60817 POVERTY THE WORLD BANK REDUCTION AND ECONOMIC MANAGEMENT NETWORK (PREM) Economic Premise APRIL 2011 · Number 54 Strengthening Public Financial Management in Postconflict Countries Verena Fritz, Edward Hedger, and Ana Paula Fialho Lopes Understanding how to rebuild resilient states in postconflict countries is an urgent priority for the international community. A new cross-country study of public financial management reforms in postconflict situations shows that substantial progress is possible even in difficult circumstances, while showing a pattern of sequencing and progress that differs from standard assumptions. However, the impact on state building remains less than what might be hoped. That impact could be strengthened by persistently targeting sustainable capacity, challenging areas such as procurement, greater public awareness, and more rapid coverage of line ministries and subnational levels. In fragile and postconflict states, strengthening core fiscal sys- substantially. The contrasts between the Democratic Repub- tems has been a long-standing priority of the World Bank and lic of Congo and Sierra Leone and between Kosovo and other international agencies. The substantial scale of these ef- Tajikistan are especially notable. forts, their intended contribution to state building, and the very high aid flows with which they interact all make it im- Table 1. Starting Points and Relative Progress on PFM Rebuilding portant to understand better what has worked well, where, and Reforms and why. Over recent months, a team jointly led by the World Bank's fragile states and public sector governance units Approximate starting point(s) has examined public financial management (PFM) reform of current state and Relative progress Economy peace building by 2010 approaches and results in eight postconflict situations. This note presents findings from these case studies.1 Afghanistan 2001­02 Substantial The study focused on approaches to PFM reforms and Cambodia 1991­93 Intermediate Congo, Dem. Rep. 2001 Limited the results achieved to date in the contexts of institutional Kosovo 1999 Substantial legacies, levels of aid dependency, the nature of the postcon- Liberia 2003 Intermediate flict settlement, and wider public administration reform Sierra Leone 2002 Substantial processes. Situations covered were those of Afghanistan, Tajikistan 1997 Limited Cambodia, the Democratic Republic of Congo, Kosovo, West Bank and Gazaa 1993­2002 Intermediate Liberia, Sierra Leone, Tajikistan, and West Bank and Gaza.2 Table 1 shows the considerable cross-country variation in the Source: Assessment of progress based on most recent PEFA scores, plus authors' assessments based on case study information. time periods of state building since the end of the respective a. Oslo agreements 1993, start of reforms to Palestinian National Authority conflicts. Relative progress with PFM reforms also varies and associated PFM reforms in 2002. 1 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK www.worldbank.org/economicpremise Findings confirm that strengthening PFM in fragile states ministration until 2003 and gradual political transition until is possible and can progress quite quickly. Achievements in 2008 may have been influential factors not found in the oth- Afghanistan, Kosovo, and Sierra Leone have been relatively er study cases. rapid and substantial. These cases show that reform progress Although external support has been helpful for strength- can be made under difficult circumstances--including high ening PFM systems, donor assistance creates its own chal- levels of continuing insecurity (Afghanistan), absence of any lenges. The technical assistance, policy dialogue and system prehistory of independent statehood (Kosovo), and acute investments that donors make in these environments can levels of underdevelopment (Sierra Leone).3 A more cau- promote significant change (see below). As in other coun- tionary finding is that a functioning PFM system is just one tries, however, high levels of aid involve negative side effects of many ingredients required for successful postconflict state on state capacity in fragile states. These effects include the building. loss of competent staff from government to the offices of donor agencies and international nongovernmental organi- The Influence of Legacies, Leaders, and Aid zations and the fragmentation of external support for capac- ity building. Significant external influence through capacity PFM reforms have progressed fastest in countries with high substitution and other means has also raised issues for the levels of external support, whereas domestic revenue per- sustainability of those approaches to reform. formance did not play a clear role. As shown in table 2, the Institutional and capacity legacies matter for PFM reform, level of aid dependency has been relatively high in six of the but neither legacy dimension prevents substantial change. eight countries. Standard assumptions about state building Broad institutional legacies can remain relevant. The Dem- suggest that stronger expenditure management systems ocratic Republic