Public Financial  Management Reform:  Trends and Lessons Bill Dorotinsky World Bank ICGFM December 2008 Washington, D.C.
Outline <ul><li>Popular Reforms </li></ul><ul><li>Recent Reform Trends </li></ul><ul><li>Observations </li></ul>
Popular Reforms Recommended reforms generally try to change incentives by changing rules, roles and information   Extern...
And other popular themes…. <ul><li>Anti-corruption </li></ul><ul><ul><li>Anti-corruption commissions </li></ul></ul><ul><l...
“ OECD” Model? <ul><li>Changing role of MoF </li></ul><ul><ul><li>From control to monitoring/oversight and advisory role <...
And other practices….. <ul><li>Fragmenting MoF </li></ul><ul><ul><li>Separate debt agency </li></ul></ul><ul><ul><li>Separ...
Budget Formulation Recent Reform Emphasis Different drivers of reforms confuse the picture. Which are donor-driven? Which ...
Budget Execution Recent Reform Emphasis na 12% 14% Procurement na 12% 11% Internal audit/control 15% 9% 17% Payroll/Person...
Other Reforms Recent Reform Emphasis 23% 15% 26% Decentralization 15% 21% 3% PPPs 15% 30% 20% Transparency 23% 36% 26% Bud...
Observations <ul><li>LICs struggle to get basics in place </li></ul><ul><ul><li>Do advanced reforms detract from this obje...
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Mon 300 Dorotinsky

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Public Financial Management Reform:
Trends and Lessons

Bill Dorotinsky
World Bank

Published in: Economy & Finance, Business
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Mon 300 Dorotinsky

  1. 1. Public Financial Management Reform: Trends and Lessons Bill Dorotinsky World Bank ICGFM December 2008 Washington, D.C.
  2. 2. Outline <ul><li>Popular Reforms </li></ul><ul><li>Recent Reform Trends </li></ul><ul><li>Observations </li></ul>
  3. 3. Popular Reforms Recommended reforms generally try to change incentives by changing rules, roles and information   External audit ? ? ? Accrual Accounting  Internal control/audit  Procurement    Reporting/ Transparency    Budget classification, chart of account   Treasury Single Account  Fiscal Responsibility Laws   IFMIS, automation   Performance, Program budgeting    Medium-Term Expenditure Frameworks Operational Efficiency Strategic Allocation Macrofiscal Discipline
  4. 4. And other popular themes…. <ul><li>Anti-corruption </li></ul><ul><ul><li>Anti-corruption commissions </li></ul></ul><ul><li>Decentralization </li></ul><ul><li>Deconcentration </li></ul><ul><li>Demand-side </li></ul><ul><ul><li>Legislative oversight, involvement </li></ul></ul><ul><ul><li>Civil society oversight, participation </li></ul></ul><ul><li>Sovereign wealth funds </li></ul><ul><li>Public-Private Partnerships </li></ul><ul><li>Monitoring and Evaluation </li></ul><ul><li>Sectoral measures (e.g. road funds) </li></ul><ul><li>Long-term planning </li></ul><ul><li>Debt sustainability analysis </li></ul>
  5. 5. “ OECD” Model? <ul><li>Changing role of MoF </li></ul><ul><ul><li>From control to monitoring/oversight and advisory role </li></ul></ul><ul><ul><li>Risk management: analysis of emerging issues, problems, and health of decision-making and finance system </li></ul></ul><ul><ul><li>From excessive budget detail to policy analysis and development </li></ul></ul><ul><ul><li>Shifting authority and accountability towards line ministries </li></ul></ul><ul><ul><ul><li>Emphasizing MoF training and guidance </li></ul></ul></ul><ul><ul><ul><li>Performance over compliance </li></ul></ul></ul><ul><li>New Public Management </li></ul><ul><ul><li>Separating policy from implementation </li></ul></ul><ul><ul><li>Contractual relationships, agency model </li></ul></ul><ul><ul><ul><li>Empowering line ministries for efficiency </li></ul></ul></ul><ul><ul><li>Caution: advanced industrial economies, to solve efficiency problems, not macrofiscal stability or sectoral allocation issues; good control structures, high transparency </li></ul></ul>
  6. 6. And other practices….. <ul><li>Fragmenting MoF </li></ul><ul><ul><li>Separate debt agency </li></ul></ul><ul><ul><li>Separate procurement function </li></ul></ul><ul><ul><li>Separate treasury </li></ul></ul><ul><ul><li>Separate budget </li></ul></ul><ul><ul><li>Separate revenue authority </li></ul></ul><ul><ul><li>Separate planning and policy processes (persistent state rather than trend) </li></ul></ul><ul><li>All tend to weaken the MoF </li></ul><ul><ul><li>Effect on financial management unclear </li></ul></ul><ul><ul><li>Frequently done to improve pay or improve independence </li></ul></ul>
  7. 7. Budget Formulation Recent Reform Emphasis Different drivers of reforms confuse the picture. Which are donor-driven? Which country driven? Which address real need? Which are simply fashionable? If higher income enables more self-direction, interesting that performance budgeting of greater interest in upper-middle income countries. * 2006 gross national income (GNI) per capita. The groups are: low income (LIC) US$905 or less; lower middle income (LMIC) US$906–3,595; upper middle income (UMIC) US$3,596–11,115. 23% 21% 9% Capital-Investment Bdgts 38% 15% 23% Performance/Program Budgeting 46% 39% 37% MT Expenditure Framework 31% 45% 29% MT Fiscal Framework UMIC* (13) LMIC* (33) LIC* (35)
  8. 8. Budget Execution Recent Reform Emphasis na 12% 14% Procurement na 12% 11% Internal audit/control 15% 9% 17% Payroll/Personnel 23% 42% 40% Accounting/classification 8% 18% 11% Debt management 15% 18% 26% Commitment controls 31% 36% 51% Treasury/Cash management UMIC (13) LMIC (33) LIC (35)
  9. 9. Other Reforms Recent Reform Emphasis 23% 15% 26% Decentralization 15% 21% 3% PPPs 15% 30% 20% Transparency 23% 36% 26% Budget Law/Legal 8% 18% 3% MoF Reorganization 23% 36% 49% IFMIS UMIC (13) LMIC (33) LIC (35)
  10. 10. Observations <ul><li>LICs struggle to get basics in place </li></ul><ul><ul><li>Do advanced reforms detract from this objective? </li></ul></ul><ul><li>LMICs and UMICs frequently struggle to overcome legacy systems </li></ul><ul><li>Recently, slight movement away from larger reforms, towards pragmatic reforms linked to country problems </li></ul><ul><ul><li>IFMIS to FMIS </li></ul></ul><ul><ul><li>Unbundling MTEFs, better sequencing </li></ul></ul><ul><li>Challenges remain on </li></ul><ul><ul><li>Holistic views of PFM systems, focus on weakest links </li></ul></ul><ul><ul><li>Sequencing reforms </li></ul></ul><ul><ul><li>Limiting adverse impact of supply-push, transplanting of advanced reforms to weak environments </li></ul></ul><ul><ul><li>Realistic time horizons </li></ul></ul><ul><ul><li>Redefining ownership as helping the country solve practical financial management challenges simply, directly </li></ul></ul><ul><ul><li>Right-sizing reforms, measures </li></ul></ul>

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