Public Financial Management

In line with the Paris declaration on aid effectiveness, donor countries have committed themselves to increasingly rely on partner countries' public financial management (PFM) systems instead of setting up parallel systems for managing program funds. As a result, donors have become increasingly concerned with the quality of PFM systems in the receiving country and are providing support to strengthen the PFM systems.

What is public financial management?

PFM includes all components of a country's budget process - both upstream (including strategic planning, medium term expenditure framework, annual budgeting) and downstream (including revenue management, procurement, control, accounting, reporting, monitoring and evaluation, audits and oversight).

Why reinforce PFM systems?

Good public financial management systems are important for democratic governance, macro-economic stability, effective use of resources available and poverty reduction. Good PFM systems can also help prevent corruption and foster aid effectiveness. A sound PFM system is a precondition for making it possible to effectively channel resources to service delivery like e.g. basic education and health services. Ineffective PFM systems, on the other hand, can hamper development and increase the risk of corruption.

How does Norad?

Norway supports several broad PFM reforms in our partner countries usually together with other donors at country level or through multi donor organizations. Norway also supports development of PFM areas like supreme audit institution, including core funding of the INTOSAI Development Initiative, tax administration and public financial management of oil resources (see also Tax for Development and Oil for Development). Norad provides advice and cooperate with Norwegian Embassies, The Norwegian Foreign Ministry, and several Norwegian and international partners.

Norad and the Ministry are also supporting a program for developing and maintaining a framework for assessing a country's public financial management system (The Public Expenditure and Financial Accountability (PEFA) Performance Management Framework, see www.pefa.org ). Since its introduction in 2005, the PEFA framework has been applied in more than 125 countries. Norway has used the framework for a self-assessment of the public financial management in Norway (Norad Report 15/2008).

Which countries receives support

Norway supports public financial management reform programs through basked funding and bilateral cooperation in countries like Tanzania, Kenya, Malawi, Zambia, Uganda, Mozambique and Nepal.