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October 15, 2010

Planning for Reform in the Caribbean

Posted by Mark Silins, PFM Advisor at CARTAC[1]

Over the last decade, much progress has been made in Caribbean countries with PFM reforms, particularly in terms of implementation of government financial information systems. However, the fiscal crisis in 2009 exposed some fundamental flaws in the PFM systems in the region. Some of these weaknesses were highlighted through diagnostic assessment tools, such as the PEFA, while others were flushed out by the critical nature of the recession. The situation has certainly crystallized the imperative that countries in the region better manage their financial resources through improved PFM systems.

Reform requires planning, resources, commitment, and monitoring. It is also crucial to success to ensure that reforms are properly sequenced. The key to ensuring all these elements occur is the development of a PFM Reform Action Plan. Effective planning requires analysis, discussion and brainstorming with all participants, agreement on a prioritized and feasible list of actions and interventions, and monitoring of the implementation process once agreement has been reached. While it may seem an onerous process, planning actually clarifies the way forward, breaking down processes into manageable units, thus making implementation of reforms easier to achieve. This post discusses how CARTAC, a regional technical assistance center based in Barbados and managed by the IMF, supports its member countries in developing such plans.

A PFM reform action plan is the result of a process that a country undertakes to ensure it clearly documents its PFM reform priorities, preferably based on objective diagnostic tools such as the PEFA, carefully sequences these and assigns a timeline for implementation and monitoring. While it is important that the plan be guided by diagnostic tools, it should also ensure that country specific issues are strongly reflected. The plan may change over time, reflecting the dynamic nature of the planning, implementation and review process.

A low rating in an area of PEFA is a good indicator of the need for improvement; however, the plan should also consider local issues such as capacity, corresponding reforms and sequencing of the reforms. The plan should be part of an overall process of managing the reform agenda, and developing the plan occurs at the beginning of the reform cycle. Implementing the plan with the support of development partners requires both review of the plan and monitoring of the results of the specific interventions.   

A good country example is Saint Vincent and the Grenadines (STVG). It has been implementing a PFM Reform Action Plan since early 2009. The authorities developed the Plan based on a PEFA diagnostic process. The European Commission subsequently provided funding for the activities identified in the plan. STVG has a PFM Reform Steering Committee which includes the CARTAC PFM Advisor and convenes approximately quarterly to review progress made during the last quarter and to plan for interventions and actions during the next quarter and beyond.  These meetings are guided by the planned activities and interventions defined for the next 12 months.  

Since May 2009, STVG has improved its budget preparation process, reformed the operations of the Accountant General’s Department, established a more independent internal audit unit, reviewed its IT processes and state-owned enterprises, updated legislation, and convened a number of development activities for officials, including permanent secretaries.

To date, seven Caribbean countries have developed PFM Reform Action Plans, most with the support of CARTAC. The process document CARTAC uses to develop PFM Reform Action Plans is attached.

Download Developing a PFM Action Plan

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[1] CARTAC is a regional resource, based in Barbados, which provides technical assistance and training in core areas of economic and financial management at the request of its participating countries.  CARTAC operates as a UNDP project with the International Monetary Fund serving as the executing agency.  The priorities of CARTAC are set by a Steering Committee consisting of six representatives from the participating countries, four from the bilateral and multilateral agencies, and one each from CARICOM and the Caribbean Development Bank.

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.

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Comments

Mark

I was fortnate to participate in the development action PFM Plan under the auspices of CARTAC.I found it to be a very practical approach to help resolve the myriad of issues that plague PFM in the region.

My only concern is, given all the acions required in the plan and the possiblity of most of them being of a high priority, whether we would soon lose momentum.

I am pleased that St Vincent and the Grenadines seem to be making some strides,seem focus and do hope that other countries will follow suit.

While I do believe that we do require donor assistance and guidance, we must ensure that the process is "Home Grown" and is not abandoned once the donor resources are not as forthcoming.

We need to identify that the PFM requirements are a key output of various Departments, such as Audit, Accountant General and Budget and therefore must ensure that they are done.

It is very critical to not only establish a PFM Steering Committee, but also to identify:

1. Localised PFM Experts within the various MDAs, such as Budget, Audit, Accountant Generals Dept to lend support to the process.(Experienced and Qualified individuals who are able to help diagnose the issues and help resolve them)

2. Develop a Cadre of PFM Experts who can serve in country and within the region lending support to each other

The issues identified by the PEFA framework have been with us,are now in one document or study and therefore requires a coordinated and well sequenced approach to resolving them, such as pesented by the PFM Action Plans.

I have every reason to believe that with good planning we will overcome the shortcomings

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