Government budgets are key areas of public action by which policy objectives are chosen and acted upon and the necessary resources collected, allocated and spent. Government budgeting systems are also important to donor agencies because of their role in providing fiduciary safeguards, helping to ensure, for example, that foreign aid funds remitted as direct budget support are properly used for their intended purpose. Strong budgeting systems also contribute to better overall standards of public sector governance. In recent years, donor-supported Public Financial Management (PFM) reform programmes have covered a range of initiatives to strengthen the rules and procedures that underpin budget processes in aid recipient countries.

This Background Note reviews the sources of data on PFM performance and the resulting findings and considers what we already know about the factors that influence PFM reform. It further assesses the implications for future reform efforts.