Modest steps ‘more likely to lead to PFM success’

3 Mar 16

Pragmatic, targeted and well-sequenced public finance management reforms are more likely to lead to success than ambitious, large-scale overhauls, the Asian Development Bank vice president has said.

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Wencai Zhang, vice president of the ADB. Credit: ADB
Wencai Zhang, vice president of the ADB. Credit: ADB

 

Speaking at a panel discussion in India on global PFM trends, Wencai Zhang said that experience has shown PFM reforms are not always easy and can have only limited success, whether in low-, middle- or upper-income countries.

Because PFM reforms are complex, take time and require broad political consensus, he said that “big bang” approaches like the one taken in New Zealand are giving way to more gradual and steady processes.

“There is a growing realisation that ambitious, large-scale reforms may not always work. Pragmatic, targeted reforms, and quite simply, a better sequencing of reforms, might lead to more success.”

He added that reforms can only succeed when supported by all stakeholders, and that achieving sustainable economic development will require lasting improvements in institutions working across the entire public financial management cycle.

IT-based PFM reforms in particular can contribute to improving accountability and governance at all levels of public implementation by standardising processes, he said.

He referred to one $400m ADB programme in West Bengal, India, where IT-based PFM reforms “not only strengthened the state government’s capacity and efficiency in tax administration, expenditure, and debt management, but also enhanced the quality and accessibility of public service delivery at affordable costs to different segments of society, including the poor”.

Zhang stressed: “Strong PFM management systems are essential to improve public service delivery, speed up poverty reduction, and to achieve the sustainable development goals.

“Effective PFM systems also strengthen transparency and accountability, and financial efficiency. In summary, it provides an important element of trust in public finances.”

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