PFMGlobal Landscape What can we cay about PFM systems and trends around the world? Sanjay Vani, World Bank Bill Dorotinsky, IMF March 21, 2008 Sequencing Seminar
Outline • Overview of Significant Developments in PFM area in the last few years • Trends and Status of PFM systems – HIPC data • 2000-2004 • 2005-6 update • Cross-country status • Developments in ECA region • PEFA Stock Take results • PEFA Impact Study • PFM Reform • What Triggers PFM Reforms • Initiatives and trends
Significant Developments in PFM in the last few years • Articulation of the Strengthened Approach • Tool for PFM performance measurement – PEFA • Paris Declaration (March 2005) – commitment by countries to strengthen country systems (indicator 2a) and commitment by donors to use country systems (indicator 5b) • GAC Strategy – importance of country systems and emphasis on use of country systems
Comparison of Outcomes of Assessment in 2001 & 2004 Budget execution and reporting relatively weaker than formulation in 2001, and showed most progress to 2004.Comprehensiveness, medium-term perspective, internal audit, timely in-year reporting, and ex poste audit, remain weakest areas.
Performance across the major PEM categories was uneven. Countries improved in some categories, only to fall back in others. 2004 Update: Findings • In terms of benchmarks met, • Largest improvements were seen in budget reporting • Budget formulation improved in nine countries and deteriorated in eight • Budget execution improved in six countries and deteriorated in eight • Overall, five countries (Cameroon, Ghana, Mali, Tanzania, Senegal) showed improvements in the PFM systems by meeting an additional three or more benchmarks than in 2001
HIPC-PEFA Update % of Benchmarks met by indicator (2001-2006) Budget comprehensiveness, donor funds on-budget, medium-term perspective, internal audit, relatively weaker areas.
Other Trends • Significant PFM reforms in the recent past in countries joining the European Union to meet the requirements of EU acquis communautaire • Regional initiatives in • WAEMU • Central America tax and customs • ECA PEM-PAL
Cross-country Look • Recent draft stock-take, examining PEFA scores across all countries in sample (57 countries) • Broad results • Better PFM systems (as measured by PEFA) correlate with • Higher income • Higher population size • Higher aid dependency
Regional Comparison Average PEFA scores, by region and dimension
Recent PEFA Impact Study • Alignment of PFM programme – 6 countries out of 12 • Govt/Donor understanding of PFM strengths/ weaknesses – 9/12 • Reduced transaction costs – 7/12 • Donor coordination – 8/12 • Govt – Donor coordination – 8/12
What triggers major PFM Reforms? • Internal crisis – e.g. the 1998 financial crisis • Outside pulls – the EU accession requirements for the Central and Eastern European countries • Donor Driven - the HIPC initiative or donor requirements • Forward looking new government, country demands for improvement
Reform Trends • Donors • Accrual accounting, MTEF, performance and program budgeting, PRSP and budgeting, gender budgeting, fiscal rules, decentralization, IFMIS • Sectoral reforms. Earmarked revenues, separate funds, parallel systems (Chad oil revenue). • OECD • Long-term forecasts/planning • Fewer big-bang, more refinements (accounting, performance information)
Conclusions • Scope for improvement in all regions across all areas of PFM • Challenge is to support countries in better managing all resources • Challenge of sequencing, goals • From HIPC, we see there is some improvement, though slow • Expectations need to be realistic • Reform efforts and instruments need to be geared towards longer term, on-going engagement
Issues to Ponder • Have certain donor-led PFM initiatives complicated the PFM reform landscape in countries? (e.g. MTEF or Accrual Accounting or Performance Budgeting) • How do you explain better PFM scores in countries with high aid dependency?