What is public financial management?
Public financial management (PFM) refers to the systems through which governments organise their budgets.
A PFM system has three key objectives:
- maintaining fiscal discipline (preventing over-spending and over-borrowing)
- promoting strategic priorities (ensuring there are sufficient resources to achieve the government's main objectives)
- delivering value for money (making sure resources are used efficiently and effectively).
The main components of PFM are:
- revenue policy
- macroeconomic forecasting
- a medium term budgeting framework, supported by service plans, annual budget preparation and implementation (including procurement)
- accounting (including asset inventories, reporting against the budget, internal control arrangements, internal audit, annual financial and service reports, and external auditing).
DFID’s support for PFM reform
Strong PFM systems help to build states that are capable, accountable and responsive to the needs of their citizens.
DFID works with the governments of a number of developing countries to strengthen their PFM systems. Working with other donors and the UK public sector, we aim to ensure that these efforts support developing countries’ own priorities.
To make our assistance better coordinated, better informed and ultimately more effective, we support or cooperate with the following bodies and initiatives:
In improving PFM systems, an important issue that partners need to address is how to deal with political and economic barriers to reform.
To support this work, DFID has produced guidance for partner governments and donors, including DFID country office staff. The documents, which may be found under "Related Publications" and are prepared under the auspices of the International Organisation of Supreme Audit Institutions, look at:
- the sequencing of reforms
- working with Supreme Audit Institutions.