Public Investment Management (PIM), Public Asset Management (PAM), and Debt Management (DM) are critical to sound government balance sheet management. The Public Expenditure and Financial Accountability (PEFA) framework assesses public financial management (PFM) performance on a scale from A (highest) to D. Across recent PEFA assessments, countries tend to show less progress on PIM and PAM reforms, while DM processes perform relatively better. PEFA data (chart below) show that average scores and performance distributions for DM are consistently higher than for PIM and PAM, which are more often concentrated in lower performance bands. PFM is both science—methods, standards, and systems—and art—political will and contextual judgment. While the “science” of debt management is relatively mature, the “art and science” of PIM and PAM, and the art of sustaining DM, remain frontiers for many governments.
What explains this performance gap, and should it concern governments? This analysis offers our reflections on progress in PIM, PAM, and DM, and how reforms across all three can be accelerated.
- Pressures from Debt with more immediate consequences make reforms inevitable. Faced with a series of debt crises in the 1980s and 90s, it is not surprising that countries focused on establishing processes that help account and manage debt better. It was one of the most pressing issues—both for fiscal management purposes and for reporting to international lenders. Over time, governments prioritized DM reforms, often supported by development partners. Further, good practices in DM, as included in PEFA framework, have technical parameters that can be improved faster, where reforms are backed up with political will and leadership support. Better recording debt as an accounting exercise with well-defined obligations, payment schedules, and interest rates, creation of specialized debt management offices and agencies, development of professional civil servants with skills in debt management, availability of IT systems like UNCTAD’s Debt Management and Financial Analysis System have contributed to this progress.
- PIM reforms are complex but are necessary. The ‘science’ of PIM requires rigorous processes, including cost-benefit analysis, demand forecasting, project appraisal and selection, and lifecycle risk management. Should we build the highway or expand the hospital? Which rural roads deserve paving first? What's the economic return on secondary education versus vocational training? These aren't accounting questions — they are analytical, political, and deeply contextual. Many countries perform poorly on PIM because their budget documents often include only the capital cost for the upcoming year and omit full life‑cycle cost projections, recurrent implications, and multi‑year breakdowns, resulting in low performance and weakening governments’ ability to assess long‑term affordability or value for money. Further, the ‘art’—aligning investments with political priorities, stakeholder expectations, and local context—often determines the extent to which these analytical processes support resource allocation decisions.
- Effective Public Asset Management unlocks significant value by enabling optimal utilization and monetization of public assets. Good Public Asset Management requires comprehensive asset registers and monitoring, which are lacking in many countries, thereby denying the ability to understand and tap potential through optimal use or monetization. Often non‑financial asset (fixed assets) monitoring reflects incomplete or fragmented asset registers that lack key details such as asset usage, age, condition, or comprehensive coverage of land and subsoil assets. The recent World Bank’s global report on use of accrual accounting forfiscal management provides a track to implement science of Public Asset Management well through migration to accrual basis accounting aligned to global standards like International Public Sector Accounting Standards (IPSAS).
Good balance sheet management is both an art and a science across debt management, public investment management (PIM), and public asset management (PAM). The science of debt management processes and debt accounting has advanced and is widely applied across countries. By contrast, the science underpinning PIM and PAM is less consistently used, reflected in lagging performance in many contexts. This calls for greater focus on PIM and PAM reforms. Yet science alone is not enough. The art—political will, sustained commitment, interagency coordination, and incentivizing reform champions within government—must work hand in hand with the science of PFM processes. By sharpening science and embracing the art, PFM reforms can help governments unlock the full potential of their balance sheets for sustainable development.
