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PEFA: Public financial management and good governance

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PEFA: Public financial management and good governance

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The World Bank Group book PEFA, public financial management, and good governance (Mustapha, S., Long, C., Löffler, G. and Mills, Z. 2019) outlines how to assess the status of a country’s public financial management system. PEFA measures the extent to which PFM systems, processes, and institutions contribute to the achievement of desirable budget outcomes: aggregates fiscal discipline, strategic allocation of resources, and efficient service delivery.

Chapter 4 in this volume explains how budget credibility can be measured; in particular in fragile states. In fragile states, even those conforming to 'best practice,' may experience a crippling combination of factors that leaves them stuck in a 'capability trap.' Low human capacity, lack of physical infrastructure, and persistence of parallel informal systems are some of the factors that can impair the proper functioning of a well-designed PFM system in a fragile state. The chapter then investigates whether PFM reforms can produce the desired outcomes in fragile states, but the results are mixed. Context matters and needs to be understood.


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