International Monetary Fund



Table 1 Inventory of Political Economy Influences on PFM Reforms:Conditioning Factors: political contextDescribe factorDescribe how the factor impacts PFM reform (positive or negative)Indicator/indicators to assess impactHow important is the factor for reform:(High/med/low)How relevant for this country? (High/med/low)Relevant Sources:Level of political support for PFM reform. Impacts legitimacy, leadership, empowerment, engagement and ownership of reform. Level of shared cross political party support of the reform.Reform part of dominant political agenda. (Plan/Budget Speech)Political engagement in reform:-Top political support (Speeches/Participation)-Determination of strategic vision (Executive Decision)-Support in public dialogue.-Political appointee in charge-Representation on reform steering committee.DIFD, 2001. Pp.50ff; Bergmann, p.13Stability in governmentImpacts continuity of strategic vision, leadership and ownership arrangements of reform.No. of years continuously in power;Frequency of party and cabinet changes (in particular Minister of Finance).Closeness to general elections;Prominence of the militaryAllen,2010,p.5; Andrews 2010,Dressel and Brumby, 2009Allen,2009Status of the political system: a) autocratic or democratic; b) majority party or coalition; c) federal or unitary Impacts extent to which political leadership can exert power to support/enforce reform; (also impacts power of MOF to lead reform)Impacts on effectiveness of accountability arrangementsEffectiveness of legislative and civil society oversight; Levels of accountability; Distribution of power between coalition members;Clear constitutional mandates for federal and state authorities.Clear rules for intergovernmental transfers.Degree to which these rules are followed. Dressel and Brumby,2009B. Conditioning Factors: economic contextDescribe factorDescribe how the factor impacts PFM reformIndicator/indicators to describe impactHow important is the factor for this type of reform:(High/med/low)How relevant for this country? (High/med/low)Relevant Sources:Growth rateAvailability of resources for PFM Reform;Level of political demand and confidence in reform as well as focus of PFM reform efforts.BasicsMore AdvancedAverage 5 year g/r of GDP;Average g/r over world average Andrews, 2010Level of Economic stability (1)Level of Economic stability (2) Stability positively Influences the pace of, and nature of, efforts to strengthen various components of PFM :Revenue MobilizationResource AllocationExpenditure and arrears controlTreasury ops. OR Severe instability or disruption is a shock to induce reformAv. GDP growth in recent 2 years compared to past 10 years.Av. Inflation rate in recent 2 years compared to av. in past 10 yearsDifference in growth rate of credit compared with nominal GDP in 2 recent years compared to av. over last 10 yearsReal rate of interest in recent 2 years compared to its average over last 10 yearsWhether in or out of an IMF program;MOF resort to cash controls;Extent of expenditure arrears.Andrews,2010Allen,2009Resource availability (1) Positive, orResource availability (2) Negative “Resource curse” Commitment to predictability, sustainability and effectiveness of expenditure management and control reforms.Scale of revenues from external sources and natural resources may lead to weak and fragmented PFM governance Over reliance on high donor disbursementsmay encourage dependencyTax as % of GDPAccess to capital market?Degree of donor support, especially budget support% of revenues derived from trade and nat. resources as % of total How transparent the accounting for natural resource receipts?How transparent/timely the flows between managing entity and government accounts?Donor inflows as % of govt. exp., average over 5 year period.Tomassi,2009Andrews, 2010, p.34Browne,2010 Allen2010, Andrews,2010C. Conditioning Factors: social and general governance context Describe factorDescribe how the factor impacts PFM reformIndicator/indicators to describe impactHow important is the factor for this type of reform:(High/med/low)How relevant for this country? (High/med/low)Source:General perception of governance statusLikelihood resources will be captured; reform progress will be slowWorld Bank, Index of corruption;Index of ease of doing business, others?DFID p.49Allen, 2010,p.4Quist,2009Social stabilityEase of implementing longer run reforms; degree of disruption likelyIncidence of civil unrest; degree of ethnic/religious homogeneityDressel and Brumby,2009Cultural stance towards reformWillingness and support for change, as indicated by:Power distance/ risk aversion.Trust Task versus Process orientationIndividual or Group dynamic Time orientationwill affect the climate for reform.Level and frequency of delegated decision making. (Levels and centralization of Procurement) Range and importance of procedural rule sets. (how detailed are financial regs.?)Tolerance of ambiguity. (level of discretion for budget decision –making?)Transparency of results