, 2008, “Where Does the Money Go? Best and Worst Practices in Foreign Aid,” Journal of Economic Perspective, Vol. 22, Number 2 (Spring), pp. 29—52)and the other by Easterly (Easterly, William, 2007, “Improving Aid Agencies,” Economic Policy, UK, pp. 635—678), explore this issue and examine the track record of aid agencies in the past decades, both in establishing aid policy and in the actual flow of funds. Based on the past experience of successful and not-so-successful aid, they ask three questions: what is an ideal aid agency, what are best aid giving practices, and have the aid agencies followed the best practices.

Quality of Development Aid - Accra Meeting 2008 – What are the Issues and How to Get There.

Posted by Mario Pessoa

The Facts

The Accra Agenda for Action

The Third High-Level Forum on Aid Effectiveness has just concluded its works in Accra, Ghana. More than 1,500 delegates from 85 countries reached an agreement denominated the "Accra Agenda for Action" (Download AAA.pdf ) on how to make foreign aid to developing countries more effective. The key elements agreed in the Agenda are:

Predictability – donors will provide 3-5 year forward information on their planned aid to partner countries;

Country systems – partner country systems will be used to deliver aid as the first option, rather than donor systems;

Conditionality – donors will switch from reliance on prescriptive conditions about how and when aid money is spent to conditions based on the developing country’s own development objectives; and

Untying – donors will relax restrictions that prevent developing countries from buying the goods and services they need from whomever and wherever they can get the best quality at the lowest price.

Are Government Debts Really Irresponsible?

Posted by Andy Wynne

Disclaimer: Andy Wynne, an independent consultant,  is the editor of the International Journal of Governmental Financial Management; the point of view he expresses in the following post is not necessarily shared by either PFM Blog or the IMF.

In recent years it has been assumed that fiscal discipline should be one of the main objectives of public financial management. Thus, for example, the World Bank cites aggregate fiscal discipline as the first of the three much quoted objectives for public expenditure management.1/ The European Union has set targets of 3% for annual fiscal deficit and 60% for government debt. Several countries are adopting fiscal responsibility acts which limit the fiscal deficits which their governments are allowed to apply when setting their annual budgets.

The financial crises in Mexico (1994-95), Southeast Asia (1997) and Russia (1998) brought extensive economic dislocation, fiscal hardships and liquidity problems for the governments of these countries. The debt crisis for the governments of many developing countries over the last two decades had a similar effect and made them dependent on policy advice from the World Bank and IMF. Having suffered these problems it is a question of once bitten, twice shy. Many governments now accept the need to constrain their public expenditure to avoid future debt problems. However, in doing so they may not undertake much needed investment in public infrastructure which could be essential to achieve optimal economic growth in the future.

Public Financial Management and Fiscal Outcomes In Heavily Indebted Sub-Saharan African (SSA) Countries

Posted by Tej Prakash

A substantial amount of donor aid, estimated to be around US$60 billion from bilateral and multilateral sources, is expected to flow to SSA in the coming years to help these countries alleviate poverty and achieve the Millennium Development Goals (MDG). Also, to provide relief from debt burden, the International Monetary Fund (IMF) and the World Bank (WB) decided to forgive debt to these countries. However, the Bank and the Fund wanted to ensure that these countries had the capacity both to spend this money meaningfully, and to track the actual spending at the lowest level. Hence improvements in PFM systems in these countries was an essential part of debt forgiveness initiative.

In this paper on PFM and Fiscal Outcomes In Heavily Indebted sub Saharan African (SSA) Countries, we try to determine the effect of PFM systems on key fiscal outcomes such as budget balance and overall debt. We use data from two PFM assessments by the IMF and the World Bank in 2000 and 2004 as a part of the debt forgiveness exercise for this group of 22 countries in SSA.

PEFA Training in Perspective

Posted by Franck Bessette, PEFA Secretariat

The PEFA Monitoring Report 2007 extensively documented a substantial increase in the overall quality of the PEFA performance reports. This trend has continued, contributing to a wide recognition of the PEFA Framework as the core assessment tool adopted in more than 90 countries for PFM performance measurement and reform monitoring.

