Financial reform in a devolved African country: Lessons from Ethiopia

This article provides three frameworks for understanding the process of imp lementing a financial reform in an African country that has adopted a polic y of devolution. The article is based on four years of experience in implem enting a financial reform under Ethiopia's Civil Service Reform. The first framework, which we have termed the Framework for Financial Reform. provide s an overall conception of financial reform. It has two dimensions: the sta ges of development of financial systems (external control, internal control , management, planning) and the steps to changing financial systems (compre hension, improvement, expansion). The second framework, the Four Tasks of M anaging a Financial Reform. elaborates the steps in changing financial syst ems. These tasks include: reforming the approach to financial reform, impro ving the design of the reform, managing the implementation of the reform, a nd protecting the reform. The third framework focuses on the task of managi ng the implementation of financial reform and details the phases, variables and dilemmas of implementation. The phases of implementation are design, p ilot and operation. Associated with these phases are variables that affect the implementation (resources, interdependence, sequence and timing) and di lemmas (comprehensiveness and monitoring). These frameworks support the art icle's two theses: (1) that reform of financial systems in Africa must be e volutionary, not revolutionary; and (2) that evolutionary reform of financi al systems is especially needed in devolved African countries. Evolutionary reform Is needed because financial systems in the public sector are fragil e traditions that need first to be comprehended. Before more complicated fi nancial 'management' reforms can be introduced that focus on outputs and ou tcomes, the existing 'administrative' financial systems which control input s have to be understood, implemented and improved. 'Best Practice' is often the enemy of 'feasible' practice in developing countries. Copyright (C) 20 01 John Wiley & Sons, Ltd.