Posted by Holger van Eden and Duncan Last
The World Bank recently published a diagnostic framework for assessing public investment management systems. The diagnostic can be seen as a “drill-down” exercise building on the PEFA (Public Expenditure and Financial Accountability) framework, which has become the main PFM diagnostic in the developing world. While PEFA gives a general overview of the strengths and weaknesses of the PFM system of countries, it often provides insufficient guidance for the design of concrete TA reform programs. Such limitations are evident, for example, in the procurement area which is covered in the PEFA by just one indicator. It is also true for many other parts of the PFM system such as MTEF, treasury management, and internal audit, where further work is required, post-PEFA, to identify specific shortcomings in the existing sub-system that need to be corrected. Of course, the PEFA was always intended as broad diagnostic. The question is should further in-depth diagnostics be developed on the basis of indicator systems or not. Indicators always give only a partial impression of processes and institutions, and can be quite cost intensive to monitor in a consistent way across countries. As one drills down into institutional architecture differences between countries are usually magnified. Descriptive analysis could perhaps provide a richer basis for reform planning and be more focused on the country in question. On the other hand indicator systems have obvious benefits for cross-country analysis, and identifying good practice approaches.
