Reimagining Public Finance (RPF) is an initiative by a committed group within the World Bank to address a significant problem that affects public financial management (PFM) and public finance reform practice. The problem is that too much PFM technical work is driven by a best practice mentality. When operating in best practice mode, analysts don’t proceed by asking what PFM reforms will improve government performance in the country concerned. Instead, they ask what needs to be done to bring country practices into conformity with a set of pre-defined PFM best practices. This makes PFM reforms ends in their own right, rather than instruments for improving government performance in tangible ways.

I don’t think that this approach is as dominant as RPF suggests, but there is no doubt that it characterizes a certain portion of contemporary PFM technical work. RPF is pointing to a real problem, and the issue at stake is how to tackle it.

This blog piece is the first of two intended to contribute to the debate at the World Bank conference on Reimagining Public Finance (September 29-30, 2025) – at which I will be a panelist. The RPF team is to be congratulated for the effort that they have put into developing the proposals to be discussed at this conference, and for encouraging open debate on the issues.

The RPF remedy for this problem is twofold. Firstly, RPF calls for radical change in the PFM analytic framework – that is, in the set of principles and concepts that are used to structure work on these issues. Secondly, it proposes a new diagnostic methodology – i.e. a new way of identifying the problems in PFM systems and public finance policies that require reforms.

In this blog piece, I look at the second of these proposals – the new diagnostic methodology.

I will address the call for a new analytic framework in my next blog piece. By way of preview, my message there will be that is neither necessary nor useful to reinvent PFM doctrine. This is because there is a well-established mainstream PFM doctrine that is sound, and the problem that RPF addresses is not due to any flaws in this mainstream PFM doctrine. It is mainly due to more mundane and practical factors, which means that it cannot be solved by developing new theories.

The RPF “Development Outcome” Based Diagnostic Methodology

RPF’s proposed new diagnostic methodology is complex. The essential idea is to take as the starting point a specific “development outcome” that government wishes to achieve, such as universal literacy and numeracy. The analysis then proceeds, by a number of steps, to identify “public finance bottlenecks” – including PFM bottlenecks – that present obstacles to the achievement of that development outcome. Reforms to remove those bottlenecks are, finally, proposed. In the case of education, for example, the result would be a set of PFM and other public finance reforms to facilitate the achievement of universal literacy and numeracy.

This is a version of the so-called problem-driven approach to public sector reform. It represents a worthwhile attempt to ensure that PFM reforms are not pursued as ends in their own right, but as ways of improving government service delivery. In the words of the RPF team, it “reverses the logic behind many existing PFM interventions. Rather than starting from an isolated focus on the quality of PFM systems, it considers first the development outcomes that governments are pursuing and that public finance can achieve.”

I have a range of technical issues with the specifics of the methodology proposed, including its complexity and several conceptual issues. However, if we set aside such technical issues, the broad approach has a lot going for it. Indeed, I currently have the privilege of working with a team from the World Bank and World Health Organization to apply a somewhat similar approach to the overhaul of the FinHealth Toolkit. What we are developing is precisely a methodology to identify PFM bottlenecks that degrade the performance of public health systems and, in doing so, create obstacles to the achievement of universal health coverage.

I therefore look forward to RPF’s continuing work on developing its new methodology for sectoral applications such as these. The project has already commissioned initial work on applying the methodology to several sectors. This should serve as the basis for extensive discussion with, I would expect, subsequent major improvements.

The Limits of the RPF Methodology

The big “but” is that the new RPF methodology has great limitations. Its general approach can work when the focus is on specific sectoral objectives such as universal literacy and numeracy. It cannot be used for more broadly-focused work that looks at the way in which PFM systems can be improved to better support the performance of government as a whole.

Governments pursue hundreds of major outcomes – national security, economic development, low levels of crime, social harmony, faster technological progress, and many others. PFM systems need to support the achievement of all of these many outcomes. There are also important output goals that PFM systems need to serve, of which universal health cover is one[1]. It would be impossible to carry out a diagnostic analysis of a PFM system, or of a specific component of the system, such as budget preparation processes, using a methodology that proceeds by looking, one-by-one, at every one of these goals to identify the specific PFM bottlenecks that obstruct its achievement.

RPF more or less recognizes this: the RPF project “framing” paper acknowledges that the proposed new diagnostic methodology “may” only be suitable for the analysis of public finance problems contributing to “specific development outcomes” in individual country contexts[2].

So when PFM technical advisers are tasked with analyzing and proposing reforms to some part of a country’s PFM system – such as cash management, aggregate fiscal policy formation or the budget classification – they will be disappointed if they look to RPF for new ways of carrying out their mission. Fortunately, however, the existing mainstream PFM analytic framework already provides a good way of approaching such work. I’ll explain why in my next blog piece, and will consider whether RPF has made a convincing case for radical change in the PFM analytic framework.

[1] UHC is often mistakenly referred to as an outcome goal. Because it is a goal concerning who receives a public service — i.e. an output — it is in fact an output goal. The health outcome that UHC serves is reduced mortality and morbidity.

[2] To quote the RPF Framing Paper in full on this point: “Given the complexity of the proposed framework, it might be impossible to apply [the methodology] wholesale to a broad set of development outcomes … Rather, it is probably better used to analyze the contribution of fiscal policies [i.e. public finance policies] and PFM systems to specific development outcomes in individual country contexts …”