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Strengthening Public Financial Management: Challenges in Africa Yongmei Zhou, AFTPR Operational Task Force on Africa Capacity Building
Strengthening Public Financial Management:
Challenges in Africa
Yongmei Zhou, AFTPROperational Task Force on Africa
Capacity Building
Topics
l Urgency of overall capacity development in Africa and importance of PFM capacity development in this context
l Good principles of capacity developmentl Challenges to operationalize good principles in
PFM Capacity Development
Urgency of Capacity Development in Africa
l Poverty in Africa and challenges to meet MDGsl Prospects of larger aid flows but doubts about governance and
absorptive capacity (Blair Commission for Africa, UN MilleniumProject, IDA Africa Action Plan)
l Mixed results of PACT to datel Recent African effortsl NEPAD provides framework for regional efforts to resolve
conflict, improve governance and reduce poverty l 2001 Pan African Forum on Capacity
l Recent development of donor harmonization (Paris Declaration)l A renewed compact between African States and stakeholders,
development partners incl. the Bank
Propositions on Effective Capacity Development
Countries should approach capacity development as a core, not an add-on, objective of their development strategies.
Development partners (DPs) should approach capacity development as a core, not an add-on, objective of country assistance strategies.
Countries’ development requires l effective state, capable of creating enabling
environment for private entrepreneurship and collective action and accountable to citizens;
l engaged society, engaging in collective action and demand state accountability at national and local levels.
DPs should help l strengthen, rather than bypass, domestic
political and administrative accountability systems
l improve, rather than bypass, inter-governmental fiscal and accountability relations
l Strengthen, rather than bypass, local accountability system
Countries shouldl take full ownership of capacity diagnosis and
identification of capacity development strategies;
l Take full ownership of implementation of capacity development strategies;
l be accountable for results.
DPs can make space for countries to identify viable entry points and sequencing strategies and offer assistance, if necessary; and support implementation of country-owned capacity development strategies.
Countries should establish a results-focused M&Esystem tol communicate shared vision of successl measure progress and recognize successl ensure accountability for resultsl facilitate continuous feedback and learning
DPs should l help countries strengthen their results-focused
M&E systems;l Be accountable for effectiveness of assistance.
A capacity development strategy should be based on a frank diagnosis:l Is there latent capacity that can be unleashed?l What is impeding full utilization of existing
capacity?l Weak incentive? l Poor ethics? l Low operational budget? l Weak leadership?
l What is impeding accumulation of capacity?l Weak incentive to learn new skills and adopt better ways of
doing business?l Lack of peer network for mutual learning and development?l Difficulty in skills retention due to domestic and international
market competition? l No sustainable mechanism to reproduce skills?
An effective capacity development strategy often involves hard/creative measures to effect behavioral, organization, institution-level changes in order to l unleash latent capacity
l Uganda’s fiscal decentralization and local government development program
l China’s Household Responsibility Systeml improve utilization of and build on existing
capacityl Tanzania’s Public Service Performance Improvement
Program and Selective Acceleration of Salary Enhancement Strategy
l Indian State of Madhya Pradesh’s Education Guarantee Program: train villagers as as teachers for remote villages
A viable capacity development strategy need to have l realistic entry points determined by stimuli
for change and existence and ability of champions to lead change;
l a viable sequencing strategy that sustains momentum for further change, generates learning for scale-up.
DPs need to recognize that no one strategy fits all countries, a comprehensive approach may not be feasible for many countries, recognize realistic entry points and strategies that fit countries’ context.
System-wide capacity development requires successful change management and in particular local leaders and champions who
l recognize and maintain urgencyl create a shared visionl expand constituencies for changel manage a continuous learning processl communicate proactively
Effective DPs assistance not only advises on WHAT changes are needed but also HOW these changes can be effected – and supports the champions to effect changes.
Countries should pay particular attention to attract and retain qualified professionals in public service by addressing issues of pay, job satisfaction, career development.
