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November 17, 2010

Public Expenditure Management and Public Policy Implementation in Developing Countries

Posted by Jean-François Almanza, Agence Française de Développement (AfD)

A book on the subject of public expenditure management (PEM) in the developing countries, available in French through the following link under the title La Gestion des Dépénses Publiques dans les Pays en Développement, was published by the Agence Française de Développement in September 2010. Its author, Daniel Tommasi, is well known to the international community of public financial management (PFM) experts.

This project was driven by three observations:

-          There is a lack of French-language publications on PEM in the developing countries;

-          The PEM approach often concentrates on fiscal legislation or the systems and processes without analyzing their contribution to public policy implementation;

-          The focus is on the “Finance Ministry” and its objectives, rather than on the technical ministries that use the systems in place for their public policy implementation.

This book on PEM asks how such methods can best support public policy implementation in the developing countries. It looks mainly at French-inspired PEM systems.

This pragmatic and highly practical publication has three purposes: to identify the main features of PEM systems and describe how they contribute to public policy implementation; to focus the analytical approach to be taken to these systems in order to best capture their strengths and weaknesses; and to single out the keys to the success of major PEM reforms.

This approach entails considering public expenditure in relation to a vast context covering: (i) all the domestic economic, social, and political systems; (ii) strengthening democracy and addressing the associated transparency requirements; (iii) domestic public policies; and (iv) the various public management tools designed for efficient public policy implementation.

The book is primarily concerned with the management of the State budget, but it also looks at extrabudgetary public administration operations and addresses a number of questions surrounding decentralization.

The first chapter describes where PEM fits in with the other public policy implementation instruments. It presents the specific purposes of PEM and its main stakeholders. It also considers the political aspect of PEM and the informal factors (interest groups and balances of power among different stakeholders), which can have a strong influence on the ability of PEM to fulfill its objectives.

The second chapter addresses the framework surrounding PEM. Its subsections explore: (i) the legislative and regulatory framework, the distribution of budget management responsibilities, and the main budget and financial documents; (ii) budget expenditure classification issues; and (iii) performance-related tools.

The third chapter reviews the different phases of the expenditure process: budget preparation, execution, accounting, financial reporting, and external review.

The fourth chapter presents some food for thought on budget decentralization issues. Budget decentralization is designed to encourage efficiency in public service delivery and better meet the people’s needs, but it requires that the authorities have adequate management capacities and adhere to accountability obligations.

The last chapter addresses the diagnostic tools used for PFM systems, including the Public Expenditure and Financial Accountability (PEFA) performance evaluation system. It presents some questions that are currently the focus of debate on defining reform priorities.

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

This is an excellent book, providing an introduction to the approach to public financial management adopted by most Francophone countries. One of the important lessons from the book is that there is more than one approach to public financial management.

The separation of responsibilities between the person who authorises an official order (the ordonnateur) and the person who is responsible for the associated payment (the comptable public) is central to the French approach to public financial management. However, such a clear distinction would not be relevant for most people brought up with the Anglophone approach to public financial management.

Similarly with audit. In the French approach there is administrative control (by the general financial inspectors and, in Francophone Africa, the General State Inspectorate); judicial control (by the Court of Accounts); and parliamentary control (with parliamentary control of the budget). In the Anglophone approach there are the different roles for the internal auditors and the staff of the Auditor General. These are fundamentally different approaches. The actors have different functions and responsibilities and so it does not make sense to try and identify the equivalent of, for example, the Auditor General within the French system.

Saying that the approaches or systems are different does not mean that one is superior to the other. Either approach may result in cost effective public financial management. However, for some reason, by some measures at least, Anglophone African countries appear to have better public financial management systems than Francophone African countries. For example with the recently published Open Budget Survey, most Francophone African countries only receive single digit scores for the openness of their budget procedures, whilst many Anglophone countries score in the 40s or 50s. Whilst in the case of France and the UK both countries score and impressive 87.

What is it about the history of Francophone countries that means that their budget systems are so closed compared to the relatively open systems of Anglophone countries?

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