of Congo has maintained a francophone emerge where domestic revenue collection is the primary public expenditure system with multiple ex ante controls; source of public funds (Moore 2004). This connection does similarly, in Liberia and in Sierra Leone, the respective influ- not seem to hold in the postconflict cases considered: some ences of U.S. and U.K. public administration systems remain of the fastest reforms took place in Afghanistan and in Sierra visible. In some postconflict states, specific institutional lega- Leone, even though levels of domestic revenue have been cies are very limited. In Kosovo, neither external nor internal the lowest in the group. Conversely, higher revenue per- stakeholders drew on ex-Yugoslav legacies; in West Bank and formance in Tajikistan did not seem to spur PFM reform.4 Gaza, influences on the public administration come from a The only case in the group that has achieved substantial mix of neighboring countries and international practice. The progress on both revenue performance and PFM improve- system in Cambodia is a hybrid of francophone, Soviet, and ment is Kosovo. In that case, the direct United Nations ad- anglophone influences. All the cases in the study have need- Table 2. Levels of Aid and Domestic Revenue Performance Congo, West Bank Afghanistan Cambodia Dem. Rep. Kosovoa Liberia Sierra Leone Tajikistan and Gazaa ODA/GNI percent (Ø 2002­08)b 38.3 9.3 33.3 10.9c 74.7 31.6 9.9 31.3 d ODA per capita in current US$ 103 41 37 95 112 76 34 423 (Ø 2002­08) Domestic revenue as percent of GDP, 6.9 12.0 18.5 24.5 24.4 11.5 20.5 25.7 excluding grants (2008)e Percent of aid, using country PFM 48 14 0 3 32 20 n.a. n.a. systems according to 2008 Paris Declaration Monitoring Survey Source: World Bank; International Monetary Fund; Organisation for Economic Co-operation and Development Survey on Monitoring the Paris Declaration (2008). Note: GNI = gross national income; n.a. = not applicable; ODA = official development assistance. All data for fragile states is subject to increased levels of uncertainty and should be seen as only approximate. a. Data are particularly uncertain for Kosovo and West Bank and Gaza. b. Averages give an impression of the overall level of aid dependency; year-to-year, most fragile states experience considerable volatility in commitments and disbursements. c. Aid to GDP levels for 2001­06,excluding costs for international administration. d. Average for 2005 and 2006 only. e. Domestic revenue includes taxes on international trade and revenue from resource sectors. 2 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK www.worldbank.org/economicpremise ed to deal with legacies of limited and eroded human capac- an administrative budget classification or adopting a new ity and physical infrastructure as the result of conflict and chart of accounts--took considerable time. That said, the ex- neglect. As discussed below, it has been possible to "short- perience in Cambodia shows that a limited reform consen- circuit" such legacies of conflict by supplementing capacity. sus can be built and that progress may accumulate over a However, the underlying weaknesses often persist for at least longer time horizon to produce improvements in PFM. one or two decades while local capacity remains limited. A central contextual factor is the nature of "higher-level" A Different Take on Sequencing and political commitments and how supportive of PFM reforms the Most Challenging Parts of PFM Reforms these commitments are. The nature and strength of political commitment to goals such as statehood, security, and rev- Cross-country comparison shows that the actual sequencing enue flows matter greatly for PFM reform prospects. In of reform has varied; and an exclusive focus on whether PFM Kosovo and in West Bank and Gaza, progress with PFM re- reform measures are "basic" or "advanced" is not helpful (see form has been considered expedient in striving for inde- Schick [1998] and Tommasi [2009]). The evidence suggests pendence and international recognition. In Afghanistan, there was greater focus on budget execution aspects of PFM Liberia, and Sierra Leone, improvements in PFM have helped and that these dimensions have been strengthened more suc- sustain the commitment of international actors to provide cessfully than budget formulation processes or accountability substantial development assistance and security support. mechanisms. This finding stands in contrast to experience in However, the cases also show that levels of political interest many nonfragile low-income countries that have seen a in PFM reform fluctuate. They may be influenced by elec- stronger reform emphasis on "upstream" budget planning as- toral cycles (Democratic Republic of Congo, Sierra Leone) pects and that tend to score more highly on formulation than or by broader changes in the relationship with the interna- on execution in standard PFM assessments (see Andrews tional community (Kosovo, 2008 independence; Liberia, 2010). Moreover, what emerges clearly from the postconflict 2005/06 change in the presidency). economies is variety in the sequencing