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Public expenditure management (PEM)

PEM is an approach to public sector budgeting that is oriented towards achieving socially desired outcomes. A sound PEM system allows the government to make the best use of available resources to help the poor. The three core themes in PEM are: maintaining aggregate fiscal discipline, allocation of resources according to strategic priorities and promoting efficiency and effectiveness of policy implementation.

This page, which forms part of the Governance Theme section on 'public financial management and accountability', includes a series of key texts that explore this concept.

Key texts

Heimans, J. 2002, 'Strengthening Participation in Public Expenditure Management', OECD Policy Briefing no. 22.
This brief analyses participatory budgeting. It is based on a review of the existing literature as well as interviews with a range of experts, including members of civil society, government officials, and specialists in multilateral agencies, who have had experiences with different aspects of participatory budgeting.
Full document available online

IMF and World Bank, 2001, Guidelines for Public Debt Management, IMF, New York.
This paper from the International Monetary Fund and the World Bank provides guidelines for public debt management. The guidelines are designed to assist considerations about reforms to strengthen the quality of public debt management and reduce the vulnerability of countries to international financial shock.
Full document available online

Lienert, Ian, 2003, 'A comparison between two public expenditure management systems in Africa', IMF Working Paper no. 03/2.
Provides very good summaries of the basic workings of the Anglophone PEM system and the Francophone PEM system, and a comparison of the two. This would be a very useful reference for anyone wanting to understand either system, and provides the nuts and bolts in a very readable and concise form.
Full document available online

World Bank 1998, Public Expenditure Management Handbook, World Bank, Washington D.C.
This handbook provides a framework for thinking about how governments can attain sound budget performance and gives guidance on the key elements of a well- performing public expenditure management (PEM) system. The handbook is divided into two parts, concerned with budgetary and financial management in the public sector. Part 1 offers guidelines for improvement and Part 2 diagnoses weaknesses.
Full document available online

Schick, A. 1998, A Contemporary Approach to Public Expenditure Management, World Bank, Washington D.C.
This paper produced for the World Bank Institute outlines the concepts of public expenditure management (PEM), explaining how PEM supplements formal budgeting process rules with behavioural norms for allocating and controlling public expenditure. PEM seeks procedures that increase the probability of achieving preferred outcomes, and its three basic themes are aggregate fiscal discipline, the allocation of public resources in accord with strategic priorities and the promotion of efficient provision of services.
Full document available online

Fozzard, F., Holmes, M., Klugman, J. and Withers, K., 2000, 'Public Spending for Poverty Reduction,' Chapter 1.6 in PRSP Sourcebook Volume 1, World Bank, Washington D.C.
This document begins with an overview of the budget system, considering the influence of institutional arrangements on public spending outcomes at the national, sector and local levels. It sets out a framework for assessing spending options and presents a guide on how to get started on this process.
Full document available online

Premchand, A. 2000, Control of Public Money - The Fiscal Machinery in Developing Countries, Oxford University Press, New Delhi & Oxford.
This book covers the role of the fiscal mechanism in the allocation, utilisation and accounting of public money; a historical review of relevant concepts, systems and operational techniques; the problems associated with the inexorable growth of expenditures; the implementation of reforms and their impact on the provision of public services; the role of institutions; and a menu of options to formulate a diversified framework for management according to the changing portfolio of expenditures.
Chapters of this book are available through BLDS document delivery service. Full summaries and presently available for the following chapters:
'Recent Reforms and Issues'
'Bias In Budget Estimates, Underfunding and Money Management'
'Multiple Facets of Expenditure Control'
'Institutional Development and Organisational Paradoxes'
'Organizing Finance Ministries'
'Comparative Survey of Budgetary Management in the United States, and in Australia, New Zealand, and the United Kingdom'
'Legislative Control'
'Financial Management in Spending Agencies'

Potter, B. H. and Diamond, J. 1999 'Guidelines for public expenditure management', Legal Institutions Thematic Reform Group, International Monetary Fund, Washington DC, 1999.
The aim of this paper is to provide information for economists lacking experience in the practical issues of public expenditure management. These guidelines aim to provide a general overview of the principles and practices observed in three key aspects of public expenditure management: budget preparation; budget execution; and cash planning.
Full document available online

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