The partners of the program were convinced from the start that only high quality assessments of PFM performance could lay the basis for a pool of information on PFM reform that would be shared by the donor community and the partner governments. Training has been considered, since the launch of the PEFA Framework in June 2005, as one of the main pillars of this quest for quality, along with a solid mechanism for report reviews, involving all stakeholders and the PEFA Secretariat. For this reason, a training strategy was prepared by the program and approved by the PEFA Steering Committee. This post would like to give a short overview of this PEFA training activity and some insight into its near future.

Progress on the Use of Country PFM Systems: an OECD-DAC Joint Venture Report

Posted by Sanjay Vani, World Bank

A recent OECD-DAC Joint Venture on Public Financial Management commissioned report on the Use of country PFM systems takes stock of the progress made in meeting targets specified in the Paris Declaration.

The Report (Download report_on_use_of_country_systems_in_pfm.pdf )finds that there has been progress:many countries and donors have taken positive action toward strengthening and using country PFM systems, and the Public Expenditure and Financial Accountability (PEFA) partnership has developed a performance measurement framework that can help countries determine where they need to concentrate their efforts. At the same time, the aggregate numbers on donors’ use of country systems have not changed much; it is clear that there is much work to do.

Another Warm Welcome to Daniel Kaufmann Who Does It Again

Posted by Michel Lazare

In a March 11, 2008 post titled "Warm Welcome to the Kaufmann Governance Post", we announced the launch of Daniel Kaufmann's personal blog on governance issue.

Although this personal blog is still active, Dani Kaufmann has now created a World Bank blog on governance : "Governance Matters" which defines itself as "A Blog about Governance and Development for All."

The key difference between the two is that, while the Kaufmann Governance Post (KGP) was, initially at least, a one man show, Governance Matters is more an institutional and team approach. A number of Bank's experts on governance issues have already posted at least one article on this post. This difference should however not be overestimated as the KGP blog has now welcomed a number of guest bloggers and as Dani Kaufmann appears to be the key writer of the new Governance Matters.  Actually, convergence between the two blogs is such that most of Dani Kaufmann's latest posts have been posted on both blogs.

PFM blog likes the new Governance Matters as much as it liked the initial KGP. We wish long life and full success to both.

PFM Reforms in Developing Countries

Lessons from Ghana, Tanzania and Uganda

Posted by Bill Dorotinsky

In trying to learn what public financial management (PFM) reforms work, it is important to challenge conventional wisdom and look afresh at what has been tried, and its relative success. Model reforms need to be compared with actual experience, and lessons learned based on evidence need to be drawn and fed back into the reform processes. A 2005 working paper "Public Financial Management Reforms in Developing Countries: Lessons from Ghana, Tanzania and Uganda" by Andy Wynne does just that, looking at medium-term expenditure framework (MTEF) and integrated financial management information system (IFMIS) reforms in the three African countries cited. The working paper was published in December 2005 by The African Capacity Building Foundation.*

New EU-Supported Financial Information Management System Public Finance in Serbia

Posted by Michel Lazare

Here is a YouTube video presenting the key features of a new financial management information system introduced in Serbia with the support of the EU-European Reconstruction Agency.

Increase in Food and Fuel Prices---Macroeconomic Impact and Policy Responses

Posted by Christian Schiller

In my PFM Blog posting of June 18, 2008, I reported that the IMF was working on the impact of higher oil and food prices. Now the IMF has released two comprehensive studies and presented them to the public on July 1, 2008 in Washington D.C. The presentation was introduced by the IMF’s MD, Dominique Strauss-Kahn; five IMF senior staff members summarized the work done by the IMF staff and answered questions.

One study is a broad assessment of the impact of the surge in food and fuel prices on the balance of payments, budgets, prices and poverty in a large sample of  (roughly 150) countries. The other study is a country-by-country assessment of the implications of the price shocks for the balance of payments in sub-Saharan Africa. Both studies are available at the IMF’s web site (click links above).

