Do ‘good practice’ PFM systems lead to better outcomes in fragile states?
By Tobias Haque
The questions keeping me awake at night
As I wrote here, there seem to be important unanswered questions as to whether the standard ‘good governance’ reforms recommended by development agencies should be expected to make things better in conflict societies, where the broader institutional context is entirely different.
In my new paper (here), I apply some of this thinking to the ever-glamorous field of public financial management (PFM). Development agencies tend to recommend a highly standardised set of systems and processes when reforming PFM in developing countries, often without much regard to important contextual differences. Countries are advised to adopt budget processes, reporting systems, and accountability arrangements that look like those in place in OECD countries, even when the countries themselves are at radically different levels of development. This is well-established in the broader literature, and I’ve previously explored how standardised PFM solutions are often a poor fit for very small states (see here and here).
Are standard solutions the right ones for fragile states, or are there systemic reasons why they might not be?
Pushing on a string?
I think there are big questions here. Most basically this is because standard PFM solutions rely on broader institutional underpinnings that are – by definition – absent in fragile states. Efforts towards creating PFM systems in fragile states that look more like those in OECD systems are ‘pushing on a string’ because the transmission mechanisms that translate ‘good’ PFM systems to ‘good’ outcomes are missing.
To illustrate, it’s useful to think about what PFM systems do. I think they serve three basic functions. Firstly, PFM systems structure decision-making. Good PFM systems ensure that decisions regarding the use of fiscal resources are made by individuals with the formal mandate to make those …read more