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Second Phase of the Governance Reform Program

sector: Public Sector Management | country: Mongolia

The evaluation offers lessons regarding the need to properly adapt the scope and time frame of reforms to institutional capacity and to sequence reforms. Budget reform should be regarded as an evolving process and should focus on a more limited set of reforms that are within the reach of government institutions. Organisation for Economic Co-operation and Development (OECD)-type budget systems in developing countries and emerging markets must be based on a solid platform of financial management (the micro basis of broader budget system reform) within Ministry of Finance (MOF), line ministries, and other government agencies. In Mongolia as well as many other developing countries, this aspect of public financial management (PFM) reform has proved to be particularly problematic. Reforming PFM systems is a long-term process, for which a time frame of 15-25 years is often considered realistic.

In general, program loans should either exclude highly complex and far-reaching policy reforms or build on intensive policy dialogue and enhanced monitoring and review by ADB. Corrective action regarding the scope and implementation arrangements of the program should be considered at an early stage if implementation is observed to fall behind schedule or government capacity, ownership, and commitment show signs of receding. To improve ADB’s processing and supervision of complex program loans�particularly those that entail policy reforms, development of legislation, and human resource and institutional development�strong in-house specialist expertise, instead of predominant reliance of consultants, should be ensured, in particular sufficient provision of budget for supervision and staff skills.

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