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Follow-up Actions by Donors and Countries

~ The case of PEFA ~

Session: “What Governments are Doing to Improve Governance”

ICGFM, Miami, May 20, 2008

Presented by:Jim BrumbyPREM Public Sector GovernanceThe World Bank

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Outline

Placement of PFM in Governance How countries can use PEFAs

Action plan creation MOF strengthening and other capacity building

How donors can use PEFAs Mainstreaming into Country Policy & Institutional Assessments

(CPIA) and Country Assistance Strategies (CAS) Mainstreaming into country lending and analytical products

• Program lending• TA lending• Dialogue

Future issues Repeat assessments

• Goodhart’s law Increased publication From diagnosis to action

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Public Management

Public financial management & procurement,

monitored by PEFA

Administrative & civil service reform

Governance in SectorsTransparency & participation

Competition in service provision

Sector-level corruption issues (Extractive Industries Transparency Initiative, forestry)

Civil Society, Media & Oversight Institutions

State oversight institutions (parliament, judiciary, audit)

Transparency & participation (FOI, asset declaration, user

participation & oversight)

Civil society & media

Local GovernanceCommunity-driven development

Local government transparency

Downward accountability

Private Sector

Competitive investment climate

Responsible private sector

PEFA is part of improving governance through various ‘Entry-Points’

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Country use of PEFAs

1. Necessary for the country to ‘own’ the results1. Quality of process; nature and intensity of government engagement2. Quality of information flows; openness to reform3. Skills of assessors

2. Drill down from PEFA results to understanding the root causes1. Look at comparators2. Look at time series3. Look at key factors such as institutions, systems, human resources

3. Consider country effort in different areas1. What are the signals being sent by MOF and other management

1. E.g. Ghana2. Are the areas of weakness of equal importance

1. E.g. Norway

4. Create action plan that fits circumstances1. Engage with donors when important2. Capacity constraints can be limiting

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Donors use of PEFAs (esp. Bank)

PFM is the ‘core of the core’ of Governance work at the Bank GAC is central element of current President’s strategy

PEFA is having a very significant influence on Bank’s work in PFM Core aspect of the ‘strengthened approach’ Provided discipline and focus to Bank’s interaction Used by the IEG in reviewing performance of lending for PFM

CASs (e.g. Azerbaijan, Brazil (subnational level) Mali, Zambia) CPIAs (e.g. Q13; rigorous cross-check)

Influences IDA lending limits Investment and program lending

Creates baseline; major input to review Part of a growing portfolio

• From 2.6% Bank loans (2000) to 10.2% (2000-06) Recommend to replicate it for other public management work

Economic and Sector Work and Analytical & Advisory Activities Ghana PER 2006; Albania as part of Country Fiduciary Assessment and Public

Expenditure & Institutional Review 2006 Other donors

Increasingly used as input to fiduciary considerations Informing dialogue; shared understanding

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Going forward

Repeat assessments PEFA generally recommends about every 3 years

• About 10 repeat assessments either completed or planned Some countries may prefer self-conducted annual reassessments, with

periodic attestations by external parties Will provide ‘test’ of framework

• Team composition and incentives– Some common membership may be desirable– Watch for desire to retrofit assessments with reforms

• New information– New information suggest old judgments were wrong

• Quality improvements– Whether to correct for error

• Stakeholder engagements– Ensure many sided and sighted view of system

Is Goodhart’s law relevant to PEFAs Dissemination

Part of value is form common pool Drive to increase publication; reduce unpublished stock, and keep it low

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Action plans

Movement from diagnosis to action is fundamental to PEFA’s success For development and fiduciary reasons But in 2006, recommendations for actions included

• All reports 45%• Integrated products 100%• PFM-PR’s 23% - “No PFM-PR presents a thorough and systematic

narrative exposing coherent recommendations.”

Country is in the driver’s seat Needs space and time to develop its own action plan Needs to focus on what is important

• Prioritized actions• Reflect on sequencing

May need assistance to implement and to monitor the plan • Potential role for PEFA updates

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Conclusion

From both donor and country perspectives, indicators are usefully informing governance reform strategies PEFA directly very influential at the Bank PEFA model very influential at the Bank PEFA model spreading to other areas:

• HR indicators being piloted, as part of Actionable Governance Indicators

Other speakers Thusitha Pilapitiya; case of Malawi John Sitton; case of Mali Miguel Russi; case of Colombia

On-the-ground responses to various mechanisms to improve transparency and accountability

• Role of tracking indicators

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DiscussionDiscussion

Thank you for your attention