ABSTRACT
This chapter deals with the strategic criteria for reconstruction and recovery and discusses the budgeting process in fragile and conflict-affected situations, drawing on the lessons of 25 years of international experience in post-conflict reconstruction. The principal challenge of reconstruction is to restore the legitimacy and credibility of the state—primarily by re-establishing order and security; rebuilding the social capital destroyed during the conflict; and addressing the urgent needs of the moment without compromising long-term goals. The chapter outlines the public financial management reform priorities, and reviews the arrangements for financing reconstruction and recovery—primarily the experience with multi-donor trust funds. Donor agencies can exert both a positive and a negative influence on tax policy and administration in fragile and conflict-affected states (FCS). Investment priorities in an FCS setting are determined in part by security and political circumstances, and the profile of public investment will depend on the evolution of the political process.
