This year’s CAPE conference at ODI looked at ‘Budgeting in the real world’, the reality of which was vividly portrayed by former Finance Ministers Dr. Antoinette Sayeh of Liberia and Mme. Luisa Diogo of Mozambique. Both insisted that reform should be internally driven, externally supported. But some participants worried that what appeared during the conference to be an emerging consensus on public financial management (PFM) reform might end up as a ‘new orthodoxy’, suffering the same problems of external imposition as before.
We need a way to ensure that new approaches to PFM really do support internal reformers and are genuinely context-specific. Some points raised at the conference suggest there is an opportunity to achieve this. Kuniaki Amatsu of JICA proposed that donors present governments with potential reform options and describe the pros and cons of each, rather than push a single pre-prepared plan. Nick Manning of the World Bank thought that encouraging government reformers to challenge the evidence and rationale behind external policy advice could improve the learning process. These notions could introduce a new narrative about formally giving government reformers space to evaluate and challenge the options for PFM reform plans.
The idea has several potential benefits. First, if government reformers challenge and shape proposed policy options, their valuable local, context-specific and institutional knowledge could improve planned reforms by helping to tailor them to a particular country. Second, government reformers need the capacity to design as well as implement reforms, as pointed out by Marco Cangiano of the IMF FAD. Challenging policy options could help governments develop this kind of capacity through a process of learning by doing where ‘muscles are strengthened through exercise’, as ODI’s Phillip Krause put it. And third, debating potential options could support the ‘internal drivers’ of reform by engaging and increasing the interest of government officials. More research is needed on how internal drivers emerge, but in the non-PFM sector, there has been some innovative research by the University of Oxford which found evidence of greater success of a collective endeavour when participants are engaged in the decisions that frame it.
Discussion at the conference suggested three key ingredients for creating a ‘challenge space’ for government reformers:
- Credible commitment by donors: For a credible challenge process to work, government reformers must be able to say ‘no’ to a particular policy proposal while still saying ‘yes’ to funding for an agreed reform plan. This would require donors to unbundle their funding from their preferred policy design. This was highlighted by Matt Andrews of Harvard as a key way that donors have successfully supported reforms.
- Structure: Donors may need new techniques and capacity in order to structure the ‘challenge space’ in a way that effectively supports the process. Lessons would need to be learned from successful experiences, such as the facilitation approach used for PFM reform in Mozambique described by Renaud Seligmann of the World Bank. Research is needed to identify ways that donors can create an open space for challenge and exchange, perhaps drawing on innovative methods like those developed by Mindlab for improving public services (described at a previous ODI event).
- Data and information: Reliable country-level data can help reformers to identify binding constraints, and context-specific policies that could remove them. Without data, government reformers may find it harder to make a case that a policy reform which worked in other countries may not be appropriate in theirs, and to figure out which policy might be a better fit. And the quality of data can be improved by publishing it – as Mme. Diogo said, ‘transparency brings acceleration’.
Enabling government reformers to challenge external policy advice may be difficult for donors, but it could be a fruitful way to support three long-held ambitions of PFM reformers: ensuring reforms are context-specific; building the capacity of finance ministries; and supporting internal drivers of reform. The recent conference threw up some ideas about how such a process could work; to move forward we need further research and to share more good examples of how to make the ‘challenge space’ in PFM reform a reality.