of PFM reform meas- One mechanism that can translate political commitment ures. into concrete action on PFM reform is the choice of finance Reform of the legal framework for PFM did not form an minister. In five of the eight situations studied (Afghanistan, essential starting point for PFM rebuilding. However, it has Democratic Republic of Congo, Liberia, Sierra Leone, and played a role in beginning to secure and consolidate PFM re- West Bank and Gaza), presidents have appointed former forms in countries such as Liberia. Across the cases, legal re- staff from international financial institutions to head min- forms--specifically, the adoption of new organic budget leg- istries of finance. Such internationally recognized officials are islation--have most frequently occurred three to four years purposefully appointed as the key interlocutor for donors. In after the starting point and, at a minimum, took two years to Afghanistan, Liberia, Sierra Leone, and West Bank and Gaza, introduce.6 Existing laws and interim decrees often sufficed these ministers have been notably important initiators of as a temporary basis for PFM rebuilding. This stands in con- PFM rebuilding and reform. However, the tenure of individ- trast to earlier findings by Gupta et al. (2007) that legal re- ual finance ministers has varied, and the key reformers were form should be the starting point of PFM reform efforts. typically in post no longer than two to four years.5 The Not all "basic" reform measures are easy, and some "ad- strong thrust of reform effort and progress in those periods vanced" reforms can happen quickly. There was no general is apparent from the case studies, and it suggests they offer pattern of progress from basic to advanced PFM reforms. All valuable "windows of opportunity" for external engagement eight cases started with basic measures such as revising the on PFM strengthening. chart of accounts, improving the recording of cash balances In some contexts, political commitment has been less and debt obligations, and ensuring the timely reconciliation concerted and has offered less space for development part- of accounts. However, those with more extensive donor in- ners to become deeply involved. In the Democratic Republic volvement also progressed rapidly to more advanced meas- of Congo and Tajikistan, high-level support for PFM reforms ures--even in the presence of severe capacity limitations.7 was subjugated to other political priorities. This factor lim- The computerization of budget execution processes was pri- ited the space for donor engagement, and Tajikistan received oritized in most of the cases, followed by efforts to introduce the lowest levels of PFM-directed aid among the eight cases. more comprehensive financial management information sys- In Cambodia, the degree of commitment to strengthening tems. The three countries showing most substantial overall PFM has evolved gradually, balanced by other considerations PFM progress--Afghanistan, Kosovo, and Sierra Leone--are about the allocation and management of public resources. also those where automation of PFM systems moved most The evolution of PFM systems was less rapid in these cases, quickly. The introduction of a treasury single account by and even relatively simple reform steps--such as introducing closing separate accounts held by line ministries and agencies 3 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK www.worldbank.org/economicpremise outside the treasury system was a priority, despite the chal- (SAI) and the appointment of a proactive reformer as audi- lenges of extending central control and engaging with actors tor general (following the 2005 elections) have significantly beyond the ministry of finance. These improvements in strengthened the external audit function. In the Democratic budget execution have enabled more regular and more ac- Republic of Congo, international nongovernmental organi- curate in-year and end-of-year fiscal reporting--an impor- zations have helped develop greater civil society participa- tant requirement for donor agencies. tion in budget reviews and overall PFM reforms. In Sierra At the same time, the case studies suggest that some re- Leone, increased external technical support and changes to forms commonly classified as "basic" actually can be very legislation and procedures have enabled the SAI to clear a challenging, with progress frequently remaining incomplete. large backlog of annual audits and publish the audit reports, Weaknesses in procurement and audit are often at the heart and have enabled more substantive audits of the education of why it is so difficult to overcome donors' fiduciary con- sector and public works. In Kosovo, the auditing function has cerns. Strengthening public procurement is a basic reform in been developed under external guidance, and the country the sense that it is primarily focused on compliance rather achieved the best Public Expenditure and Financial Ac- than performance. However, because of significant rent seek- countability (PEFA) rating for that category across all the ing around public investments in most