Public finance management (PFM) reforms deliver results:
- When there is a strong political commitment to implement reforms;
- When reform design and implementation models are well tailored to the institutional and capacity context; and
- When government officials put in place strong coordination mechanisms to monitor and guide reforms.
These are the findings of the final phase of an in-depth evaluation of public finance management reforms, which points out that policies, good design and strong coordination mechanisms are key to public finance management reforms. Without these three conditions, PFM reforms often fail or fall short of expectations.
The evaluation also identified lessons for donors and governments engaging in PFM reforms. These lessons are based on the experience of a decade of PFM reforms in the three countries under study.
- Since political commitment is essential for success, donors should be more selective in the type of reforms they support – focusing on the most committed countries, or starting with small capacity building reforms;
- Donors should practice what they preach when it comes to alignment and harmonization. Despite improvements in donor coordination over this period, certain donor habits still undermine PFM reforms, for example, off-budget financial support, requiring separate accounts.
- Donor advice and other input should be of high quality, and not dominated by a preference for a single reform option, which might not be the best in a given context.
- Informed political and technical support is needed for reforms to succeed. Over the long term, support needs to be built across the political spectrum in order to ensure reforms continue even after government leadership changes.
- Governments need to take their coordination role seriously by ensuring quality staffing and visibility for coordination units.
- Monitoring and flexibility are important. Adjustments should be seen as a sign of continuous learning and not failure. Failure stems from the fact that problems that could have been addressed earlier are ignored.
This final phase of the joint evaluation was published in August 2012.