Understanding trends in PFM system performance

PEFA Open Forum ICGFM Miami - May 2012 Clay Wescott

Positive results from Evaluation of World Bank Support to PFM

Sharp increase in lending: number of operations with PFM components increased by half around 2005 Increase partly attributable to use of actionable indicators like PEFA, which generate a list of potential prior actions and technical assistance needs Positive results from Bank support: 62% of countries improved their PFM rating (CPIA) from 1999-2006, compared to only 25% who didnt receive Bank support
2

Considerable challenges remain

In 2010, average PFM score for the World Banks client countries was less than 60% of the top rating. PFM ratings are usually equal or better than for civil service administration, but never by more than one grade; civil servants are needed to implement PFM Improved PFM takes a very long time to translate to improve public services; in the 20th century, it took the fastest 20 reformers 20 years to achieve basic transformation of bureaucratic quality.
3

Analysis of repeat PEFA assessments

Results from 32 countries found better progress on formal than functional PFM features The difference is greatest where progress can be achieved working with one or a few agencies, in comparison with PFM features where many agencies are involved. Among the functional features, more scores are increasing than decreasing, indicating that reforms are attaining results even in the more difficult areas.
4

Country PFM Systems overall performance changes

Change in score "A" scores maintained Increasing scores Maintained "B" or "C" scores Decreasing scores "D" scores maintained Incomparable scores (no scores and other reasons) Percentage of indicator dimension ratings 11% 20% 21% 8% 10% 12+18%

Classifying PFM elements

FORMAL FEATURES FUNCTIONAL FEATURES De jure Legislation, intention Upstream in budget cycle Planning, budgeting Actor concentration Central finance agencies only De facto Implementation, compliance, enforcement Downstream in budget cycle Cash management, accounting reporting and audit Actor deconcentration Many government entities involved

Performance change by feature

Actor concentration showed much higher performance improvements than actor deconcentration Upstream and downstream elements of the budget cycle performed at equal rate De jure elements performed moderately better than de facto features
7

Performance changes by feature

45% 40% 35% 30% 25% 20% 15% 10% 5% 0%

Based on 33 repeat assessments

% increase % decrease

Performance changes net

De jure / facto Up/Downstream Concentration

Form

28%

21%

33%

Function

16%

21%

11%

Conclusions: Much more progress on formal than on functional features Gap is expanding between actor concentration and deconcentration

Opportunities and Challenges of using PEFA Data

PEFA indicators are actionable, so can generate a list of potential prior actions and technical assistance needs But, high PEFA scores dont necessarily mean functional performance has improved, particularly in line ministries, agencies and subnational units
10

Improving PFM knowledge sharing between practitioners and researchers

Networks, communities of practice, publication in scholarly journals Help practitioners apply more robust theory, grounded in previous scholarship Provide scholars with research opportunities leading to actionable recommendations
11

Enhancing the role of local researchers

Local researchers have comparative advantage in understanding the subtle barriers to institutional change in their own countries; Local researchers had pivotal role in designing and promoting market-supportive reforms in Chile, China, Indonesia, South Korea, Taiwan Likewise, they could be critical in designing and advocating new PFM behaviors that will have traction. Need for outreach, mentoring, twinning to identify and build up local PFM researchers
12