Peterson, Stephen. "Reforming Public Financial Management in Africa." HKS Faculty Research Working Paper Series RWP10-048, December 2010.

Abstract

Successful public sector reform is rare in Africa. Over twelve years, Ethiopia transformed its public financial management (PFM) to international standards and now has the third best system in Africa that is managing the largest aid flows to the continent. This article presents a framework for understanding PFM reform based on the Ethiopian experience. Reforms succeed when they are aligned with the four drivers of public sector reform: COPS—context, ownership, purpose and strategy. Public financial management is a core function of the state and its sovereignty and it is not an appropriate arena for foreign aid intervention—governments must fully own it, which was a key to the success of Ethiopia’s reform. The purpose of PFM reform should be building stable and sustainable ‘plateaus’ of PFM that are appropriate to the local context and they should not be about risky and irrelevant ‘summits’ of international best practice. Plateaus not summits are needed in Africa. Finally, a strategy of reform has four tasks: recognize, improve, change, and sustain. Ethiopia succeeded because it implemented a recognize-improve-sustain strategy to support the government policy of rapid decentralization. All too often, much of PFM reform in Africa is about the change task and climbing financial summits.