Recently, Armenia underwent its third Public Expenditure and Financial Accountability (PEFA) assessment, marking a decade since the last evaluation in 2014. To gain deeper insights into the results of this assessment, we spoke with Zorayr Karapetyan, Ph.D. in Economics, currently the Managing Partner at Prunus Partners, a consulting firm. With over 15 years of experience in Armenia's public financial management sector and extensive involvement in audit assignments across various government bodies, Dr. Karapetyan provided an expert analysis of the findings.

Before delving into the specific outcomes of the assessment, Dr. Karapetyan emphasized the importance of understanding the PEFA framework itself. The PEFA program, an internationally recognized tool for evaluating the strength and performance of a country’s public financial management (PFM) systems, was initiated by several international financial institutions, including the World Bank, the International Monetary Fund (IMF), and the European Commission. The primary purpose of the PEFA assessment is to measure how well public finances are managed and to identify areas where improvements are needed. For Armenia, aligning with PEFA criteria is essential for ensuring financial stability, enhancing transparency, and promoting accountability in the public sector.

Dr. Karapetyan pointed out that the PEFA framework and methodology have evolved since the last assessment for 2013 performance, which makes direct comparisons quite challenging. "It is crucial to understand where the PEFA assessment team observed institutional progress and where Armenia still needs to push the reform process harder," he noted. This evolution in the framework means that while some areas may show progress, others might not be directly comparable, highlighting the need for a nuanced approach in interpreting the results.

According to the latest PEFA assessment, Armenia's public financial management system received its highest performance scores in areas such as the Transparency of Public Finances (including Transfers to Municipalities and Public Access to Fiscal Information), Debt Management, Budget Preparation Process, and Predictability in Budget Execution (including Accounting for Revenue and Predictability of In-Year Resource Allocation). Overall, only 8 out of 31 performance indicators received the highest scores.

However, the assessment also identified significant concerns in several key areas, including Public Investment Management, Legislative Scrutiny of Budgets, Fiscal Risk Reporting, Internal Audit, and External Audit. These findings underscore the complexities and challenges that Armenia faces in further strengthening its PFM system.

Despite the shortcomings highlighted in the report, Dr. Karapetyan views the assessment as a valuable opportunity for Armenia. "The PEFA report provides a clear diagnosis of the weaknesses in the public financial management system. The real question now is whether the Armenian government will seize this opportunity to address these issues in a targeted and strategic way. Only time will tell," he remarked.

by Grigor Grigoryan