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But when governance is poor, even if a country has financial resources and technical assistance, it may fail to achieve development goals.

For governance to work, public organizations must have sufficient institutional capacity to design and implement policies in ways that are ‘effective, transparent, impartial and accountable’ (World Bank 2001).

Problems can be traced to a complex reform design, inadequate personnel and capacity to implement, professional boundaries between financial and clinical personnel and weak leadership.

The Lesotho reform experience suggests that less complex designs for budget reform, better adapted to the context and realities of health sectors in developing countries, may be needed to improve governance.

This study designed and tested a methodology for measuring implementation progress for PBB reform in the hospital sector in Lesotho.

We found that despite some efforts on the national level to promote and support reform implementation, staff at the hospital level were largely unaware of the purpose of the reform and had made almost no progress in transforming institutions and systems to fully realize reform goals.

Rolling 3-year budgets are created and new budget classifications may be introduced to allow monitoring of expenditure in relation to programme activities and performance indicators. Figure 1 illustrates the steps in a general MTEF framework.

Yet, public budgeting institutions in many countries do not yet meet these criteria: they are often based on line items or objects of expenditure—for example, salaries, medicines and equipment—and amounts are determined by making incremental changes to past patterns of resource expenditure.

This type of budgeting is generally seen as less effective because it is not focused on results: incremental, line-item budgeting makes it difficult to trace expenditures to policy objectives, and to hold government accountable.

steps executed by the staff of the ministries who are responsible for implementing plans and achieving objectives.: The two viewpoints on the MTEF process are ‘Top Down’, i.e.

steps executed by the staff of the ministries who are responsible for implementing plans and achieving objectives. PBB has been defined as procedures intended to ‘strengthen links between the funds provided to public sector entities and their outcomes and/or outputs through the use of formal performance information in resource allocation decision-making’ (Robinson and Brumby 2005).

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