countries, procure- cases. The head of the SAI continues to be an international ment reform typically remains an unfinished challenge-- position, even after independence. with formal legal and institutional changes made, but only Coordination of PFM reforms often emerges rather late, limited real traction (Afghanistan, Kosovo, Liberia, and Sier- and it sometimes has been overly comprehensive rather than ra Leone). Similarly, reforms of internal control and audit focused on key problems. Across the cases, proper coordina- that would enforce effective compliance have proved diffi- tion of donor and of government efforts in support of PFM cult to entrench. reforms has typically emerged 4 to 10 years after the post- Advanced reforms for budget planning appeared to gain conflict starting point. Problems resulting from weak coordi- less traction than measures aimed at strengthening budget nation have been felt both in faster and in slower reforming execution. Basic budget planning has improved in most of countries (for example Afghanistan and Tajikistan). Lack of the economies analyzed, notably in terms of forecasting ca- coordination has resulted in costly duplication,10 weaker trac- pacity and improved budget credibility in more than half of tion on reform initiatives, and inefficient and ineffective ca- the cases. However, more advanced reforms of budget plan- pacity development efforts. At the same time, how coordina- ning processes--such as medium-term expenditure frame- tion happens also matters. The case studies suggest that an works and program budgeting--achieved limited results. Ini- important impetus for eventual coordination efforts is often tial attempts at developing multiyear frameworks were a broad-based public expenditure review (PER) or a sys- made in all eight economies (with the partial exception of temwide PFM diagnostic--whether a Country Financial Ac- West Bank and Gaza). Yet Afghanistan is the only case countability Assessment (CFAA) or, more recently, a PEFA where this effort gained significant traction. Attempts to in- performance report (Afghanistan, Democratic Republic of troduce program budgeting in some form were made in four Congo, Liberia, Sierra Leone, and Tajikistan). Such PFM as- cases, and the most far-reaching implementation effort was sessments provided a common evidence base. However, these in Afghanistan about six years into the PFM reform process. assessments are overviews and (except potentially for PERs) However, that initiative was rolled back after serious diffi- are not problem focused. Without good processes following culties emerged with the definition of programs and per- the diagnostic, resulting joint action plans may become overly formance indicators and with the redesign of control and ac- broad (Tajikistan). However, they may also serve as an impor- countability mechanisms. tant basis from which to start dialogue on reform priorities Budget accountability and oversight have remained an (for example, the 2003 combined CFAA and PER in Cam- unmet challenge in most of the case studies, but focused ef- bodia). forts can get traction.8 Developing fiscal accountability is challenging in many countries. However, in postconflict The Reach of PFM Reforms and the states, this dimension is particularly important--to address Impact on Service Delivery the persistent fiduciary challenges and to contribute to the legitimacy and consequently the resilience of the state. Donor PFM support was concentrated on ministries of fi- Overall, PFM reform approaches have not prioritized ac- nance rather than service delivery agencies across the eight countability mechanisms, and progress in this area is limit- cases. Ministries of finance are the primary locus of external ed.9 However, where greater efforts have been made across aid and financing flows and the guardian of fiduciary man- the case studies, significant progress can be noted. In Liberia, agement and financial control--predominant concerns of the legal independence of the Supreme Audit Institution donors. Most external technical assistance was focused on 4 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK www.worldbank.org/economicpremise this ministry, especially in early stages, and the nature of re- same time, it appears important to combine such efforts forms often involved a centralization of PFM functions. The with attention to strengthening accountability at subnational case studies suggest that PFM reforms paid less early atten- levels focused on specific delivery service areas because cit- tion to sector ministries and subnational governments. Given izens are often disappointed by local governments and per- data constraints as well as attribution problems, effects on ceive strong local-level corruption (as has been documented service delivery are uncertain. However, some suggestions on in public opinion surveys in Sierra Leone, where substantial how to extend the reach of PFM reforms emerge from the decentralization has been implemented). case studies. Over time, PFM support has included selective engage- Capacity "Fixes" and the Challenge of ment with line