Public Sector Governance and Accountability Series: Budgeting and ...

390 Salvatore Schiavo-Campo
it; and if you cannot allocate it, you obviously cannot manage it well. 4
Corruption is the greatest single impediment to effective management of
public financial resources, and conversely, improvements in PEM are at the
center of the struggle against corruption. Preventing corruption in financial
management must therefore be the absolute priority in those African
countries that, because of past civil conflict or other reasons, have extremely
weak revenue forecasts and cash management systems. However, in those
countries, it is also essential to (a) tighten financial accountability and
expenditure control in ways that do not jeopardize the improvements in
sectoral allocation and operational management that should eventually
follow and (b) have a clear ex ante sense of how far to push improvements in
expenditure control and cash management before strategic allocation and
management issues become timely and necessary. The law of diminishing
returns applies to institutional development even more strongly than to
physical production.
Corruption in Public Financial Management
In Transparency International’s Corruption Perceptions Index rankings for
2005, most African countries regrettably score very low. 5 On a scale of 1
(most corrupt) to 10 (least corrupt), the greatest government integrity is
perceived to be in Iceland, with a score of 9.7, and the “distinction” of the
most corrupt country in the world goes to Chad. Scores for other African
countries range from a relatively favorable 5.9 for Botswana and 4.5 for
South Africa, to a disappointing 2.1 for the Democratic Republic of Congo
and Kenya, to just 1.9 for Nigeria, which is ranked as the sixth most corrupt
country in the world. Other African countries’ scores are clustered around
3.0 to 3.5—even African countries generally known as good performers in
public financial management (for example, Rwanda was scored at 3.1 and
Tanzania, at 2.9). The good news is that public integrity appears to have
improved over the past decade for most African countries that do not
suffer from severe internal security problems. Also, image tends to lag
behind reality, and the positive changes in public expenditure management
of recent years in many countries will soon be reflected in more favorable
international perceptions—including the Transparency International ratings.
By contrast, and understandably, countries in conflict or recently emerging
from civil conflict have shown an increase in official corruption. For example,
in Burundi, which was scored at 2.3, corruption was modest and predictable
until the early 1990s; it has become pervasive, however, after the decade of
civil war. 6 In Africa, as in most developing countries, the areas in which