The European Commission signed today a €5 million contribution to the new phase of the Public Expenditure and Financial Accountability (PEFA) programme. This internationally recognised tool assesses Public Finance Management systems, which are key to implementing public policies, service delivery and promoting sustainable development. In its new phase, PEFA includes the increasing roll-out of the newly developed modules on Gender Responsive Budgeting and Climate Budgeting that contribute to two important priorities of the EU. The signing took place in the margins of the Spring Meetings of the World Bank Group and the International Monetary Fund (IMF), together with other contributing partners: France, Luxembourg, Slovakia, Norway, Switzerland, the IMF and the World Bank.
European Commissioner for International Partnerships Jutta Urpilainen said: “Effective Public Finance Management is critical to enabling better domestic resource mobilisation which in turn helps partner countries strengthen basic services, reduce inequalities and increase their resilience. It is also essential to improving the investment climate, in line with the EU Global Gateway strategy. The new commitment we sign today underlines the EU’s strong and continued engagement in the Public Expenditure and Financial Accountability programme. I also welcome the contribution of EU Member States to the programme, acting together as Team Europe!”
PEFA is at the heart of the EU’s cooperation with many partner countries. It feeds into the progress on Public Finance Management reforms especially in countries receiving the EU Budget Support. Also, PEFA is part of the EU’s “collect more – spend better” approach, improving efficient and equitable revenue collection and effective and transparent spending. The new Phase VI is the continuation of a successful multilateral initiative supporting improvement in Public Financial Management in partner countries for the next five years.
Background
PEFA began in 2001 as a mechanism to harmonise the assessment of Public Financial Management (PFM) across development partner organisations. It was created through a joint initiative by seven international development partners: the European Commission, the International Monetary Fund, the World Bank, and the governments of France, Norway, Switzerland and the United Kingdom. These initial partners were joined in 2019 by the governments of the Slovak Republic and Luxembourg.
PEFA was created to provide a standard methodology and reference tool for PFM diagnostic assessments. PEFA was also intended to provide a basis for dialogue on PFM reform strategies and priorities. It was expected to create a pool of shared information that could contribute more broadly to the research and analysis of PFM. PEFA has become the acknowledged standard for PFM assessments.
PEFA is a global initiative with an overarching objective of strengthening PFM systems and promoting more coherent and effective approaches to PFM reform. The PEFA assessment tool, the main product of the initiative, is designed to identify the strengths and weaknesses of PFM systems at national or subnational level. Supplementary frameworks were developed during Phase 5 to assess how countries’ PFM systems account for aspects of climate change and gender equality.
The PEFA Program has been implemented in five phases since its establishment in 2001.
- Phase 1 (December 2001 to March 2006) was primarily concerned with creating a consensus on the most appropriate approach to supporting PFM systems. It focused on the development of the initial PEFA performance measurement framework.
- Phase 2(April 2006 to September 2008) was concerned with supporting users of the PEFA tool during its early implementation and establishing systems for monitoring its use.
- Phase 3 (October 2008 to June 2012) involved the creation and use of a pool of information on PFM performance from PEFA assessments. The program focused on improving the quality of assessments and monitoring changes in countries’ PFM performance over time.
- Phase 4 (July 2012 to April 2017) involved doubling the number of new and successive assessments by central and subnational governments. The assessment methodology was substantially upgraded. It was also strengthened through the introduction of the PEFA Check process quality arrangements. The PFM performance information database was expanded, and knowledge dissemination was increased. PEFA assessments were used by many governments and development institutions for examining and planning PFM reform initiatives and strategies.
- Phase 5 (current phase, which started in May 2017) is heading toward successful completion. It builds on the previous four phases, taking advantage of the preeminent position of PEFA among PFM reform tools. A full set of guidance materials was developed to support the implementation of the substantially upgraded methodology, PEFA 2016, including one product that focuses on the process to consider when using PEFA to support PFM improvements. Strengthened quality assurance was also introduced. PEFA 2016 was complemented by supplementary frameworks that assess the responsiveness of PFM in mainstreaming gender and climate change. The PEFA methodology was also substantially revised for application at the subnational level to better suit the characteristics of subnational governments. In addition to strengthening the PFM performance information database, the PEFA Program launched a global report on PFM that highlights PFM trends based on the analysis of PEFA data. PEFA also increased its visibility with a series of regular events on PFM to allow engagement with various stakeholders, including events building on research products from the PEFA Research Competition (launched in 2019).
