Issues of budgetary reformsUnit 1. Approaches to PFM reforms

Module 1.4. Conditions for successful reforms

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•Module 1.1. PFM objectives and budgetary approaches

•Module 1.2. Why reform PFM systems? Why establish a sequencing?

•Module 1.3. The starting point: assessing PFM systems

•Module 1.4. Conditions for successful reform

Day 1: Approaches to PFM reform

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Module 1.4. Conditions for successful reform. Objectives of the module

• Many reform programmes do not have the expected results

• This module identifies some of the causes for failure or difficulties as well as the conditions for success

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Module 1.4. Outline

• Possible causes for failure or difficulties

• The conditions for a successful reform

• Beware of pitfalls

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Possible causes for failure (1)The causes for the failure of a reform are various and numerous, but often contain the following elements:• Reforms carried out without a strong internal demand (eg.

Reforms pushed by an external party)• Little political support• External parties and/or the political push for reforms, but

the administration feels concerned by it; strong resistance• Reform measures are technically questionable

• Copying a more advanced and complex reform from another country (best practice) - not viable given the country context

• Technically questionable measures (eg. Sectorial MTEFs not compliant to financial constraints)

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• Insufficient capacityo Institutional capacities: separation of Plan and Finances,

difficult Finance-sectors relations, etc.o Human Resources

• Insufficient reform steering mechanismso Fragmentation of the steering force

• According to lender projects, themes, etc.o Deficient steering capacities (eg. Large, badly carried

out IT projects)

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Possible causes for failure (2)

Facades of reformsSome reforms may not produce results because they are purely formal. For example :

• Formal procedure for the drafting of the budget have been modernised, but the systems stays flawed• The budget as a theatre. The formal and informal

institutional makings of the budget process in Malawi. DFID 2004

• “Reforms” that seek solely to please to external pressures or to comply to a trend• Potemkin Villages: 'The' Medium-Term Expenditure

Framework in Developing Countries. Schiavo-Campo. Public budgeting and finance. Summer 2009 7

Module 1.4. Outline

• Possible causes for failure or difficulties

• The conditions for a successful reform

• Beware of pitfalls

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The conditions for success: Gleicher’s equation

• SDxVxFS>R• Shared dissatisfaction• Vision• First successful steps• Resistance to change

• There must be:• SD>0 dissatisfaction regarding the current system• V>0 a vision• FS>0 visible short-term gains• Combination of SD, V, and FS must overcome

resistances• FS: cf. exercises on quick wins 9

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The conditions for success: what experience tells us (1)

• Cf. Lawson 2012. Evaluation of PFM reform in Burkina Faso, Ghana and Malawi

• Three conditions:o Strong political commitment to implement the

reformso Reform conception and implementation models

adapted to the institutional context and capacitieso Strong coordination arrangements, carried out by

government representatives in order to monitor ans stir the reforms

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• A strong technical leadership is important. It helps in a context of political commitment, but in no way replaces it

• An external pressure (civil society, donor, etc.) may strengthen the political commitment, but is not enough to create it

• A learning process is necessary, in order to adapt reform conception and implementation models

• The influence of NGOs and legislative power must not be overestimated

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The conditions for success: what experience tells us (2)

Donor support: what effect?cf. Lawson

• Considerable influence in countries benefitting, or if external resources are funding a government programme

• Attempts to openly influence the contents and rhythm of the reforms through the conditionality have been inefficient and often counterproductive

• Efficient only if it focuses on specific and clearly defined objectives

• Many reform programmes suffer from bad advice and promotion of inadequate reform models from external agencies

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Module 1.4. Outline

• Possible causes for failure or difficulties

• The conditions for a successful reform

• Beware of pitfallso Leading edge practiceso Other pitfalls

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Should leading edge practices be imported ("best

practice")?

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RAB, LOLF, Output budgeting, outcome budgeting, output price budgeting, ABB, MBO, etc.

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An imported product: NPM• In the 90s: New Public Management (NPM)• Oriented towards a greater performance and lightening od the

state apparatus• Some instruments

• Separation between decision-makers and managers– contracts, public service contracts, etc.

• Output-based budget and accrual accounting (commercial type)• Autonomous agency reporting on results

– Considerable administrative reorganisation• The manager is granted greater flexibility in terms of resource

management and accounts for results• Competition• Public-private partnerships, concessions

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Can NPM be copy/pasted from a country to another?

• A few concerns in OECD countrieso Risks regarding dilution of responsibility, overly autonomous agencieso Lack of ethics and of a sense of public serviceo Too little result assessment

• The necessary change in administrative culture can be a major impediment in many countries

• Inadequate for most DC (cf. Allen Schick concerning basics)• Some aspects are nevertheless useful. Depending on the context

of each country, some elements can be kept in mind• Semi-autonomous revenue agencies• public-private partnerships (Beware budgetary risks)• Contractual approaches (if they are adapted to the country)

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LOLF - France• Loi organique relative aux lois de finances (LOLF, ie

legislation governing public finance) has introduced a budgetary reform in France

• The LOLF introduced a programme-based budgetary management, but is a more cautious version of NPMo No administrative reforms, such as "next steps agencies”o The ministry of Finance’s central control is modernised, more

flexible, but maintained

• The 2009 WAEMU and 2011 CEMAC directives, de la CEMAC de 2011, the 2005 Malagasy reform, etc. have been largely inspired bu the LOLF• With some modifications: eg. Central controls are less flexible than in

France

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Can LOLF be copy/pasted from a country to another? (1)

• Advantages of applying LOLF in Africao This reform is relatively prudent compared to the

Anglo-Saxon ones, and offers the opportunity of rationalising a currently heavy and inefficient control system.

o Organic laws inspired by the LOLF create a framework in which to rationalise more or less disordered reforms For eg., the WAEMU reform could enable to eliminate the

MTEF/multiannual programme budget duplication encountered in a few French-speaking countries

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• Risks in applying LOLF in African countrieso The superposition of different systems emphasises

bureaucratisation or/and generates conflictso Administrative hierarchy vs programme

managemento A lot of fruitless paperworko Unmanageable theoretical constructiono Capacity problem

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Can LOLF be copy/pasted from a country to another? (2)

Module 1.4. Outline

• Possible causes for failure or difficulties

• The conditions for a successful reform

• Beware of pitfallso Leading edge practiceso Other pitfalls

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A few other pitfalls

• Promptness does not mean efficiency• Reform is a long-term, continuous process• Deadlines should not be too short and take into

account that the same reforms took years to be carried out in developed countries

• A accumulation of micro-measures does not constitute a reform

• A lassitude regarding the reform may develop, or even a scepticism due to changing recommendations

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An accumulation of techniques may create the illusion of

reform, but does not constitute a real reform

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. A CO!

programme budget !

Two performance contracts !

"

One regulatory law!

La COFOG!

… I carried out a lot of reforms today !

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•

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The plumber who did that doesn’t know how to do the job. Everything has to be made over!

Can plumbers be trusted?

A changing demand The PIP no longer in trend, hail the MTEF !Cash-based accounts are no longer the trend, hail the accrual-based accounting ! Etc.

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Key messages

• A reform’s success relies on a strong national commitment and the country’s capacity to respond to the dissatisfactions regarding public finance management

• Reforms must be adapted to the national country context rather than just be mechanical copies of “best practices”

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