UNICEF Visits FAD to Discuss Collaboration and Best Practices in PFM and Expenditure Management

Posted by Mario Pessoa and Duncan Last.

A team from UNICEF spent a day with the Fiscal Affairs Department (FAD) of the IMF on October 8, 2009 to learn about FAD’s work in expenditure policy and public financial management and to discuss possible forms of collaboration.

The Challenge of Reforming Budgetary Institutions in Developing Countries

Richard Allen was recently interviewed by the PFM Blog about his recent IMF Working Paper―”The Challenge of Reforming Budgetary Institutions in Developing Countries,” WP/09/96. The full text of Richard Allen's working paper is available by clicking on the following link: Download Wp0996[1]

Question:  What are the main conclusions of your analysis?

RA:  First, reforming public financial management is a frustratingly slow business. In developing countries, the progress of modernizing budgetary institutions needs to be measured in small steps. Major reforms such as introducing a new treasury system or a medium-term budget framework can take a decade or longer. Second, governments, donors and multilateral institutions―including the IMF, I would admit―almost always underestimate the difficulties and challenges, and overestimate the capacity of government to deliver reforms. They fail to learn from the lessons of the past.  Third, countries that are now advanced went through similar experiences when they were in the developing phase.  Some PFM reforms in these countries have taken up to two centuries to evolve from where many developing countries find themselves today, to where the developed countries are today.

OECD Sigma Provides Regular Updates of Public Expenditure Management and Related Public Administration Systems in Central and Eastern Europe

Posted by Eivind Tandberg.

OECD Sigma assessment reports provide a useful and concise overview of public expenditure management systems in EU candidate and potential candidate countries in Central and Eastern Europe. They are based on annual assessment visits by the Sigma team. Sigma also produces assessment reports for related aspects of public administration, including public internal financial control, procurement and external audit.

World Bank—Sovereign Debt Management Forum (October 27-29, 2008)

Posted by Brian Olden

The World Bank hosted the Fourth Sovereign Debt Management Forum between October 27–29, 2008 in its Washington, D.C. headquarters. Despite the ongoing turmoil in world financial markets, the event was well attended, with representatives from over 55 advanced OECD, emerging, and low-income countries (LICs), as well as representatives from international institutions, including the IMF and the EU.

The forum was very timely, given the current market turmoil, and naturally much of the discussion centered around the impact of the crises on economies, in general, and on debt management operations, in particular.  Much of the focus was on what the role of debt managers will be in helping to mitigate the effects of the crises on economies in the short and medium-term.

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.

The Accra High Level Forum – a PEFA Perspective

Posted by Frans E. Ronsholt, Head of the PEFA Secretariat

In the 2005 Paris Declaration, partner countries committed to strengthening their national PFM systems while donors committed, to support partner countries’ efforts to enhance the capacity of such systems, and both parties committed to jointly implement harmonized diagnostic reviews and performance assessment frameworks in PFM. In other words, the Paris Declaration confirmed donors’ and partner countries’ commitment to the three main principles of the Strengthened Approach to Supporting PFM Reform, which constitutes the foundation for the PEFA Program. Donors also committed to using country systems to the extent possible and avoid parallel structures.

The PFM Performance Measurement Framework (PEFA Framework) provides a foundation from which to build reform programs to strengthen a country’s PFM system and to monitor progress towards reform targets. As the PFM system is strengthened, it will create an enabling environment for donors to increasingly use national PFM systems. The PEFA Framework also contributes to the Paris Declaration targets of reduced transaction costs in diagnostic work through harmonized analytical instruments and joint missions.

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.

The Good, the Bad and the Ugly of MTEFs?

Posted by Ismail Manik, consultant, World Bank Institute

An interesting recent working paper by Clay G. Wescott, of the Asia Pacific Governance Institute, has a good review of country experiences with MTEF implementations. The working paper is a background paper to the World Bank’s Independent Evaluation Group’s report ‘Public Sector Reform: What Works and Why?’ 

Norway's public financial management system

-- a PEFA-based assessment

Posted by Bill Dorotinsky, World Bank

In previous posts, we've blogged about the Public Expenditure and Financial Accountability (PEFA) Performance Measurement Framework, launched in 2005 and applied in over 80 developing countries (see our April 21 and August 4, 2008 posts).

Norway has supported the development of this framework to assess the performance of a country’s public financial management system. This PEFA assessment of the Norwegian public financial management is the first time the framework has been applied in a high income OECD country. The aim of the assessment was to get further experience with the framework by using it in another country context. A special section on management of Norwegian petroleum revenue is included in the report.

