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Capacity constraints and public financial management in small Pacific Island countries

Author

Listed:
  • Haque, Tobias A.
  • Knight, David S.
  • Jayasuriya, Dinuk S.

Abstract

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.

Suggested Citation

  • Haque, Tobias A. & Knight, David S. & Jayasuriya, Dinuk S., 2012. "Capacity constraints and public financial management in small Pacific Island countries," Policy Research Working Paper Series 6297, The World Bank.
  • Handle: RePEc:wbk:wbrwps:6297
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    References listed on IDEAS

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    Cited by:

    1. Matthew Dornan & Tess Newton Cain, 2014. "Regional Service Delivery among Pacific Island Countries: An Assessment," Asia and the Pacific Policy Studies, Wiley Blackwell, vol. 1(3), pages 541-560, September.
    2. Devendra Kumar Jain & Rup Singh & Henali Kumar & Nikeel Kumar & Arvind Patel, 2022. "Why does currency denomination in external liabilities of small island developing states matter? Evidence from Fiji," Asia and the Pacific Policy Studies, Wiley Blackwell, vol. 9(3), pages 447-464, September.
    3. Devendra Kumar Jain & Asif Chida & R. D. Pathak & Raghbendra Jha & Stephanie Russell, 2022. "Climate risk insurance in Pacific Small Island Developing States: possibilities, challenges and vulnerabilities—a comprehensive review," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 27(3), pages 1-21, March.
    4. Ezequiel Cabezon & Ms. Patrizia Tumbarello & Mr. Yiqun Wu, 2015. "Strengthening Fiscal Frameworks and Improving the Spending Mix in Small States," IMF Working Papers 2015/124, International Monetary Fund.

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