DPs are significant employers in local job market and need to help government retain skills rather than contributing to skill depletion.
In-country training capacity (universities, professional training institutions, associations) is required for sustainable reproduction of skills and capacity development.
DPs should revisit the current balance of aid for tertiary education versus the aid for primary and secondary education.
African regional bodies have acquired a growing role in capacity development through l Regional networks, associations and training
programs, e.g.,l African Capacity Building Foundationl Municipal Development Programl East and Southern Africa Association of Accountant
Generalsl African peer reviewing mechanism
DPs should support these regional bodies.
Opportunities for PFM reform in Africa
l Democratization presents opportunities for improving accountability in the long-run.
l Efforts to improve aid effectivenessl Aid alignment to national programsl Reliance of national system for implementation and
accountability
l PFMCD is center of capacity development agendal PFM key building block of government management
system and accountability system;l PFMCD corner stone of budget support operations
and SWAPs;l HIPC AAP gave major momentum to developing
rigorous M&E of system performance and reform progress;
l Donor harmonization led to harmonized performance monitoring tools (PEFA indicators)
Challenges for PFM reform in Africa
l Ownership: PFMCD driven by African domestic accountability reform or donor fiduciary concerns?
l Weak domestic accountability system l Soft control and widespread corruption within
political and bureaucratic systems, non-enforcement of own PFM laws/regulations, informality
l Legislative oversight and civil society voice varies across countries but generally have little bite. Financing of competitive politics puts pressure on PFM.
l Independence and investigative capacity of media varies
l Realistic entry points rather than unrealistic comprehensive reform (often recommended by CFAA, CPAR)l Post-conflict countries (Sudan, Liberia): rebuilding core
treasury and revenue systeml Resource-rich countries (Chad, DRC, Nigeria): improve
revenue management, EITIl Post-post-conflict countries (Sierra Leone):
transparency and accountability of public spending, building citizens’ trust in gov
l South Africa: service-delivery driven PFM reforml Good fit rather than best practicel E.g., MTEF, IFMIS software, procurement reform
models
l Sub-national government PFM capacity development: democratic decentralization in Africa requires attention to sub-national government
l M&E of PFMCD: need to establish feedback loop between PFM performance indicators (e.g., PEFA) with changes introduced by reforms (new laws/regulations and better enforcement; improved standards for budgeting, accounting, auditing; new systems, procedures) and skills development
l Linking training/qualification to career progression
l Poor public sector remunerationl unable to attract or retain enough qualified accountants.
Reform pay or train public-sector accountants who are not perfectly mobile to private sector?
l Reform champions at political and technical levels require hard-working support staff: how do motivate them under a selective pay reform strategy?
l IFMIS: billion-dollar investment in Africa and results very uneven
l Difficulty for donors to change behavior
Challenges for the Bank
l Tension between speed and sustainability: e.g., PIUs outside government structure, Social Fund bypassing inter-governmental transfer and local government systems.
l Tough (and often neglected) topics in Bank-gov PFM dialogue: MoF stewardship role, sanctions of non-compliance to PFM rules, HR policy?
l Staff skills mix required for supporting PFM reform: accounting, budgeting, procurement, public administration, IT, sub-national government administration, HR policy, political and institutional analysis, change management
l IDA Indicative Action Plan for Africa:l Increased reliance of MTEF in country which
integrates sector programsl Increased proportion of aid provided through
programmatic lending instrumentsl Reliance of national system for implementation
and accountability
l Appropriate Bank instrument mix (PRSC, Adjustment Lending, SWAPs, TAL, SIL, IDF grant; PER, CFAA, CPAR, HIPC AAP, PEFA Performance Monitoring)?
l How do we support regional public goods, e.g., professional associations, development of public sector PFM training curriculum, networks of training institutions?
l How do we help build knowledge base on PFMCD approaches and experiences?
l Bank internal organization
