Public Financial Management for PRSP - Deutsches Institut für ...

Stefan Leiderer et al.
tion of the poor. At the same time, however, decentralization renders the
processes of budget planning, execution and control significantly more complex,
multiplying coordination requirements and possibly overtaxing scarce
human and technical capacities in developing countries. None the less, most
work on PFM systems and reform focuses almost exclusively on PFM at the
central level of government, neglecting that many developing countries –
strongly supported by international donors – are increasingly delegating political
decision-making powers and financial responsibilities to sub-national
levels of government.
To make matters worse, most analytical work on PFM in any particular country’s
circumstances focuses mainly on assessing formal institutions and processes
governing the management of public finances. And although most
authors recognise that PFM systems in most developing countries are largely
characterised by informal practices and procedures, the underlying mechanisms
leading to these informal practices are rarely examined in detail. Instead,
neo-patrimonial structures and a lack of commitment by political leaders
to sound PFM and poverty reduction are readily blamed for consistent
non-adherence to formal rules and procedures in the management of public
finances. This study, however, argues that there are a number of important
influencing factors that lead to persistent non-adherence to formal rules and
regulations other than “cultural” ones. These factors leading to informal PFM
practices are in part the result of modern but poorly adapted formal PFM
rules as well as inadequate sequencing of reforms, and not least donor behaviour.
This study examines how the PRSP approach and decentralisation efforts
interact with each other by studying their impact on the PFM system in Malawi.
It is precisely the PFM system where PRSP implementation and decentralisation
need to be linked and reconciled with each other. The research
focus of this study is thus on the implications of a decentralising PFM system
for PRSP implementation. The following section presents the main research
question of the case study for this report in detail in the following section. It
goes on to provide some background information on the issues being addressed.
The section then briefly introduces the research approach and ends
with an overview of the structure of this report.
16 German Development Institute