Bill Dorotinsky on Public Financial Management Reform -- Trends and Challenges (Video 3)

Posted by Michel Lazare

You liked Bill Dorotinsky's post of June 27 "Public Financial Management Reform -- Trends and Challenges"?

Well, you'll then love the video of this presentation delivered at the ICGFM meeting. Here is the third part of this YouTube video; parts 1 and 2 appear in other posts published today.

Bill Dorotinsky on Public Financial Management Reform -- Trends and Challenges ( Video 2)

Posted by Michel Lazare

You liked Bill Dorotinsky's post of June 27 "Public Financial Management Reform -- Trends and Challenges"?

Well, you'll then love the video of this presentation delivered at the ICGFM meeting. Here is the second part of this YouTube video; parts 1 and 3 appear in other posts published today.

Bill Dorotinsky on Public Financial Management Reform -- Trends and Challenges (Video 1)

Posted by Michel Lazare

You liked Bill Dorotinsky's post of June 27 "Public Financial Management Reform -- Trends and Challenges"?

Well, you'll then love the video of this presentation delivered at the ICGFM meeting. Here is the first part of this YouTube video; parts 2 and 3 appear in other posts published today.

Public Financial Management Reform -- Trends and Challenges

Posted by Bill Dorotinsky

On June 18, 2008, I spoke on Public Financial Management Reform: Trends at the the International Consortium on Government Financial Management (ICGFM) monthly speaker series in Washington, D.C.

I took the opportunity to share my personal views on current trends and challenges in public financial management (PFM) reform, drawing on my experience across the globe and multiple institutions. (As I noted, these are not the views of the IMF, or any other institutions with which I have been associated.)

The presentation covered three broad areas:

1. Common PFM reform recommendations, seen across all donors, consultants, etc.
2. Information on what reforms countries have been implementing in recent years
3. Challenges ahead for improving PFM

The PowerPoint can be downloaded here Download public_financial_reform_trends_icgfm_June_2008.ppt

The ICGFM Blog also posted a summary and video of the presentation on their Blog (CLICK HERE).

Food Price Hikes: Equitable and Efficient Subsidies

Posted by Christian Schiller

On June 3 to 5, 2008, a United Nations sponsored conference on world food security took place in Rome Italy. A large number of world leaders were there, including my boss, the Managing Director of the IMF, Dominique Strauss-Khan. He warned that high food prices are a serious humanitarian concern as well as a source of macroeconomic instability affecting, among others, government budgets everywhere in the world. The MD told delegates that the Fund has already doubled financial assistance to four low-income countries affected by food and fuel price hikes and is discussing additional support with another 11 countries.

Banking on Accountability?

Posted by Carlos Santiso, Sector Manager, Governance (AfDB)

"Banking on Accountability? Strengthening Budget Oversight and Public Sector Auditing in Emerging Economies," by Carlos Santiso in Public Budgeting and Finance, 26(2), pp.66-100, 2006.

In a relatively recent article (“Banking on Accountability? Strengthening Budget Oversight and Public Sector Auditing in Emerging Economies” Public Budgeting and Finance, 26(2), pp.66-100, 2006), Carlos Santiso reviews multilateral development banks’ support to parliaments and external audit agencies in Latin America. The analysis reveals a learning curve in multilateral assistance to budget oversight institutions, including in the choice of strategies and the combination of instruments. It underscores the importance of the underlying political economy context for strengthening checks and balances in the management of public finances.

MDBs have traditionally centered their attention on the modernization of financial management within the executive and the bureaucracy (finance ministries, central budget offices, central banks, and tax authorities). They nevertheless realize the limitations of an exclusive focus on the executive and the need to balance executive discretion with external accountability and, as a consequence, are increasingly supporting the infrastructure of accountability within the state - those institutions outside the executive branch of government and tasked with scrutinizing government and overseeing the budget.

Performance, the Upper Level in Management as Part of an MTEF

"Our work will be judged on the access and quality of education services" – "performance is not only about more resources, it s is about their effective use"

Posted by Mr Genc Pollo, Albania Minister of Education and Science

Since the introduction of an MTEF in Albania, the Ministry of Education and Science (MoECS) has linked budget resources to its policy priorities through a three-year, rolling programme review process.

