PFM Knowledge Sharing, Part 2: History of PFM Reforms class=

PFM Knowledge Sharing, Part 2: History of PFM Reforms

This is part 2 of the 9 part series on PFM knowledge sharing.

Updated: June 2009

Financial Crisis Accelerating PFM Reforms

The conclusion from the 23rd Annual ICGFM Conference in Miami is that the current financial crisis has accelerated reform.  Many governments recognize the need to manage more effectively because of a loss of taxation revenue. Other governments need to manage stimulus funds in order to achieve economic results.

  •  ICGFM delegates believed that government financial experts have an important role in identifying financial issues (92%). The delegates believe that the G20 can do more to overcome the financial crisis (70%).
  • The majority of countries represented at the conference have formal PFM reform programs (68%). Increased transparency (30%), improved budget expenditure (26%) and improved accountability (24%) were cited as major factors encouraging reform.
  • The most important resources needed by countries for PFM reform include employee training (32%) and automated financial management systems (24%). When asked to determine the most important type of technical assistance required, the implementation of an Integrated Financial Management Information System received twice as many votes (33%) as the number two choice, from 10 choices.
  • PEFA assessments have been carried out in many of the countries represented at the conference. Most respondents (72%) believe that PEFA assessments can improve PFM reform.

The Current Cycle of PFM Reforms

The history of PFM Reforms was provided by David Nummy of Grant Thornton at the 2008 FreeBalance International Steering Committee meeting. Mr. Nummy traced the current cycle in international PFM reform to the early 1990s and the fall of Communism in Eastern Europe. The difference in country context means that there is no best practice for PFM, nor is there a standard definition of success.


(Notes taken during presentation)

Current PFM Reforms Initiation (Nummy)

  • Started in the early 1990s with collapse of communism
  • Over 20 countries needed to transition from command economy to market economy
  • Coincided with predominant view that macroeconomic stability is paramount
  • IMF needed to grasp national accounts to support monetary stability
  • World Bank determined lack of basic governance expertise is more urgent than traditional development focus
  • Focus on PFM and resources available to support reform efforts drew expertise from many countries
  • Focus on PFM moved outside of Eastern Europe and FSU in late 1990s
  • Over 15 Years, a pattern of phases of PFM reform has evolved in numerous countries
  • There are no correct answers in PFM
  • Concept of PFM reform is really 15 years old with the fall of communism and the need to help countries move to a market economy
  • World Bank moved out of primarily “sector” support into PFM.
  • There does not seem to be a standard definition of “success”