The World Bank PREM Public Sector Governance Page 1 Follow-up Actions by Donors and Countries ~ The case of PEFA ~ Session: “What Governments are Doing to Improve Governance” ICGFM, Miami, May 20, 2008 Presented by: Jim Brumby PREM Public Sector Governance The World Bank

PREM Public Sector Governance Page 2 Outline  Placement of PFM in Governance  How countries can use PEFAs  Action plan creation  MOF strengthening and other capacity building  How donors can use PEFAs  Mainstreaming into Country Policy & Institutional Assessments (CPIA) and Country Assistance Strategies (CAS)  Mainstreaming into country lending and analytical products Program lending TA lending Dialogue  Future issues  Repeat assessments Goodhart’s law  Increased publication  From diagnosis to action

The World Bank PREM Public Sector Governance Page 3 Public Management Public financial management & procurement, monitored by PEFA Administrative & civil service reform Governance in Sectors Transparency & participation Competition in service provision Sector-level corruption issues (Extractive Industries Transparency Initiative, forestry) Civil Society, Media & Oversight Institutions State oversight institutions (parliament, judiciary, audit) Transparency & participation (FOI, asset declaration, user participation & oversight) Civil society & media Local Governance Community-driven development Local government transparency Downward accountability Private Sector Competitive investment climate Responsible private sector PEFA is part of improving governance through various ‘Entry-Points’

The World Bank PREM Public Sector Governance Page 4 Country use of PEFAs 1. Necessary for the country to ‘own’ the results 1. Quality of process; nature and intensity of government engagement 2. Quality of information flows; openness to reform 3. Skills of assessors 2. Drill down from PEFA results to understanding the root causes 1. Look at comparators 2. Look at time series 3. Look at key factors such as institutions, systems, human resources 3. Consider country effort in different areas 1. What are the signals being sent by MOF and other management 1.E.g. Ghana 2. Are the areas of weakness of equal importance 1.E.g. Norway 4. Create action plan that fits circumstances 1. Engage with donors when important 2. Capacity constraints can be limiting

The World Bank PREM Public Sector Governance Page 5 Donors use of PEFAs (esp. Bank)  PFM is the ‘core of the core’ of Governance work at the Bank  GAC is central element of current President’s strategy  PEFA is having a very significant influence on Bank’s work in PFM  Core aspect of the ‘strengthened approach’  Provided discipline and focus to Bank’s interaction  Used by the IEG in reviewing performance of lending for PFM  CASs (e.g. Azerbaijan, Brazil (subnational level) Mali, Zambia)  CPIAs (e.g. Q13; rigorous cross-check)  Influences IDA lending limits  Investment and program lending  Creates baseline; major input to review  Part of a growing portfolio From 2.6% Bank loans (2000) to 10.2% ( )  Recommend to replicate it for other public management work  Economic and Sector Work and Analytical & Advisory Activities  Ghana PER 2006; Albania as part of Country Fiduciary Assessment and Public Expenditure & Institutional Review 2006  Other donors  Increasingly used as input to fiduciary considerations  Informing dialogue; shared understanding

The World Bank PREM Public Sector Governance Page 6 Going forward  Repeat assessments  PEFA generally recommends about every 3 years About 10 repeat assessments either completed or planned  Some countries may prefer self-conducted annual reassessments, with periodic attestations by external parties  Will provide ‘test’ of framework Team composition and incentives –Some common membership may be desirable –Watch for desire to retrofit assessments with reforms New information –New information suggest old judgments were wrong Quality improvements –Whether to correct for error Stakeholder engagements –Ensure many sided and sighted view of system  Is Goodhart’s law relevant to PEFAs  Dissemination  Part of value is form common pool  Drive to increase publication; reduce unpublished stock, and keep it low

The World Bank PREM Public Sector Governance Page 7 Action plans  Movement from diagnosis to action is fundamental to PEFA’s success  For development and fiduciary reasons  But in 2006, recommendations for actions included All reports 45% Integrated products 100% PFM-PR’s 23% - “No PFM-PR presents a thorough and systematic narrative exposing coherent recommendations.”  Country is in the driver’s seat  Needs space and time to develop its own action plan  Needs to focus on what is important Prioritized actions Reflect on sequencing  May need assistance to implement and to monitor the plan Potential role for PEFA updates

The World Bank PREM Public Sector Governance Page 8 Conclusion  From both donor and country perspectives, indicators are usefully informing governance reform strategies  PEFA directly very influential at the Bank  PEFA model very influential at the Bank  PEFA model spreading to other areas: HR indicators being piloted, as part of Actionable Governance Indicators  Other speakers  Thusitha Pilapitiya; case of Malawi  John Sitton; case of Mali  Miguel Russi; case of Colombia  On-the-ground responses to various mechanisms to improve transparency and accountability Role of tracking indicators

The World Bank PREM Public Sector Governance Page 9 Discussion Thank you for your attention