Successful development depends in large part on the efficiency, integrity and effectiveness with which the state raises, manages and expends public resources. Improving the rules and institutions governing these activities should be a major component, therefore, of any development approach. Given that strengthening Public Financial Management (PFM) is at the heart of the Millennium Development Goals, and good governance more generally, the Paris Declaration (2005) seeks to promote joint efforts in this area between donors and partner countries. This report takes stock of progress in strengthening public financial management systems and provides recommendations on how best to facilitate achieving the 2010 targets set out in the Paris Declaration.

It sets out the benefits of and rationale for using country systems, assesses progress in meeting the Paris Declaration targets, reviews the landscape of PFM reforms in partner countries, looks at drivers of successful PFM reforms, examines the factors that influence decisions to use country PFM systems, focusing on the perceived risks and their assessment and management, and describes the PEFA (Public Expenditure and Financial Accountability) assessment, which provides information on the quality of a country’s PFM system.

This report shows that now, as perhaps never before, partner countries and donors must strive to build mutual trust and work together in a true partnership for results.