DFID's Methodology for Managing Fiduciary Risks

Posted by Michel Lazare

Our March 31, 2008 post presented the recent DFID's Policy Paper on extending development aid through direct budget support. It indicated that provided that some conditions are in place DFID favors direct budget support. DFID like all the other development practitioners do recognize the fiduciary risks involved by the provision of aid through this form. Therefore, DFID has developed a methodology to manage fiduciary risk in its bilateral aid programs.

This methodology is the object of a DFID "How to note" published on January 30, 2008. Its full text can be accessed by clicking on the following link: Download howtonotefiduciaryrisk1.pdf .

This fairly technical note, which is mainly targeted towards DFID's country office staff, is nevertheless of interest for all PFM practitioners.

Poverty Reduction Budget Support -- A DFID Policy Paper

Posted by Michel Lazare

Further to our March 17 post: Is Providing Budget Support to Developing Countries Effective? -- Evaluation of DFID's Direct Budget Support by UK's National Audit Office, which discussed NAO's assessment of effectiveness of budget support, it is important to note that the UK's Department for International Development (DFID) has recently published a policy paper on budget support.

This paper updates DFID's previous policy (dating back to 2004). It draws on the conclusions of a May 2006 multi-donor Joint Evaluation of General Budget Support -- which provided new evidence about the effectiveness of general budget support -- and on the implications of the 2005 Paris Declaration on aid effectiveness.

It "reaffirms DFID's commitment's to using budget support -- alongside other aid instruments -- where it is appropriate to deliver aid to partner governments to reduce poverty. "

Debt Management Stakeholder’s Conference – Oslo, Norway – March 5-6, 2008

Posted by Brian Olden

A Debt Management Stakeholders’ Conference, organized by the World Bank and the Norwegian Ministry of Foreign Affairs, was held in Oslo on March 5-6, 2008. It was attended by over 100 delegates including country authorities, donors, and the main technical assistance service providers in low income countries (LICs). The Norwegian Minister of the Environment and International Development was the keynote speaker at the event.

Civil Society and Public Finance

New International Budget Project Budget Briefs Help Civil Society Understand and Engage on PFM

Posted by Duncan Last

The Center for Budget and Policy Priorities (CBPP) International Budget Project (IBP) has just launched a new publication series – Budget Briefs – which aim to keep readers up-to-date on debates and challenging new thinking relevant to the work of monitoring public budgets. They will not only draw on new work by the IBP and its partners but also on new academic literature and developments in the broader governance, civil society and poverty fields. Briefs will be produced as short, accessible reports or think-pieces and will be published on an occasional basis. The first brief focuses on how civil society can help in monitoring donor budget support.

Is Providing Budget Support to Developing Countries Effective? -- Evaluation of DFID's Direct Budget Support by UK's National Audit Office

Posted by Michel Lazare

One of the main changes in development aid policy over the last decade was the decision made by the international community to move away from project aid in favor of direct budget support. This meant shifting away from aid financing specific projects and disbursed outside of the beneficiary country's public financial management (PFM) system (e.g., money deposited on projects' accounts in the commercial banks) to favor generally unearmarked aid funds directly disbursed using the beneficiary country's  PFM system (e.g., direct budget support deposited on the treasury's account at the central bank).

Evaluation of the efficiency and effectiveness of this new aid policy is a key issue for the international community. Just a few weeks before the upcoming Fourth High Level Forum on Aid Effectivemess to be held in Accra (Ghana), the UK's National Audit Office (NAO) has published, on February 8, 2008, a report evaluating DFID's (the UK's development agency) performance in providing budget support. This report titled: "Department for International Development -- Providing Support to Developing Countries", concludes in a nuanced way:

"Evidence on whether budget support has yielded better value for money than other forms of aid is not conclusive. While budget support has some advantages compared to other forms of aid, it also carries significant risks which need to be better managed."

Warm Welcome to "The Kaufmann Governance Post"

Posted by Michel Lazare

Daniel Kaufmann, a well-known authority on governance and one of the key governance experts at the World Bank, has just launched a personal blog: "The Kaufmann Governance Post.

