This synthesis report considers the feasibility of and constraints to public financial management reforms in post-conflict contexts. It discusses findings from a cross-country analysis of the design, implementation, and impact of PFM reforms in eight post-conflict environments over ten years. It finds that, while significant progress in improving public financial management is possible in post-conflict countries, efforts to strengthen budget execution have tended to outperform work on other dimensions of PFM. The success of PFM reforms is less clearly associated with progress on state-building and service delivery than expected.
Six of the cases reviewed showed ‘intermediate’ (Cambodia and Liberia) to ‘substantial’ (Afghanistan, Kosovo, Sierra Leone, and West Bank and Gaza) progress on PFM reforms, while progress remained ‘limited’ in two (Democratic Republic of Congo and Tajikistan). At the same time, progress has been uneven across the dimensions of the budget cycle, and the sustainability of PFM reforms frequently remains uncertain.
The patterns emerging from the analysis of how reforms have been pursued do not suggest one single best practice or sequence. However:
- Shared analysis and coordination among development partners supporting PFM reforms typically emerges late and should be considered earlier
- Reforms of organic budget laws tend to happen over a period of time rather than early in the process, so rushing adoption of new laws too early is not necessary in many cases
- Some rethinking may be needed of reform approaches targeting budget planning on the one hand and control and accountability on the other
- Developing sustainable capacity remains a challenge and needs greater and more sustained attention.
A key determinant of PFM reform success is the degree of political commitment, which in turn is driven by donor incentives and governments’ goals. Other findings include the following:
- The success of PFM reforms is less clearly associated with progress on broader state-building goals and service delivery improvements than expected
- PFM reforms can contribute to state-building but cannot ensure progress, especially where strong countervailing factors are present
- Improvements in service delivery and PFM reforms have evolved on parallel tracks, with little apparent gain from initial PFM strengthening.
It is important to consider country context (and existing incentives for local stakeholders) systematically in deciding if and how to intervene on strengthening PFM systems. Some post-conflict environments offer substantial opportunities for reform; while in other environments with very little commitment, a focus on selected small steps may be more appropriate. Further implications are that:
- Development partners can use aid allocations and aid modalities to incentivise sustained PFM improvements, and can also contribute to reducing the fragmentation of public finances.
- Developing clear reform plans based on emerging analysis and the periodic updating of such plans will help ensure that approaches to PFM reforms and the provision of support are strategic and focused.
- There are distinct reform challenges and opportunities across the three key phases of the budget cycle (budget planning, execution, and accountability).
- Legal and institutional reforms are an integral part of strengthening PFM systems in post-conflict environments, but there is less need to front-load these reforms than has been suggested by previous analysis.
- Strengthening capacity development requires a phased and layered approach that includes addressing capacity constraints in the short term as well as pursuing longer-term improvements.
- Development partners and governments could consider monitoring tools that complement PEFA reports to provide a stronger focus on results chains and on the impact of strengthened PFM systems on service delivery and state building.
- A more structured inclusion of sectors and subnational levels — going beyond a focus on ministries of finance — should be emphasised to ensure impact of efforts at strengthening PFM systems.
- Institutional transformations require a time horizon of at least 20 years, underlining the long-term support needed for achieving and consolidating strengthened PFM systems.
- The reasons for the lack of a clearer link between the level and pace of PFM improvements and service delivery improvements need to be better understood to enable more targeted engagement.
An ODI Briefing Paper on the research findings is also available.
