Capacity Constraints and Public Financial Management in Small Pacific Island Countries

Drawing on Public Expenditure and Financial Accountability assessment scores from 118 countries, this paper provides the first comparative analysis of public financial management performance in small Pacific Island Countries (PICs). It applies a To...

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Bibliographic Details
Main Authors:	Haque, Tobias A., Knight, David S., Jayasuriya, Dinuk S.
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2013
Subjects:	ACCESS TO INFORMATION ACCOUNTABILITY FRAMEWORK ACCOUNTING ACCOUNTING STANDARDS AGGREGATE EXPENDITURE AGGREGATE FISCAL AGGREGATE REVENUE ANNUAL REPORTING ARREARS AUDIT OFFICE AVAILABILITY OF DATA BEST PRACTICE BINDING CONSTRAINT BLUEPRINT BOOKMARK BRAIN DRAIN BUDGET ALLOCATIONS BUDGET CIRCULAR BUDGET COMPREHENSIVENESS BUDGET DOCUMENTATION BUDGET ESTIMATES BUDGET EXECUTION BUDGET PREPARATION BUDGET PROPOSALS BUDGET SUPPORT BUDGET SYSTEMS BUDGETARY EXPENDITURE BUDGETARY INSTITUTIONS BUDGETING CAPACITY BUILDING CAPACITY CONSTRAINTS CAPACITY INDICATORS CAPITAL SHORTAGES CASH BALANCES CASH FLOWS CENTRAL AGENCIES CENTRAL GOVERNMENT CITIZENS COMPETITIVE PROCUREMENT CUSTOMS DEBT DEBT DATA DEBT SUSTAINABILITY DEVELOPING COUNTRIES DEVELOPMENT ASSISTANCE DEVELOPMENT BANK DEVELOPMENT GOALS DEVELOPMENT OBJECTIVES DEVELOPMENT POLICY DISBURSEMENTS DONOR AGENCIES DONOR FLOWS ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC PERFORMANCE ECONOMIC REFORM ECONOMIES OF SCALE EXTERNAL ACCOUNTABILITY EXTERNAL ASSISTANCE FINANCE MINISTRIES FINANCIAL ACCOUNTABILITY FINANCIAL MANAGEMENT CAPACITY FINANCIAL RESOURCES FINANCIAL STATEMENTS FISCAL DATA FISCAL FORECASTS FISCAL INFORMATION FISCAL OUTTURNS FISCAL POSITION FISCAL YEARS FRAUD FUNCTIONALITY FUTURES GLOBALIZATION GOOD GOVERNANCE HUMAN CAPITAL HUMAN RESOURCES IMPACT OF POPULATION IMPACTS OF POPULATION INCOME LEVEL INCOME LEVELS INFRASTRUCTURE PROJECTS INSTITUTIONAL DEVELOPMENT INTERNAL AUDIT INTERNAL AUDIT FINDINGS INTERNAL AUDIT FUNCTION INTERNAL CONTROL INTERNAL CONTROLS INTERNATIONAL BANK INTERNATIONAL CAPACITY INTERNATIONAL COMPARISONS INVESTING INVESTMENT EXPENDITURE ISSUANCE ISSUANCE OF GUARANTEES JOB OPPORTUNITIES JOB TRAINING LABOR MARKET LABOR MARKETS LEGISLATIVE BUDGET LOCAL CAPACITY MACROECONOMIC MANAGEMENT MACROECONOMIC VOLATILITY MANAGEMENT SYSTEMS MARGINAL EFFECTS MARKETABLE SKILLS MIGRANT MIGRATION MIGRATION DATA MIGRATION FLOWS MINISTRIES OF FINANCE MINISTRY OF FINANCE MISSING DATA MULTIVARIATE REGRESSION ANALYSIS NATIONAL DEVELOPMENT NATIONAL GOVERNMENT NATIONAL GOVERNMENTS NUMBER OF MIGRANTS NUMBER OF PEOPLE OPEN ACCESS OUTSOURCING PERFORMANCE INDICATORS PERFORMANCE MEASUREMENT PERFORMANCES POLICY DISCUSSIONS POLICY IMPLICATIONS POLICY RESEARCH POLICY RESEARCH WORKING PAPER POLITICAL ECONOMY POPULATION DATA POPULATION EFFECT POPULATION SIZE POPULATION VARIABLE PORTFOLIO POST-CONFLICT SETTINGS POVERTY REDUCTION PRACTITIONERS PREPARATION OF BUDGET SUBMISSIONS PRIVATE SECTOR PRIVATE SECTOR DEVELOPMENT PROCUREMENT FUNCTION PROCUREMENT PROCESSES PROFESSIONAL STAFF PROGRAMS PROGRESS PUBLIC PUBLIC ADMINISTRATION PUBLIC ENTITIES PUBLIC EXPENDITURE PUBLIC EXPENDITURE MANAGEMENT PUBLIC FINANCE PUBLIC FINANCES PUBLIC FINANCIAL MANAGEMENT PUBLIC FINANCIAL MANAGEMENT SYSTEM PUBLIC FINANCIAL MANAGEMENT SYSTEMS PUBLIC SECTOR PUBLIC SECTOR REFORM PUBLIC SERVANTS PUBLIC SERVICE PUBLIC SERVICES REFORM EFFORTS REFORM OBJECTIVES REFORM PROGRAMS REGIONAL DUMMIES REGISTRATION SYSTEM RELATIONSHIP BETWEEN POPULATION RELIABILITY REMITTANCES RESOURCE ALLOCATION RESOURCE MANAGEMENT RESOURCE USE RESULT RESULTS RETENTION RETURN REVENUE COLLECTION RICHER COUNTRIES SERVICE DELIVERY SKILLED STAFF SMALL COUNTRIES SUB-NATIONAL GOVERNMENTS SUSTAINABILITY ANALYSIS TARGETS TAX TAX ASSESSMENT TAX COLLECTIONS TECHNICAL ASSISTANCE TECHNICAL CAPACITIES TECHNICAL CAPACITY TECHNICAL REQUIREMENTS TECHNICAL SKILLS TECHNICAL STAFF TERTIARY EDUCATION TOTAL EXPENDITURE TRANSPARENCY TREASURY TRUST FUNDS TURNOVER UNITED NATIONS POPULATION DIVISION WEB WORLD POPULATION
Online Access:	http://documents.worldbank.org/curated/en/2012/12/17103609/capacity-constraints-public-financial-management-small-pacific-island-countries http://hdl.handle.net/10986/12207

