The Political Economy of Public Financial Management


Benoit Image

Posted by Benoit Taiclet[1]

A recent report published by the World Bank[2] takes stock of long lasting efforts to improve PFM systems. Since 2002, nearly 150 countries have undertaken at least one Public Expenditure and Financial Accountability (PEFA) assessment, and development partners have spent US$1.3 billion annually to support PFM reforms. However, there is a lack of studies which analyze the impact of this support on fiscal performance and budgeting, and why the impact has varied so widely across countries. The authors’ goal in this report is to close this gap, and explain what accounts for the variable rates of progress among different countries.

The report follows a twofold methodology. First, it maps out what PFM progress looks like across countries, regions, and income groups. Second, it drills down into specific experiences and issues of how PFM reforms have progressed, or struggled to take root. The first aspect, based on a quantitative analysis, covers mainly low- and middle-income countries. The second aspect seeks to understand in detail what PFM strengthening efforts were made in a small sample of countries (namely Georgia, Nepal, Nigeria, Philippines, and Tanzania).

An interesting and original feature of the report is its focus on the political economy of PFM reforms. The underlying idea is that reforms are seldom driven solely by a concern for their impact on development or equity but, more often, by concerns to give preferential treatment to certain individuals, elites, or groups within society. What is stated in the initial policy statements and action plans of the government is thus rarely what is delivered in the end.

Here are some key findings from the report:  


All in all, this report is a must read for government officials and those who advise them about reforming their PFM systems. When dealing with the challenge of strengthening PFM systems, decision-makers are often confronted with stark choices between several possible approaches such as “basics first versus smart reforms”, or “big bang versus incremental change”, or “a bottom-up versus top-down approach”. This report does not give a definite answer to these recurrent questions, nor provides a “one-size-fits-all” solution for all countries and all situations. Yet, it should help policy makers think through the options for designing and implementing reforms, while illuminating how political, institutional, and fiscal drivers intersect and interact.


[1] Benoit Taiclet is a Senior Economist in the Public Financial Management II Division of the IMF’s Fiscal Affairs Department.

[2] Verena Fritz, Marijn Verhoeven, and Ambra Avenia, 2017. Political Economy of Public Financial Management Reform: Experiences and Implications for Dialogue and Operational Engagement. (Washington DC: World Bank).

[3] Georgia offers an example of successful “unorthodox” approach that contradicts “best practice”. Instead of selecting a “customized off the shelf solution” IT package recommended by donors for treasury automatization, the government developed an in-house system which eventually proved viable and less costly.

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.