Prioritising Robust PFM Systems in a Post-Covid19 World.

Updated: May 18





It's very hard to speak of the 'new normal' without speaking of the 'how-to'.


For example, How do we get there?; And when we get there, how do we ensure that things are working as they should?; And if we suspect that things aren't working as they should, how can we work together to get things back on track?; And so on.


The problem itself is never too hard to spot, and in some cases, neither is the solution.

Think cause-and-effect for instance; do more of this, and you get more of that. Do less of this and you get less of that, etc.


PFM is an economic planning tool that encourages the inter-governmental, departmental and disciplinary coordination in public affairs.

The challenge is in the intentionality of doing more or doing less.

Putting this into context in developing countries, we can't speak of a new approach to public spending without developing appropriate tools to stimulate success (the how-to).

The COVID-19 pandemic reminds us of the need to take good and responsive public financial management (PFM) seriously - not just in times of crisis but for the years ahead.


What is PFM and why is it important?


Andrew Lawson defines PFM as “the set of laws, rules, systems, and processes used by sovereign nations (and sub-national governments), to mobilise revenue, allocate public funds, undertake public spending, account for funds and audit results.”


PFM is an economic planning tool that encourages the inter-governmental, departmental and disciplinary coordination in public affairs.


Public Financial Management Cycle (PFM) and Key Players chart (Extracted from gsdrc.org)

Developing countries should engage measures that guarantee effective PFM.


In a recent report by the International Monetary Fund (IMF), the objective of PFM during this public health challenge includes supporting the provision of emergency health services, providing access to essential public services, and ensuring the implementation of new fiscal measures.


As part of the objective of PFM, accountability, transparency, and integrity must be prioritised among public office officials.


The interlink


Adequate PFM allows for the provision of emergency health services for COVID-19 management.  The Center for Global Development (CGDEV) says that good PFM in health would enhance health budgetary space.


The link between the budgetary space for health and PFM would enhance appropriate budget formulation, budget approval, budget execution, and budget evaluation. 


For example, a better healthcare budget management system will help to ease the burden of COVID-19 and non-COVID-19 health challenges.


But CGDEV also notes that most developing countries' health budgets “provide relatively little on health—an average of between 1 and 2 percent of GDP—and more than 20 percent of this allocation is not utilised.”


With the peculiarities of the time, an appropriate PFM would help to manage COVID-19 and would also allow the national government in developing and advanced countries to provide health services at subsidised rates, support vaccine research, as well as collaborate with other agencies that can finance expenditure.


The decision to consolidate public financial management systems proves to be beneficial during uncertain times.

The Overseas Development Institute (ODI) asserts that the central banks or the governments of emerging markets and developing economies (EMDEs) are unable to provide relief funds because many of these countries rely on foreign aid.


But with robust PFM systems in place, government officials in EMDEs will be able to harness their finances, put an end to corruption and harness the power of tax obligations.


Planning ahead


This narrative is more persuasive when we realise that there is an imminent global recession ploughing its way through to change the dynamic of how countries relate with each other - both domestically and internationally.


The decision to consolidate public financial management systems proves to be beneficial during uncertain times.


Countries in developing regions, especially, should be reviewing the ways in which they currently handle public finance.


The  COVID-19 pandemic reminds us that we can't come up with public financial management solutions from scratch, push for immediate implementation and  evaluate their effectiveness - whilst still in the middle of an emergency. We have to plan ahead for it.


This means that we have to constantly evaluate the current system, test their resilience to various levels of socio-economic traumas and find better ways to make them useful for when we need them the most.



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This article was co-authored by Fisayo Ogundoro and Bukola Fadaini.

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