Sierd Hadley and Mark Miller from the Overseas Development Institute delivered a seminar titled “The challenges of supporting institutional change: lessons from two decades of public financial management reforms.”
There is increasing consensus that economic and social development depend on the quality of a country’s institutions. This has encouraged international actors to spend large amounts of aid on support for governance reforms, including billions of dollars to strengthen “public financial management” which concerns the way that government’s raise and spend public resources. Just as an example, it is estimated that over two-thirds of World Bank projects have a target related to public financial management. Despite this enormous investment, results have been disappointing.
Academics such as Lant Pritchett and Matt Andrews argue that there has been too much focus on reforms that introduce best practice systems, which look good but do not result in improvements in the way the systems really function. This has been reinforced by influential indicators (such as PEFA) and the organisational incentives of international institutions and professional bodies. But are these academics right? If so, what does it mean for aid agencies, or their government partners?