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.*

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.

Mozambique’s Encouraging Progress on Fiscal Transparency

Posted by Teresa Dabán

In May 2008, the IMF published, on its external web site, a reassessment of Mozambique's fiscal transparency—i.e. a completely updated Report on the Observance of Standards and Codes- Fiscal Transparency Module ("fiscal ROSC"). The overall conclusion of the report is encouraging: although several weaknesses remain, Mozambique’s fiscal transparency has improved significantly since the first fiscal ROSC conducted in 2001. Aside from this positive result, Mozambique’s fiscal ROSC reassessment is of special interest and relevance. Why? Because (i) it has been one of the few fiscal ROSC reassessments conducted since the Fund’s fiscal ROSC was launched; (ii) it shows how the Fund’s technical assistance (TA), in close coordination with donors, contributed to improve fiscal transparency; (iii) it was conducted in close coordination with the PEFA Re-Assessment; and (iv) it provides guidance on how to strengthen transparency of future resource revenues.

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.

e-Government in Africa (Dr. Schuppan's Interview with the GTZ Newsletter)

Posted by Christian Schiller

That information and communication technologies can help enhance the delivery of public services and "make public money count" has by now been widely recognized. Clearly, the industrialized and emerging countries are at the forefront of these developments. But, interestingly, there is also a great potential for e-government in the developing world. The most recent GTZ Newsletter (No. 11/April 2008) contains an interesting interview with Dr. Schuppan on the importance of e-government for development policy in Sub-Saharan Africa.

Dr. Schuppan is co-founder of the Institute for e-Government at the University of Postdam (Germany).

The study has been undertaken for the German Parliament and has unfortunately not yet been published. But the interview in the GTZ newsletter already provides an interesting overview of the study. In short, Dr. Schuppan feels that ";e-government undoubtedly has an enormous potential for Africa south of the Sahara," for revenue administration and expenditure management, but also for other government activities. He warns, however, that in order to fully exploit its potential, e-government solutions need to be introduced hand in hand with reforms of the administrative processes and systems that currently exist in Sub-Saharan countries. While overall important progress has been made with regard to the latter, there is still a long way to go, at least for a considerable number of Sub-Saharan African countries. In addition, Dr. Schuppan points out that education and training is critical, not only of the managers of the e-government solutions but also of the users, including, for example, tax payers. Finally, and this should not come as a surprise, Dr. Schuppan suggests that "e-government projects in African countries call for ...much more time to be implemented than is required in industrial countries." To read the interview and receive the newsletter, send an e-mail to public-finance@gtz.de

Managing Post-Natural Disaster Reconstruction Finance

-- World Bank Working Paper

Posted by Bill Dorotinsky

Recent PFM blog posts have focused on post-conflict public financial management (PFM) issues. The World Bank East Asia Region recently published a working paper on a somewhat similar topic, Managing post-disaster reconstruction finance, in January 2008. The paper examines eight post-disaster cases (Aceh-Indonesia, Yogyakarta-Indonesia, Sri Lanka, Maldives, Pakistan, Colombia, Grenada, and Honduras) and draws some general lessons for future events. Though the title indicates an emphasis on post-disaster reconstruction, a case studies annex includes post-conflict efforts as well.

Exchanging experiences and learning from others: PEM PAL approach

Posted by Urska Zrinski, CEF PEMPAL Secretariat

PEM PAL, the Public Expenditure Management - Peer-Assisted Learning (PEM-PAL) network, is a network of public expenditure management professionals from countries in Central and Eastern Europe (CEE), and Central Asia. The initiative, which was conceptualized in 2005 by the World Bank and the United Kingdom’s Department for International Development, represents an effort to develop capacity and share reform experiences among countries in CEE and Central Asia. At the beginning of 2008, the PEM PAL secretariat has been moved from the World Bank’s headquarters in Washington DC to the Center of Excellence in Finance, Slovenia, thus bringing the network closer to the region. (See a January 25, 2008 blog post for more on the Center.)

Post-conflict PFM -- IMF Lessons of Experience

Summary of lessons from FAD support

Posted by Bill Dorotinsky

The challenges of rebuilding fiscal institutions in post-conflict settings are daunting. An April 23, 2008, post summarized some lessons from USAID experience. The IMF Fiscal Affairs Department (FAD) has been directly involved in rebuilding fiscal institutions. Work done in 2004 summarized FAD's experience and some key lessons --- lessons reinforced by the recent USAID paper.