ministries that receive significant donor funds. Sustainability In Afghanistan, the Ministry of Education has received some attention and has reorganized and strengthened its PFM ca- Capacity substitution and supplementation approaches sup- pacity. However, many donor activities in sectors still remain ported by donors were pivotal to the implementation of outside regular PFM systems. As table 2 indicates (especially PFM reforms. In nearly all the cases, human capacity for in Afghanistan, Liberia, and Sierra Leone), total aid has ex- PFM was extremely limited at the time of reengagement. Ei- ceeded domestic revenue levels by 20 percent of GDP or ther there had never been a strong cadre of qualified civil more, whereas only one fifth to one half of aid was spent using servants or the most qualified people fled the country or domestic PFM systems in those countries. In Liberia, the Min- were killed during the conflict. For example, many senior istry of Health and Social Welfare received substantial exter- professionals from Liberia and Sierra Leone resettled in the nal support to strengthen its PFM capacity, but primarily to United Kingdom and the United States during the protract- co-manage a health sector pooled fund provided by donors. ed conflicts in their countries. Faced with the dual challenges Intergovernmental relations have remained in flux well of a scarcity of skilled people and a very weak public sector into the postconflict period, and flexibility is required in de- administration, donor-funded capacity substitution and sup- veloping PFM systems. Whether countries seek to decentral- plementation programs were implemented to a degree that ize substantially (Democratic Republic of Congo, Sierra is substantially different from nonfragile low-income or low- Leone) or whether the political decision is more in favor of a middle-income countries. centralized state (Afghanistan), intergovernmental relations Various forms of capacity supplementation have been have remained fluid for some time after a peace agreement. used to short-circuit PFM reforms in weak-capacity environ- This is a result of political contestation in the postconflict pe- ments and to address fiduciary concerns. In four of the cases, riod, lack of clarity about the institutional rules to be devel- donors funded noncivil service staff to take line positions and oped, and severe capacity and accountability constraints at to perform more traditional technical assistance roles. The local levels.11 Consequently, efforts at rebuilding PFM sys- use of local technical assistants and other noncivil service tems may need to accommodate evolving arrangements be- staff became especially widespread in Sierra Leone, with local tween the center and subnational levels. Regional rollouts of technical assistants becoming a majority of the professional financial management information systems (Afghanistan, staff in the Ministry of Finance. In Cambodia, a Merit-Based Kosovo) or of procurement responsibilities (Sierra Leone) are Pay Initiative and, in Kosovo, a Brain Fund were established positive signs, but also reflect the need for (more) substantial as top-up schemes to retain and motivate professional and investments in local capacities and local-level accountability. senior staff. Capacity substitution has been used not only to Some positive examples indicate what could be done to fill a skills gap, but also as a fiduciary measure, especially in improve the reach and functional purpose of PFM reforms. Afghanistan, Kosovo, and Liberia. In Liberia, the 2005­10 The Afghanistan Reconstruction Trust Fund introduced a Governance and Economic Management Assistance Pro- Performance Assessment Matrix to track results from its gram (GEMAP) involved placing international consultants funding, including monitoring budget execution and how as formal cosignatories at key points in the chain of revenue the budget is aligned with service delivery priorities. In Sierra and expenditure management. Despite the stated emphasis Leone, there have been dedicated efforts to strengthen on capacity building, the primary objective was to strength- budgeting, procurement, and accounting capacities at local en (external) fiduciary control. The downsides of these var- level and to establish central monitoring capacity of service ious capacity substitution and top-up schemes have been the delivery results in the Ministry of Finance. Development of perceptions of inequity they create within ministries and the financing formulas for central subventions of local education difficulty in making the transition from reliance on external and health spending in Kosovo and Tajikistan has started to support. reorient the composition of expenditure and to improve the Transition strategies have proved difficult because of the targeting--although these still remain initial steps. At the limited focus on capacity development across the civil serv- 5 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK www.worldbank.org/economicpremise ice and on pay reform. For example, the presence of local ternational community is in place, there can be