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April 11, 2022

Sharpening PFM Tools for Expenditure Reprioritization in Sub-Saharan Africa

 

April 11

Posted by Richard Allen, Martin Johnson, Willie Du Preez, Robert Clifton[1]

 

Between March 28 and April 1, 2022, more than 40 participants from 11 Sub-Saharan Africa (SSA) countries[2] took part in a virtual seminar on Institutions, Tools and Practices for Expenditure Reprioritization for Recovery. The seminar was organized and hosted by the Macroeconomic and Financial Management Institute of Eastern and Southern Africa (MEFMI) and the IMF’s Regional Technical Assistance Center for Southern Africa (AFRITAC South).

The seminar combined presentations on key PFM prioritization tools and methodologies with case studies of gender budgeting in Zimbabwe and accessible spending review techniques in South Africa (known as ‘pocket problems’). It also presented tools such as the PIMA Climate Change Module designed to help countries adapt to and mitigate the impact of climate change, and to improve their management of capital infrastructure. During lively group work sessions, participants shared experiences of developing and using PFM prioritisation techniques, tools, and processes.

In their closing presentations, country representatives confirmed the importance SSA governments are attaching to reprioritizing expenditure for the post-COVID recovery. All the tools and approaches discussed during the workshop – baseline budgeting and spending reviews, gender- and climate-related budgeting, and improvements in public investment management – are key to promoting a strong and sustainable recovery. Although some countries have already made substantial progress in implementing climate and gender-related policies, based on international commitments and norms, much work is still needed to embed these policies and improved PIM into countries’ budgeting systems.

Looking ahead, the participants highlighted several opportunities and challenges to implementing the reforms discussed during the seminar.

  1. The budgeting systems of the 11 countries are at various stages of maturity and development. Reforms will need to be tailored to the countries’ varying capabilities and institutional contexts, and to the political appetite for moving forward. Gender- and climate-related policies are cross-cutting and require strong coordination across government ministries and agencies, as well as with local governments and state enterprises. Reforms should be sustained over several years if their full benefits are to be realized. But there are also many opportunities for quick wins that will help countries build the technical capacity for undertaking more comprehensive reforms. CSOs can be helpful in securing political support and leadership for reform and increasing the transparency of information disclosure.
  1. Baseline budgeting and spending review methodologies and approaches have been adopted in many advanced and some middle-income countries but remain challenging to apply in the SSA region. Simplified methodologies – such as the “pocket problems” approach that has been successfully applied in South Africa in addition to advanced methods – could provide a helpful stopgap solution for improving spending efficiencies in discrete areas that are less complex and easier to analyze. Seychelles, for example, has completed a “pocket problem” review of prisons and is planning additional reviews in 2022. Such reviews can yield quick results for improving spending efficiency or making budgetary savings while capacity for undertaking more comprehensive spending reviews is being built.
  1. Improvements in basic budgeting systems – for example, credible annual budgets and MTBFs, sound internal control, reliable financial reporting systems, as well as improved audit and other financial oversight institutions – are key to implementing spending reviews and the other approaches and tools discussed during the seminar, including gender and climate-responsive budgeting.
  1. Several participants noted that significant deficiencies in the quantity and quality of financial and performance data (e.g., on public investment, and the fiscal impact of climate change and gender equalization policies) remain to be addressed. In some of the participating countries, basic systems of classifying climate- and gender-related public spending need to be aligned with the countries’ chart of accounts and built into countries’ financial management information systems that are being upgraded or rebuilt.
  1. Some of the countries find themselves in the front-line of climate change impact and have been adapting their legislation and strategic planning documents (e.g., Mauritius). Other countries have yet to develop firm climate response commitments. In many cases, downstream tools have still to be developed to generate the data required for climate budgeting to be effective, monitored, reported well, and subject to external scrutiny. In some cases, countries may need to work together to mitigate the impact of climate change. For example, Angola, Botswana, and Namibia are collaborating to protect water resources in the Okavango Delta, whose future existence is threatened by global warming.
  1. Also critical is further investment in skills, capacity, and IT systems to improve the coverage of countries’ capital asset registers and the quality and reliability of these data. Improvements are important not only to provide data that are essential for good analysis of public investment projects (and to calculate realistic depreciation profiles) but also to build public sector balance sheets for fiscal analysis and take forward work on developing accrual-based reporting systems. Several SSA countries are making good progress in building good asset registers, but some ministries and agencies lag in providing reliable and timely data.
  1. Participants agreed that analysis of fiscal risks related to public infrastructure, climate change and gender equalization is important for well-informed expenditure analysis, and to help finance ministries prepare comprehensive fiscal risk statements. Such work is progressing well in several SSA countries.

Finally, participants welcomed the opportunity to continue a dialog with AFS and other development partners on these issues, and for their support to build methodological frameworks and skills, prepare new legislation (where required), or establish new budgetary institutions, business processes, and organizational structures.  

 

[1] Richard Allen, Martin Johnson, and Willie Du Preez are FAD short-term experts and helped facilitate the seminar which was organized by Robert Clifton who is a PFM Advisor at the IMF’s Technical Assistance Center for Southern Africa, AFRITAC South.

[2] Angola, Botswana, Comoros, Eswatini, Kenya, Lesotho, Madagascar, Malawi, Mauritius, Seychelles, and Uganda.

 

 

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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