Examining public finance

The European Commission carries out assessments of public financial management issues in beneficiary countries when it prepares its country strategy papers and indicative programmes. Such assessments are carried out regularly and built into individual programmes that use budget support as a means of providing aid.

Improvements in public financial management systems are seen as essential for the proper implementation of European Union aid policies and for the lasting achievement of development objectives.

Improvements in public financial management are viewed by the Commission as both an eligibility criteria for – and objective of – budget support. In fact, a number of legal bases for the provision of budget support make some reference to having “sufficiently transparent, accountable and effective” or “sufficiently transparent, reliable and effective” public financial management systems. For example, see:

On the basis of these instruments budget support can be provided as long as the partner country has either in place or under implementation a credible and relevant programme to improve its public financial management. The Commission adopts a rigorous and dynamic interpretation to its assessment work in this area – no attempt is made to establish minimum conditions; instead the emphasis is on a partner country’s commitment to change and the future direction of its public financial management systems.

Assessment relies on exploring two key elements:

  • An assessment of the quality of the country's public financial management system using the ‘Public Financial Management – Performance Measurement Framework’, which comes from the PEFA Initiative (Public Expenditure and Financial Accountability).
  • An assessment of the public financial management reform process also takes place. It delves into such issues as: a government’s political will and current efforts to improve the performance of public finances; the relevance and level of implementation of a country’s reform strategies; and the usefulness and influence of any capacity development programmes that are funded by donors to support the reform of public financial management.

Access to EC led PEFA assessments:

 

Further details about these topics can be found in EuropeAid’s Guide on General Budget Support pdf - 666 KB [666 KB] .