Publication: Capacity Constraints and Public Financial Management in Small Pacific Island Countries
Date
2012-12
ISSN
Published
2012-12
Author(s)
Haque, Tobias A.
Knight, David S.
Jayasuriya, Dinuk S.
Abstract
Drawing on Public Expenditure and
Financial Accountability assessment scores from 118
countries, this paper provides the first comparative
analysis of public financial management performance in small
Pacific Island Countries (PICs). It applies a Tobit
regression model across the full cross-country sample of
Public Expenditure and Financial Accountability scores and
country variables to identify potential causes for the
observed underperformance of Pacific Island countries
relative to other countries of similar income. First, the
analysis finds small population size to be negatively
correlated with Public Expenditure and Financial
Accountability scores, with the "population
penalty" faced by small Pacific Island countries
sufficient to explain observed underperformance. Second,
through application of a new capacity index of Public
Expenditure and Financial Accountability dimensions, it
finds strong evidence in support of the hypothesis that
small population size impacts scores through the imposition
of capacity constraints: with a limited pool of human
capital, small countries face severe and permanent
challenges in accessing an adequate range and depth of
technical skills to fulfill all functions assessed through
the Public Expenditure and Financial Accountability
framework. These findings suggest that approaches to
strengthening public financial management in small Pacific
Island countries should involve: i) careful prioritization
of public financial management capacity toward areas that
represent binding constraints to development; ii) adoption
of public financial management systems that can function
within inherent and binding capacity constraints, rather
than wholesale adoption of "best practice"
imported systems; and iii) consideration of options for
accessing external capacity to support public financial
management systems on a long-term basis, from regional
agencies, the private sector, or donors.
Citation
“Haque, Tobias A.; Knight, David S.; Jayasuriya, Dinuk S.. 2012. Capacity Constraints and Public Financial Management in Small Pacific Island Countries. Policy Research Working Paper; No. 6297. © World Bank, Washington, DC. http://openknowledge.worldbank.org/entities/publication/d47ef108-6bf3-5a41-8252-c35a11a58c88 License: CC BY 3.0 IGO.”
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