There appears to be a growing? debate about terminology around public spending. In the 1990s and the early part of the 2000s, the terminology used (at least by economists) tended to be “PEM”, public expenditure management, with its relative but not exclusive emphasis on the performance measures of spending (allocative and technical efficiency and aggregate fiscal discipline), and the consequential emphasis on budget policy (what is spending used for). In those days, PEM was considered to include the whole of the budget cycle. Allen Schick’s seminal 1998 book refers to “Public Expenditure Management”. Similarly, the World Bank’s 1998 reference document, which touched on all aspects of the budget cycle, was entitled the “Public Expenditure Management Handbook”, as was the OECD’s 2001 reference manual for transition countries: “Managing Public Expenditure”. The IMF’s Guidelines for fiscal economists published in the late 1990s (from the Fund’s Public Expenditure Management Division) were termed “Public Expenditure Guidelines” and indicated that the Guidelines were intended for the “many economists participating in their first IMF mission [who] may have relatively little experience of practical issues in public expenditure management; typically, they face questions that are more about accounting and institutional structures than economic theory or policy.”
In the latter part of this decade, and particularly since there has been greater attention paid to fiduciary assessments and other financial management assessment tools (coinciding with higher levels of budget support by some aid agencies), the term now in common parlance for the whole of the budget cycle appears to be PFM, public financial management, with its implied (greater) emphasis on financial management and the downstream side of the budget cycle. PEM (both the term and the activity?) seems to have fallen out of fashion.
Some have argued that this shift is not merely cosmetic, that there has been a loss of focus on the upstream part of the budget cycle and the links amongst policy, planning and budgeting, in favour of a focus on strengthening financial management, particularly through the introduction or strengthening of Financial Management Information Systems (FMIS) or IFMIS (Integrated FMIS). In this view, budget management and financial management should remain separate in concept. Others, however, believe that the change reflects aid agencies’ current (self-) interests, and that it is this which should be addressed rather than the terminology itself.
The question is: in changing the terminology, have we lost something? Has the emphasis on financial management (implicit in PFM) replaced that on budget (and, particularly, expenditure) management (implicit in PEM)? Has the pendulum swung too far and it’s time for it to swing back? Or is this just a storm in a teacup? Is it even an issue in non-Anglophone countries?
What do PFM (PEM?)-Boarders think?
