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The State of Public Financial Management Reform


November 14, 2013

Doug Hadden, VP Products

There were some interesting observations about Public Financial Management (PFM) reform at the recent Centre for Aid and Public Expenditure Conference (CAPE) held in London at the Overseas Development Institute (ODI) and shared on line. 

PFM Reform Success

  • PFM reform success has improved but is no more successful than any other reform
  • There is a broad distribution in PFM reform success
  • There remains some debate about what works and what doesn't
Successful PFM Reform Characteristics
  • Legal reform is easy, implementation is difficult 
  • Developing countries need to avoid many so-called Public Financial Management (PFM) "best practices" and need to concentrate on basics first 
  • There is a need for measurements for successful functional change rather than successful form change (some debate over whether this is possible and whether this is exchanging one orthodoxy for another)
  • Many PFM reform plans are overly optimistic in terms of how much can be accomplished and how soon
  • Sequencing reform needs to be based on the country context (i.e. what is the problem to be solved), needs quick winsto gain political support and requires patience because reform took some time in developed countries 
  • There is a need to analyze informal and formal processes when examining ministries of finance and determining the sequence for PFM reform
  • Soft skills of change management, leadership and persuasion are critical to achieve PFM reform success
  • PFM reform projects need room to adapt in order to better address problems

External Factors: Donors and PFM Reform

  • Donors are often a source of the problem in lack of PFM reform by funding so many initiatives (meeting fatigue) and by a lack of aid transparency & coordination (there was some debate over whether donor hiring of the best and brightest from finance ministries was a good or back thing
  • Donors are reluctant to use country systems even though this is considered a good practice for reducing transaction costs and improving government capacity
  • There is a lack of technical assistance in the areas where budget capacity most lacking
  • Many of the themes from this and other conferences are similar yet donors have not adapted processes to meet the lesson learned
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Doug Hadden

Doug Hadden

Executive Vice President, Innovation at FreeBalance
Doug is responsible for identifying new global markets, new technologies and trends, and new and enhanced internal processes. Doug leads a cross-functional international team that is responsible for developing product prototypes and innovative go-to-market strategies.

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