a particularly technical assistants working in line positions in Sierra Leone wide window of opportunity. In other cases, sustained efforts and of international staff under the GEMAP in Liberia have at building understanding of and consensus on PFM reforms not been effective at transferring skills to regular civil ser- can help accumulate progress gradually over time. vants. At the same time, cases with less capacity substitution The impact of PFM reforms on state building has re- show that, by itself, this is not necessarily a better approach. mained limited. Contextual factors such as limited domestic "Going it alone" has worked quite well for the Ministry of revenue, a difficult security environment, and the typical con- Finance in West Bank and Gaza, which benefited from very sequences of high aid dependency (such as high off-budget low turnover and supported the progression of qualified funding levels, diversion of talent from government) mean staff; but it has not worked in Tajikistan, where capacity has that PFM reforms on their own cannot be expected to build remained limited because of higher turnover rates and a fail- states. However, the case studies indicate that some limits to ure to develop the more junior staff. High turnover of civil the state-building impact of PFM reforms can be overcome servants has also been a significant problem elsewhere through strengthened approaches. These approaches include (Afghanistan, Kosovo) because of relatively low pay, espe- greater attention to domestic accountability and citizen in- cially at higher grades. Civil service reform measures such as volvement, to development of sustainable capacity solutions, decompression of salaries, revision of pay and grading levels, and to PFM links with service delivery. redesign of organizational structures, and introduction of Despite significant PFM improvements, concerns about training opportunities for professional staff have gained lim- fiduciary control--and corruption, more broadly--frequent- ited traction across most of the eight economies. Where civil ly remain. The reforms undertaken have made important service and, especially, pay-related reforms have been at- contributions to the fiduciary environment through a strong tempted, they have often raised concerns about fiscal sus- focus on budget execution, but challenges on audit and pro- tainability because of the tendency to include too many staff curement remain. Further improvement on these dimen- in higher salary categories. The introduction of merit-based sions is likely to require greater sector-by-sector attention to salary measures and top-up schemes has generated tensions specific problems such as procurement for public works, in some cases: the merit-based pay system in Cambodia was medical supplies, and school textbooks. cancelled abruptly by the government, and the Kosovo Greater attention is needed to integrate PFM reforms scheme has been criticized for lack of transparency over in- with overall state building. Attention to citizen engagement clusion of staff. and domestic accountability mechanisms has tended to Ongoing capacity challenges raise questions about the come late. Stronger reform emphasis on transparency meas- likely sustainability of PFM reforms, but some initiatives to ures, accountability institutions, and engagement of civil so- develop a new local civil service have been taking hold. More ciety could enhance state legitimacy and help sustain the de- fundamental capacity-building efforts have started to show mand for PFM reforms. Such approaches may also have results. One example is the Financial Management Training political appeal if they help governments secure greater pub- School in Liberia, which has been established with donor lic credit for reform efforts. support to train university graduates in basic financial man- Capacity substitution or supplementation can be a nec- agement for entry into the civil service. At the same time, a essary measure, but strategies for developing local capacity Senior Executive Service supported by donors recruits from should be targeted from the outset. More effective knowl- the Diaspora to fill mid-level civil service positions paid at edge transfer and overall civil service and pay reforms must higher salaries. In Kosovo, the handover to local staff and the receive sustained attention--even if frustrations and false departure of international experts have been relatively suc- starts are likely and repeated attempts to generate sustain- cessful. In Afghanistan, the Treasury Department in the Min- able solutions may be needed. Unorthodox approaches istry of Finance has recruited new graduates to replace donor- should not be ruled out; but, as is generally the case, they funded staff at regular civil service salaries. need to be used with care.12 PFM links to service delivery are especially challenging in Conclusions: Emerging Implications fragile states. There are positive examples of PFM reforms expanding into important sectors and extending to subna- The findings from this study show that fragile states emerg- tional levels. However, those