What is Public Expenditure Management (PEM)?

Date: October 2001
Type: Serials
Subject:
Governance and public sector management
Series: Governance Briefs

Description

In general, Public Expenditure Management (PEM) tends to promote the achievement of three outcomes, namely, aggregate fiscal discipline, allocative efficiency, and operational efficiency. Aggregate fiscal discipline refers to the alignment of public expenditures with total revenues (domestic revenues plus a sustainable level of foreign borrowing); roughly speaking, it means keeping government spending within sustainable limits. In layman's terms, it means don't spend more than what you can afford. Allocative efficiency on the other hand refers to the consonance of budgetary allocations with strategic priorities: are budgetary resources being allocated to programs and activities that promote the strategic priorities of the country? Put simply, is the government spending money on the “right” things? And finally, operational efficiency refers to the provision of public services at a reasonable quality and cost. The relevant question here is whether the country is getting the best buy for its money.