FAD experience was summarized in a 2005 Occasional Paper 247, Rebuilding Fiscal Institutions in Postconflict Countries, by Messrs. Gupta, Tareq, et. al. The work draws on background papers prepared in 2004, including a December 2004 paper "Rebuilding Fiscal Institutions in Post-Conflict Countries," and October 2004 case study summary Background Paper for "Rebuilding Fiscal Institutions in Post-Conflict Countries" (both available electronically).

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.

Post-conflict PFM -- USAID Paper Summary of Lessons

Posted by Bill Dorotinsky

Public financial management (PFM) has moved onto center-stage in country macroeconomic management, development planning, and international development fora, as has a focus on fragile and post-conflict states. The intersection of these fields has itself become a very current topic, particularly with respect to what specific areas of PFM to address in the short-run and how to sequence reform and capacity-building interventions.

A November 2007, USAID-funded paper, Building Fiscal Infrastructure in Post-Conflict Societies, prepared by Dr. Mark Gallagher, DAI, is worth a read. The paper is a summary of seven country case studies (Afghanistan, Angola, Bosnia and Herzegovina, El Salvador, Guatemala, Kosovo, and Liberia) and some general lessons he draws from them.

Public Expenditure and Financial Accountability (PEFA) Part 1

A complete history (abridged)

Posted by Bill Dorotinsky

The term 'PEFA' is rapidly entering the international public financial management lexicon, but there is still some confusion over the term and its application. This post provides some of the background and origins of the approach.

In a December 10, 2007, blog post, we wrote about the HIPC expenditure tracking initiative, which illustrated that an indicator-based tool could track PFM system performance over time. The result of this work by the IMF and World Bank also clearly illustrated that many country PFM systems were weak, despite many years of technical assistance. The Boards of the two institutions asked staff the right question -- What is wrong with PFM reform and capacity-building? Why has there not been more progress?

This set in motion some work by the IMF, World Bank, and other development partners to try to identify barriers to PFM reform and the lessons of successful reform. The post cited above listed some of the lessons that emerged from the HIPC work. The work on identifying cases and lessons is an on-going process, and focuses on several dimensions: country incentives; development partner and international financial institution (IFI) behavior; and technical approaches to PFM system improvement.

Responding to the need to improve PFM systems as a critical element for economic growth and development, several institutions came together in 2001 to form the Public Expenditure and Financial Accountability (PEFA) initiative -- a multi-donor effort composed of the European Commission, the UK's Department for International Development, the Swiss State Secretariat for Economic Affairs, the French Ministry of Foreign Affairs, the Royal Norwegian Ministry of Foreign Affairs, the World Bank, the International Monetary Fund and the Strategic Partnership with Africa.

Fragile States, PFM and Whole-of-Government Approaches

..... there's a mouthful....

Posted by Bill Dorotinsky

On March 17-18, AusAID and the French Cooperation Agency, under the auspices of the OECD DAC, hosted a Conference on Whole-of-Government Approaches to Public Financial Management in Fragile States in Paris. The conference was a working session to explore the linkages between these three concepts. The IMF Fiscal Affairs Division attended, and spoke on PFM reform lessons for fragile states.

What is a Whole-of-Government Approach?

The whole-of-government approach concept is not well understood. Most attendees understood the concept to mean whole-of-recipient country’s government (a holistic approach to reform), when the concept as advanced is whole-of-bilateral donor government. 

The basic idea is simple -- a bilateral donor brings together expertise from across it's government to provide advisory support in fragile states, spanning issues of security, health, education, etc.  At an extreme, a bilateral donor might provide in-kind support (e.g. civil servants from their government) to prevent state failure. Bilateral donor civil servants from health, education, treasury, and perhaps even police and defense, are sent to work in the respective host country ministry. In this context, whole-of-government means literally assistance from all parts of the bilateral government, ‘embedded’ in the recipient country administrative apparatus, either in an actual operations role or an advisory or capacity-building role.

Minding the Gaps: Integrating Poverty Reduction Strategies and Budgets for Domestic Accountability

Posted by Vera Wilhelm, World Bank

Firmly linking a poverty reduction strategy (PRS) to the national budget is no small task.  Integrating planning and budgeting instruments entails technical, institutional and political challenges.  It should be of no surprise, then, that a recent review finds that although many low income countries have made progress in strengthening their PRSs, links to budgeting instruments remain often weak (see Country-Based Scaling Up: Assessment of Progress and Agenda for Action, World Bank, 2007). But while the challenges for linking planning and budgeting are large, the task is crucial: without firm links between the PRS and budget, development strategies may not be translated into actions and outcomes.