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Summary:	Drawing on Public Expenditure and Financial Accountability assessment scores from 118 countries, this paper provides the first comparative analysis of public financial management performance in small Pacific Island Countries (PICs). It applies a Tobit regression model across the full cross-country sample of Public Expenditure and Financial Accountability scores and country variables to identify potential causes for the observed underperformance of Pacific Island countries relative to other countries of similar income. First, the analysis finds small population size to be negatively correlated with Public Expenditure and Financial Accountability scores, with the "population penalty" faced by small Pacific Island countries sufficient to explain observed underperformance. Second, through application of a new capacity index of Public Expenditure and Financial Accountability dimensions, it finds strong evidence in support of the hypothesis that small population size impacts scores through the imposition of capacity constraints: with a limited pool of human capital, small countries face severe and permanent challenges in accessing an adequate range and depth of technical skills to fulfill all functions assessed through the Public Expenditure and Financial Accountability framework. These findings suggest that approaches to strengthening public financial management in small Pacific Island countries should involve: i) careful prioritization of public financial management capacity toward areas that represent binding constraints to development; ii) adoption of public financial management systems that can function within inherent and binding capacity constraints, rather than wholesale adoption of "best practice" imported systems; and iii) consideration of options for accessing external capacity to support public financial management systems on a long-term basis, from regional agencies, the private sector, or donors.

Capacity Constraints and Public Financial Management in Small Pacific Island Countries

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