ABSTRACT
With the departure of the DSA project in January 2008, the government of Ethiopia had to decide which road to take-sustain the twelve-year reform or embark on new reforms. It chose the road of perpetual reform and that made all the difference-financial performance deteriorated so quickly that some foreign aid agencies suspended funding.1 This wrong turn also brought in a new driver, foreign aid-the IMF and the World Bank-as the central government relinquished ownership of the reform. Most damaging was the loss of ownership by regional governments, which was a key factor in the reform’s success. Three ofttouted principles in PFM are government ownership of reform, contextualization of reforms, and getting the basics right. The new road violated all three of these principles, which is why finances have precipitously deteriorated since 2008. In this chapter I examine why the road of perpetual reform, with a goal to leap to sophisticated PFM, was taken and the road of sustaining the reformed PFA system was not. Both roads provide lessons for would-be reformers. The post-2008 experience in Ethiopia also affirms the need to distinguish financial reforms in terms of PFA, public financial administration, versus PFM, public financial management.
