Major public expenditure management reforms have been adopted in many developing countries in recent years, with mixed success. Andy Wynne, of the Association of Chartered Certified Accountants, reviews the implementation of key reforms in Ghana, Tanzania and Uganda. He stresses the need for caution in advocating such widespread reforms elsewhere in the absence of further evidence of successful implementation. Small-scale investment in basic internal financial controls may bring greater returns than large-scale investment in innovative reforms, which carry significant risks of failure.
Two of the most significant reforms pushed by the World Bank, DFID and others are the Medium Term Expenditure Framework (MTEF) and Integrated Financial Management Information Systems (IFMIS). The MTEF consists of a medium-term financial framework (usually three years) for the planning of government expenditure. An IFMIS is a common computerized financial system used in government offices, recording all financial transactions uniformly.
Tanzania, Uganda and Ghana have relatively effective public financial management systems. They are at various stages of implementing their MTEF and IFMIS initiatives but have achieved varied levels of success. Through a review of publicly available literature on these reforms, the suitability of the reforms is questioned, and alternatives considered.
MTEFs and IFMIS appear to provide significant opportunities for achieving fiscally sustainable budgets and re-directing government spending towards poverty eradication. However, current evidence shows limited success.
- Uganda’s MTEF has had some success in promoting fiscal balance, but this is in question in Tanzania and Ghana. None of these MTEFs show conclusive evidence of increasing finance available for poverty eradication.
- Increased numbers of public sector accountants due to pay reform is a success factor in the Ugandan MTEF (and a decrease through transfer to private sector problematic in Ghana). Improved macro-economic stability also contributed in Uganda. In Tanzania, problems include uncertain donor assistance and a budget focus on delivering inputs defined in the MTEF rather than measuring outputs.
- IFMIS reform in Tanzania was relatively successful. Financial control was strengthened, though line ministry capacity to produce IFMIS reports is limited. The Uganda reform (in progress) is overly-ambitious and inherent risks threaten its success. In Ghana the complexity of the initial design has led to considerable problems and costs in implementation.
Large and unsustainable government debt means government officials tend to uncritically accept international finance institutions’ recommendations as a condition of assistance. ‘Exporting’ of budget innovations by consultants, aid agencies and financial institutions from rich countries without proper assessment is problematic. Recommendations therefore include:
- Do not focus solely on IT. Identification of and focus on systemic and institutional weaknesses of existing public finance systems is critical. Reform requires complex technical, procedural institutional and behavioural adjustments.
- Small-scale investment in basic internal financial controls may often bring greater returns than large investment in innovative reforms with their associated significant risks of failure.
- Focus on the basics of good financial management. For example, MTEFs should be seen as a complement to, not a substitute for, basic budgetary management reform. Efficiency, accountability and well paid, motivated civil servants are essential for the public sector.
- Views on the relative success of MTEF/IFMIS reforms are mixed; further research into how they can be implemented is needed to identify key criteria for success. Practitioners in relevant countries need to be involved in this.
