Table 8.1 Inventory of Political Economy Influences on PFM Reforms: Conditioning Factors: political context Describe Factor Describe how the Factor Impacts PFM Reform (Positive or Negative) Indicator/Indicators to Assess Impact How Important is the Factor for Reform: (High/Med/Low) How Relevant for this country? (High/Med/Low) Relevant Sources: Level of political support for PFM reform. Impacts legitimacy, leadership, empowerment, engagement and ownership of reform. Level of shared cross political party support of the reform. Reform part of dominant political agenda. (Plan/Budget Speech) Political engagement in reform: -Top political support (Speeches/Participation) -Determination of strategic vision (Executive Decision) -Support in public dialogue. -Political appointee in charge -Representation on reform steering committee. DIFD, 2001. Pp.50ff; Bergmann, p.13 Stability in government Impacts continuity of strategic vision, leadership and ownership arrangements of reform. No. of years continuously in power; Frequency of party and cabinet changes (in particular Minister of Finance). Closeness to general elections; Prominence of the military Allen,2010,p.5; Andrews 2010, Dressel and Brumby, 2009 Allen,2009
Status of the political system: a) autocratic or democratic; b) majority party or coalition; c) federal or unitary Impacts extent to which political leadership can exert power to support/enforce reform; (also impacts power of MOF to lead reform) Impacts on effectiveness of accountability arrangements Effectiveness of legislative and civil society oversight; Levels of accountability; Distribution of power between coalition members; Clear constitutional mandates for federal and state authorities. Clear rules for intergovernmental transfers. Degree to which these rules are followed. Dressel and Brumby,2009 B. Conditioning Factors: Economic Context Growth rate Availability of resources for PFM Reform; Level of political demand and confidence in reform as well as focus of PFM reform efforts. Basics More Advanced Average 5 year g/r of GDP; Average g/r over world average Andrews, 2010 Level of Economic stability (1) Stability positively Influences the pace of, and nature of, efforts to strengthen various components of PFM : Revenue Mobilization Resource Allocation Expenditure and arrears control Treasury ops. Av. GDP growth in recent 2 years compared to past 10 years. Av. Inflation rate in recent 2 years compared to av. in past 10 years Difference in growth rate of credit compared with nominal GDP in 2 recent years compared to av. over last 10 years Real rate of interest in recent 2 years compared to its average over last 10 years Whether in or out of an IMF program; MOF resort to cash controls; Extent of expenditure arrears. Andrews, 2010
Level of Economic stability (2) OR Severe instability or disruption is a shock to induce reform Allen,2009 Resource availability (1) Positive, or Resource availability (2) Negative “Resource curse” Commitment to predictability, sustainability and effectiveness of expenditure management and control reforms. Scale of revenues from external sources and natural resources may lead to weak and fragmented PFM governance Over reliance on high donor disbursements may encourage dependency Tax as % of GDP Access to capital market? Degree of donor support, especially budget support % of revenues derived from trade and nat. resources as % of total How transparent the accounting for natural resource receipts? How transparent/timely the flows between managing entity and government accounts? Donor inflows as % of govt. exp., average over 5 year period. Tommassi,2009 Andrews, 2010, p.34 Browne,2010 Allen2010, Andrews,2010 C. Conditioning Factors: Social and General Governance Context General perception of governance status Likelihood resources will be captured; reform progress will be slow World Bank, Index of corruption; Index of ease of doing business, others? DFID p.49 Allen, 2010,p.4 Quist,2009 Social stability Ease of implementing longer run reforms; degree of disruption likely Incidence of civil unrest; degree of ethnic/religious homogeneity Dressel and Brumby,2009
Cultural stance towards reform Willingness and support for change, as indicated by: Power distance/ risk aversion. Trust Task versus Process orientation Individual or Group dynamic Time orientation will affect the climate for reform. Level and frequency of delegated decision making. (Levels and centralization of Procurement) Range and importance of procedural rule sets. (how detailed are financial regs.?) Tolerance of ambiguity. (level of discretion for budget decision –making?) Transparency of results focus. (interest in results-based budgeting?) Timeliness of decision-making (procurement lags? budget passed on time?). Degree of consensus in decision making (mechanisms to discuss reforms used?) Senior and Felming,2006 Strong external accountability mechanisms Strength judged by: Civil society groups organized and active in their criticism; Legislative committees strong and functioning, with power to investigate abuse; External Audit active & free from the executive Power of mass media: - freedom of press - degree to which media free from government PRSP process exists; NGOs represented in reform planning? No. of times committees meet, no. of cautions issued; Speed of audit reports; degree of follow-up (PEFA indicators?) Index of press freedom No. of non-government TV channels Degree to which government vets internet Helger and Aga, 2007 Andrews, 2010 Dressel and Brumby, 2009 Degree to which “informal” procedures prevail over formal procedures Insofar as PFM reforms tend to address the formal system, and strengthen it, this will be undermined by strong Proportion of government expenditure within regular budget Extent of “quasi-fiscal operations” Evidence of systematic variances in expenditure during budget execution (See Tommassi, 2011
governance and PFM D. Conditioning Factors: Technological and Capacity Context Depth of local labor market Reflects how severe the supply constraint might be for HR required for reform Availability of graduates as % of workforce: -Locally qualified -Internationally qualified Availability of professionals/financial expertise -No of registered accountants locally qualified -No of registered accountants internationally qualified Allen, 2010 Bergmann, p.13 Degree of power of the public sector TUs Reflects degree of flexibility in wages/hiring policies that impact the supply of HR required for reform Percentage of public employees unionized No. of strikes in the last 5 years. No of incidents of other industrial action or labor disputes Tommassi, 2011 Country’s education/training capacity Potential for training/retraining to supplement HR skills No. universities offering courses in financial skills No of colleges/training centers offering relevant courses: -outside government -internal to government Degree to which qualification is internationally accredited: -university degrees -professional certification Allen,2010,p.5; Dressel and Brumby, 2009 Public Administration Management and leadership capability Even if political leadership is strong, there is a need for a cadre of senior officials No. of graduates in top civil service grades: -locally qualified -internationally qualified Degree of which bureaucrats are Hedger and Aga, 2007 Browne, 2010, p.10
willing to champion, lead and manage reforms depoliticized: no of political appointees in top civil service DFID 2001, pp. 50ff Allen 2010 Human Resource Management System Provides complementary incentives to facilitate reform effort Size of Private/Public Sector income gap. Size of post holder skills gap. Training/retraining is a part of regular career development? Dressel and Brumby, 2009 Stability of bureaucrats Given time required by reform, some stability in the reform internal leadership/management is required Do HR rules encourage rotation of top staff? Degree of turnover of top staff (average time on post)? Degree of concentration of reform in a few individuals? Dressel and Brumby, 2009 Degree of ICT skills/computer literacy Many reforms require IT skills, but scarcity is often a constraint on the success of reform No. of relevant people with required IT skills Bergmann & Bietenhader, 2010.