focus. (interest in results-based budgeting?)Timeliness of decision-making (procurement lags? budget passed on time?). Degree of consensus in decision making (mechanisms to discuss reforms used?)Senior and Felming,2006Strong external accountability mechanisms Strength judged by:Civil society groups organized and active in their criticism;Legislative committees strong and functioning, with power to investigate abuse;External Audit active & free from the executivePower of mass media:- freedom of press- degree to which media free from governmentPRSP process exists;NGOs represented in reform planning?No. of times committees meet, no. of cautions issued;Speed of audit reports; degree of follow-up (PEFA indicators?)Index of press freedomNo. of non-government TV channelsDegree to which government vets internetHelger and Aga, 2007Andrews,2010Dressel and Brumby,2009Degree to which “informal” procedures prevail over formal proceduresInsofar as PFM reforms tend to address the formal system, and strengthen it, this will be undermined by strong informal systems that will resist this change.Proportion of government expenditure within regular budgetExtent of “quasi-fiscal operations”Evidence of systematic variances in expenditure during budget execution (See new PEFA PI 2)Evidence of special payment procedures being used, and how prevalent.Degree of under-collection in customs and excise admin.:prevalence of under-invoicing; smuggling; use of ASYCUDA systemTransparency of tax expenditures Degree of tax evasion? Evidence this is increasing or decreasing.How well tax evasion is prosecutedDegree to which revealed misconduct in PFM is prosecuted.Tomassi,2011.Reform recordSuccess breeds success: the reforms contemplated should be realistic in terms of past experience and their relationship to other on-going reforms.Record of PFM reforms: good/bad?No. of on-going reforms in same or related area?No. of which are compatible? Length of reform commitment by the present government?DFID 2001, p.42Tomassi, 2010Colonial heritageSome systems more centralized than others, give MOF more power in directing reform; Degree of pol. engagement and oversight has historical roots.Anglophone/francophone/soviet/otherAndrews 2010Degree of fiscal developmentThe strength of the “fiscal state”, or the degree to which taxes are collected from the popn., enhances governance and PFM% of taxes from non-mineral, non external sourcesAndrews,2010, p.37D. Conditioning Factors: technological and capacity context Describe factorDescribe how the factor impacts PFM reformIndicator/indicators to describe impactHow important is the factor for this type of reform:(High/med/low)How relevant for this country?(High/med/low)Source:Depth of local labor marketReflects how severe the supply constraint might be for HR required for reformAvailability of graduates as % of workforce:-Locally qualified-Internationally qualifiedAvailability of professionals/financial expertise-No of registered accountants locally qualified-No of registered accountants internationally qualifiedAllen, 2010Bergmann, p.13Degree of power of the public sector TUsReflects degree of flexibility in wages/hiring policies that impact the supply of HR required for reformPercentage of public employees unionizedNo. of strikes in the last 5 years.No of incidents of other industrial action or labor disputes Tomassi, 2011Country’s education/training capacityPotential for training/retraining to supplement HR skillsNo. universities offering courses in financial skillsNo of colleges/training centersoffering relevant courses:-outside government-internal to governmentDegree to which qualification is internationally accredited:-university degrees-professional certificationAllen,2010,p.5; Dressel and Brumby, 2009Public Administration Management and leadership capabilityEven if political leadership is strong, there is a need for a cadre of senior officials willing to champion, lead and manage reformsNo. of graduates in top civil service grades:-locally qualified-internationally qualifiedDegree of which bureaucrats are depoliticized: no of political appointees in top civil service gradesHedger and Aga, 2007Browne, 2010, p.10DFID 2001, pp. 50ffAllen 2010Human Resource Management SystemProvides complementary incentives to facilitate reform effortSize of Private/Public Sector income gap.Size of post holder skills gap.Training/retraining is a part of regular career development?Dressel and Brumby,2009Stability of bureaucratsGiven time required by reform, some stability in the reform internal leadership/management is requiredDo HR rules encourage rotation of top staff?Degree of turnover of top staff (average time on post)?Degree of concentration of reform in a few individuals?Dressel and Brumby,2009Degree of ICT skills/computer literacyMany reforms require IT skills, but scarcity is often a constraint on the success of reformNo. of relevant people with required IT skillsBergmann & Bietenhader, 2010. ................
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