A recent publication provides some solace to policymakers and development practitioners.  Minding the Gaps: Integrating Poverty Reduction Strategies and Budgets for Domestic Accountability draws on in-depth research from nine low income and four higher income countries.  Its basic message: domestic constraints are not reasons to shelve reform efforts entirely; rather, weak capacity and contested ownership underscore the importance of gradual programs to strengthen PRS-budget links, tailor-made to country circumstances.

The full text of the report is available for download free-of-charge through the link above.

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.

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.

The Pile of Books on the “Resource Curse” Just Keep Growing !!!

So, why we should read “Escaping the Resource Curse”?

Posted by Teresa Dabán

Devising policies and institutions for the prevention of the “resource curse”—a term used to describe the surprisingly negative outcomes of resource-rich countries—has been the object of an extensive literature. One of the most recent contributions is Escaping the Resource Curse, a book edited by Macartan Humphreys, Jeffrey D. Sachs, and Joseph E. Stiglitz under the auspices of the Initiative for Policy Dialogue at the University of Columbia. The book reviews the main challenges posed by the management of resource revenues and proposes some interesting ways to address them.

To strengthen resource revenue management, for instance, the book proposes creating innovative budgetary  bodies and management arrangements that would operate in “parallel” to the existing ones. This post definitely recommends reading Escaping the Resource Curse, but argues that the benefits of creating such additional bodies and arrangements need to be carefully weighed against the risk of undermining and alienating existing budgetary institutions and discouraging reform efforts, especially in low-income countries, weakening governance and fragmenting already weak public finance systems.

Automating financial management systems -- it's not just the hardware

Posted by Bill Dorotinsky

As donors and governments spend enormous sums of money on automating financial management information systems in countries around the world, a great deal of attention is paid to the hardware and computer software. Debates over off-the-shelf or customized software, getting the right hardware, and setting up the right procurement arrangements, would fill volumes. But some recent cases illus rate the importance of paying attention to the 'soft' systems that surround the automated system -- the human systems that both serve and are served by the FMIS, the rules and controls embedded in and surrounding the systems.

On February 17, 2007, the Ugandan Daily Monitor broke a story ("Exposed: money racket in government") on an alleged scam being run from the Ministry of Finance and Ministry of Public Works, where fictitious suppliers where created in the computerized database, and payments were made to these suppliers for fictitious goods and services delivered. The article describes some of the means used to skirt what controls did exist, and but also illustrated that there were other controls missing.

A continent away, in Washington, D.C., a similar story unfolded in the District of Columbia tax office, where sham corporations were recorded in the automated information system, and tax refunds approved for these corporations. In some cases, the properties did not even exist, indicating absence of automated data-matching with property records or tax records to help control for such abuses. (See , for example, the November 14, 2007, Washington Post article, "D.C. Tax Scam Could Total $32 million".)

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.

Effective PFM Technical Assistance

The IMF, donors, and beneficiary countries: a unique tri-partite partnership for an efficient and effective provision of technical assistance

Posted by Teresa Daban

Experience has shown that technical assistance is most valuable and most effective when those who supply it and those who seek it work closely. Therefore, the Fund is increasingly seeking to build strong partnerships with beneficiary countries and donors for the provision of technical assistance. These partnerships are increasingly important in light of the large number of parties interested in PFM reform, numerous providers of technical assistance, and the high transactions costs that technical assistance imposes on recipient countries. But what are the benefits of working together? And what are the costs of poor coordination? What are the lessons from existing partnerships between donors, the Fund and recipient countries? This brief post summarizes the discussion on these questions included in the recently published IMF Survey On-Line Magazine article on Mozambique.

World Bank Launches New Financial Management Web Site

Posted by Bill Dorotinsky

The World Bank recently launched a new website on financial management, spanning both broader public financial management and World Bank/donor financial management issues. The site includes links to the World Bank's work in very topical areas, such as Governance and Anti-corruption and donor Financial Management Harmonization.

Included on the site is a PFM Reform Database, collecting reference material on many public financial management areas from numerous sources. The database includes case studies, guidance material, reference models, and various articles.

The site also has links to products entitled FM notes, which provide some detail on specific World Bank financial management work. For example, a note on the bank's financial management work in post-conflict Afghanistan, or a risk-based audit approach in Kenya.

Well worth visiting and book-marking in your web-browser.

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.

Anti-corruption: you know Bono and U2….What about U4?

Well, U4 is not a rock  band, but it nevertheless rocks.

It is actually an "Anti-Corruption Resource Centre [that] assists  donor practitioners to more effectively address corruption challenges through  their development support."