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Public Financial Management (PFM) Performance Report for the Republic of the Marshall Islands

Introduction

The Public Financial Management (PFM) Performance Report for the Republic of the Marshall Islands provides an assessment of the country’s PFM performance using the Public Expenditure and Financial Accountability (PEFA) framework. This report aims to identify areas of strength and weakness in the country’s PFM system, with a focus on promoting good governance practices.

Challenges and Prospects for Reform Planning and Implementation

The report identifies several challenges in the country’s PFM system, including:

  • Limited stakeholder engagement and buy-in for reforms: The report notes that there is a lack of active participation from stakeholders in the reform process.
  • Insufficient physical and human resource capacities to support reforms: The report highlights that the country lacks sufficient resources to implement and sustain reforms.
  • Lack of consensus on the level and scope of reforms required: The report notes that there is no clear agreement among stakeholders on the extent of reforms needed.

Critical factors for successful reforms include:

  • Visible and active top management and political support for reforms: Strong leadership and commitment from senior officials are essential for driving reform efforts.
  • Government ownership of the reform process: The government must take ownership of the reform process to ensure its success.
  • Cross-cutting elements, such as sufficient physical and human resource capacities: Adequate resources are necessary to implement and sustain reforms.

PFM Performance Indicators

The report assesses 21 PFM performance indicators across three dimensions:

PFM Outturns

This dimension evaluates the credibility of the budget, including:

  • Aggregate expenditure out-turn compared to original approved budget: The report assesses whether actual expenditures align with planned budgets.
  • Composition of expenditure out-turn compared to original approved budget: The report examines whether actual expenditures match the composition outlined in the budget.
  • Stock and monitoring of expenditure payment arrears: The report evaluates the country’s ability to track and manage outstanding payments.

Key Cross-Cutting Issues

This dimension assesses comprehensiveness and transparency in the budget process, including:

  • Classification of the budget: The report examines whether the budget is properly classified and easily accessible.
  • Comprehensiveness of information included in budget documentation: The report evaluates the level of detail provided in budget documents.
  • Extent of unreported government operations: The report assesses the extent to which government activities are not reflected in official budgets.
  • Transparency of inter-governmental fiscal relations: The report examines the transparency of financial relationships between different levels of government.

Budget Cycle

This dimension evaluates the predictability and control in budget execution, including:

  • Orderliness and participation in the annual budget process: The report assesses whether the budget process is well-structured and inclusive.
  • Multi-year perspective in fiscal planning, expenditure policy, and budgeting: The report examines whether the country has a long-term vision for its fiscal management.
  • Effectiveness of measures for taxpayer registration and tax assessment: The report evaluates the effectiveness of systems for registering taxpayers and assessing taxes.
  • Effectiveness in collection of tax payments: The report assesses the efficiency of tax payment collection processes.

Overall Assessment

The report provides an overall assessment of the country’s PFM performance using a numerical score. The scores are based on dimension ratings, which range from 0 (very poor) to 5 (excellent).

Based on the report, it appears that the Republic of the Marshall Islands has some areas for improvement in its PFM system, particularly in terms of stakeholder engagement, physical and human resource capacities, and government ownership of the reform process. However, the country also has some strengths, such as a well-established budget framework and a relatively high level of transparency in inter-governmental fiscal relations.

Overall, the report provides a comprehensive assessment of the Republic of the Marshall Islands’ PFM performance and highlights areas for improvement to support sustainable economic development.