efforts could begin earlier, and ing from conflict can make substantial and relatively rapid better coordination among donors could enable broader cov- progress in reforming PFM systems. At least in this area, erage of PFM reforms. Budget planning and execution ca- short- and medium-term efforts to rebuild the public sector pacities and controls need to be developed not just in the fi- have shown results. Where a strong relationship with the in- nance ministry but also in line ministries and agencies and at 6 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK www.worldbank.org/economicpremise local levels. Design choices for PFM reform would benefit 11. Even highly centralized systems need to develop ef- from a greater problem focus that includes significant atten- fective institutional structures reaching down to local levels. tion to service delivery links and outcomes. 12. In some countries, for example, medium- to long- term capacity substitution/complementation has been fund- Notes ed with resource windfalls. 1. The case study authors are Geraldine Baudienville References (Afghanistan and Democratic Republic of Congo), Edward Hedger (Liberia), Philipp Krause (West Bank and Gaza), Andrews, Matt. 2010. "How Far Have Public Financial Management Re- forms Come in Africa?" Harvard Kennedy School Faculty Research Sam Moon (Cambodia and Tajikistan), and Heidi Tavakoli Working Paper RWP 10-018. web.hks.harvard.edu/publications/getfi (Kosovo and Sierra Leone). le.aspx?id=548. 2. The sample focuses on postconflict countries, so find- Gupta, Sanjeev, Shamsuddin Tareq, Benedict Clemens, Alex Segura-Ubier- ings apply primarily to this group. Countries that are fragile go, and Rina Bhattacharya. 2007. "Postconflict Countries: Strategy for as a result of deteriorating governance situations (for exam- Rebuilding Fiscal Institutions." Research Paper 2007/41, United Nations ple, Yemen) typically exhibit a different dynamic. University-World Institute for Development Economics Research, Helsinki, Finland. 3. Sierra Leone was ranked 180 out of 182 in the 2009 Moore, Mick. 2004. "Revenues, State Formation, and the Quality of Gov- Human Development Index. ernance in Developing Countries." International Political Science Review 4. The Democratic Republic of Congo also has relatively 25 (3): 297­319. high revenue performance, but is dependent on natural re- Schick, Allen. 1998. "Why Most Developing Countries Should Not Try sources. New Zealand Reforms." World Bank Research Observer 13 (1): 123­31. Tommasi, Daniel. 2009 "Strengthening Public Expenditure Management in 5. The exception is West Bank and Gaza, with a tenure of Developing Countries: Sequencing Issues." http://www.capacity4dev.eu more than seven years. In the two less externally dependent /sites/default/files/document/2009-05-25/Issue_Paper-PFM_Reform_ cases (Cambodia and Tajikistan), in contrast, ministers of fi- Sequencing_final-DTommasi.pdf. nance have been in place for longer time periods. 6. For reference years, see table 1. About the Authors 7. There is no uniform agreement on what constitutes ba- sic versus advanced reforms. Generally, basics are considered Verena Fritz is a governance specialist with the World Bank's to be the introduction of more traditional forms of line-item Public Sector Governance Unit. She works on public financial budgeting and corresponding control systems as well as lim- management and other public sector and governance reforms ited automation. and coleads the Bank's Community of Practice on Political 8. Given that this area poses specific challenges and is in- Economy. Edward Hedger is a research fellow at the Overseas stitutionally separate (supreme audit offices, parliament), Development Institute, where he specializes in research and ad- this is better treated as a separate area than being lumped to- visory work on budgeting and public financial management. He gether with budget execution. was formerly a consultant on government reform projects in the 9. Scores against the accountability dimensions in stan- Europe and Central Asia and Africa regions. Ana Paula Fialho dard PFM assessments are among the lowest in the countries Lopes is a senior operations officer with the World Bank's Frag- studied. ile States Unit. For more than 15 years, she has worked on the 10. In Kosovo, for example, lack of coordination resulted developmental challenges of conflict-affected countries, and she in the parallel development of a budget development and holds a PhD in political science from the Institut d'Etudes Poli- management system and a Kosovo financial management in- tiques de Paris, France. formation system by different donors, which then required costly integration. The Economic Premise note series is intended to summarize good practices and key policy findings on topics related to economic policy. It is produced by the Poverty Reduction and Economic Management (PREM) Network Vice-Presidency of the World Bank. The views expressed here are those of the authors and do not necessarily reflect those of the World Bank. The notes are available at www.worldbank.org/economicpremise.