Institute of Development Studies

Successful public sector reform is rare in Africa. Over 12 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: context, ownership, purpose, and strategy. PFM
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 the PFM reform in Africa is about the change task and
climbing financial summits.