In his first few posts, he shares his view that governance issues are by and large still misunderstood and indicates his intention to clarify misunderstandings with a series of posts to debunk myths about governance. For instance, the March 3 post is about: Myth #1.  Developing countries, and governments in particular, are all rife with corruption, while corruption is virtually absent in much of the rich industrialized world.  Worth reading.

Beyond the substance, PFM Blog also notes the modesty and human dimension relfected in the presentation pages of The Kaufmann Governance Post. Long life and full success to this new blog.

Building Fiscal Infrastructure in Post-Conflict Countries

New USAID Study Released

Posted by Justin Tyson

A recent study produced for USAID, Building Fiscal Infrastructure in Post-Conflict Countries, presents seven case studies of building, or rebuilding, fiscal infrastructure in countries that have emerged from periods of conflict.  The countries included are from different regions around the world, including: Afghanistan, Angola, Bosnia and Herzegovina, El Salvador, Guatemala, Kosovo, and Liberia.

PFM Reform Lessons – Building a Treasury in Indonesia

Posted by Bill Dorotinsky

Public financial management (PFM) is at the center of the development agenda. Sound PFM systems are essential for countries to maintain macrofiscal discipline, achieve national objectives, and use resources efficiently – regardless of the source of financing. Sound PFM systems are an essential component for giving substance to the 2002 Monterrey Consensus (proposal for a new partnership of mutual accountability between countries and development partners), the Paris Declaration on Aid Effectiveness (2005), and for countries to achieve their national objectives and the Millennium Development Goals.

Despite the centrality of PFM, there is still much to learn in terms of improving PFM reform outcomes, building capacity, and strengthening country systems durably. The process of learning what works and how best to support reforms is an on-going effort, with some important lessons emerging (see December 21 post on Mozambique). A recent IMF Survey On-line post on Indonesia cash management reform by FAD staff member Ian Lienert adds to our understanding, providing some useful lessons of PFM reform.

Country PFM Systems --- Monitoring Performance and Lessons for Reform

Lessons from IMF-World Bank work with HIPCs, 2001-2005

Posted by Bill Dorotinsky

One of the many developments in public financial management (PFM) over the past several years, one of the more interesting was in the field of monitoring PFM system performance over time. From 2001-2005, the IMF and World Bank developed and applied a new instrument for assessing country PFM systems and monitoring their development over time. The work was undertaken in the context of Highly-Indebted Poor Country (HIPC) debt relief, and covered 26 countries in Africa and Latin America.

The work is worth highlighting  for many reasons, not least of which are the approach used, the tool itself, and the lessons that emerged for PFM reform. This post summarizes the instrument and results of this work, especially important lessons for PFM reform, and subsequent posts will summarize more recent developments in this field.

Better Meeting Country Needs -- IMF Regional PFM Technical Assistance Centers

Posted by Christian Schiller

Country PFM technical assistance needs range from strategic advice on feasible PFM reform paths to very short-term advice solving specific, practical PFM problems. To meet these differing needs, the IMF has multiple ways of delivering technical assistance (for an overview, see the blog post of November 7). One specific development is the regional technical assistance center (RTAC), of which there are six at present.

Good Financial Governance in Africa - Insights into G-8 GTZ Effort

The G-8 Action Plan for Good Financial Governance in Africa was adopted by the G-8 earlier this year in Potsdam (Germany), and was one of the signature German efforts during their G-8 presidency.  GTZ, one of the German Development Agencies, in their latest Newsletter (September 2007, No. 9), focuses on the origins of the Action Plan concept.

Low-Income Countries' Public Financial Management Systems Need Upgrading to Enhance the Benefits of Scaled-Up Aid

A September 2007, IMF Survey article, and associated staff working paper, examines the challenges facing low-income countries in upgrading their public financial management (PFM) systems, and their implications for international development assistance. The article notes that PFM systems in most low-income countries (LICs) need strengthening if these countries are to fully benefit from scaled-up aid. Weaknesses in PFM can undermine budgetary planning, execution and reporting, reduce fiscal transparency, and result in leakage of scarce resources.