Reading about Public Financial Management (PFM) reform journeys may not be everyone’s cup of tea, nevertheless PFM is far more than a technical exercise. It is the backbone of how governments plan, allocate and spend scarce resources to deliver services and respond to challenges like climate change. Whether we work in education, health, infrastructure or climate policy, the effectiveness of PFM systems will have an impact on everyone’s work. 

This blog invites readers into a story worth sharing – the reform journeys of two countries in the Pacific region. Our governments have invested significantly in their national systems as they seek to be able to effectively translate climate change ambitions into action for its people.

The Road to COP30

In the lead up to the UNFCCC COP30, which will be held in Belem in November, and based on past trends, we expect countless opinions on addressing climate finance barriers in Small Island Developing States (SIDS). Many will repeat familiar advice on preparing ‘investment ready’ pipelines together with the buzz word ‘innovative’ approach to finance climate action. Behind these headlines and the distractions that can be created by such terms, Ministries of Finance (MoF) in the region continue to do the critical reform work to enable our governments to manage the development challenges brought about by climate change.

Moreover, the challenges of accessing climate finance for Pacific Island Countries (PICs) have long been known and talked about. At the core lies the reality that Governments must jump through multiple hoops, placed by each funding agency, before the financing said to be available can be unlocked for urgent climate action. Over the past decade, as our governments have been occupied with navigating these challenges, our islands have endured severe disasters. Cyclone Winston in Fiji in 2016  and Cyclone Gita in Tonga in 2018alone cost 31 percent and 38 percent of GDP respectively where these resources that could otherwise have been invested in building resilience or other national priorities.

While innovation and transformation are often emphasised, our experience as public servants underscore that strong PFM foundations and appropriate sequencing of reforms must remain a critical focus. The national budget is the government’s primary tool for delivering on priorities and policies therefore, strengthening evidence-based budgeting is essential to ensure resources are effectively used for addressing climate risks. 

In 2024, Minister of Finance, Tonga requested through the Forum Economic Ministers Meeting (FEMM) that the Pacific Islands Forum be tasked with ensuring better coordination of the PFM reform support being provided across the region. We applaud our economic ministers who have endorsed the proposed approach for the finalisation of a PFM Regional Coordination Mechanism as part of the FEMM 2025 outcomes.   Strengthened coordination of reform agendas driven by Governments can put us in a much better position to adopt sustainable finance practices and related tools including climate budgeting. We would also like to recognise and acknowledge the Development Partners (DP) in this space and the critical work they have been supporting over many years.

The Critique of PFM

There has been much critique of ‘weak PFM systems’ in the Pacific, without a nuanced conversation on the unique circumstances of PICs which require specific considerations when it comes to reform.  Placing governments in the driver’s seat rather than merely responding to internationally driven benchmarks and criteria, will assist in prioritising reforms for the best use of our available and limited capacity.   

It is also important that we highlight what is relevant, working and what has been achieved, to ensure that reform measures and external support are targeted in the best possible way. At the Inclusive Climate Finance Dialogue, we shared our Talanoa based approach to  PFM reforms. In the Kingdom of Tonga, the Cabinet has authorised the establishment of an interministerial Technical Working Group (TWG) comprising key stakeholders from Ministry of Finance, Prime Minister’s Office and the Ministry of Climate Change. The TWG is tasked with providing strategic direction for the climate mainstreaming reform agenda and ensuring its alignment with ongoing PFM reforms. Additionally, the TWG serves as a platform to channel technical advice and feedback to decision-makers, supporting informed policy choices and addressing complex reform challenges.

Similarly, the Government of Fiji, is committed to the strengthening of core PFM functions, in an effort to better deliver more complex thematic reform. The adoption of a new Budget Classification Structure (BCS), featuring dedicated segments for climate change and gender will build the capacity to track expenditures related to climate resilience and the decarbonisation of the economy with greater precision once fully utilised. This is a major milestone, placing Fiji among a small group of countries that have successfully integrated climate change and gender into its chart of accounts. In addition to this major system reform, Fiji’s leadership and commitment to sustainable finance by being one of the first in the world to issue a sovereign green bond in 2017 provides an exemplary model for its peers seeking to mobilise resources needed to address climate related development challenges. 

PFM reform journeys of Tonga and Fiji demonstrate that, despite ongoing challenges, meaningful progress is possible in strengthening national systems to better respond to climate change. 

The Importance of Flexibility

Our experience highlights the importance of flexibility in reform design to suit each country’s context. In climate budget reforms, Fiji prioritised systems change, while Tonga focused on institutional coordination. Secondly, building on country systems is paramount to strengthening absorptive capacity and embedding resilience within core PFM practices. Finally, limited human resource availability in PICs mean that DPs must step in to provide that crucial support and expertise to build local capacity to push reforms forward. The small teams in government often balance core functions alongside thematic reforms, thus a clear prioritisation becomes essential.

By sharing these experiences, we hope other PICs will be encouraged to adapt lessons to their own contexts, build on what works for them and be the drivers of their reform agenda.

This blog has been written by Shayla Rani, Assistant Manager, Ministry of Finance, Fiji, Ravneeth Dewan, Principal Climate Finance Officer, Ministry of Environment and Climate Change, Fiji, Sione Tokai, Principal Economist, Ministry of Finance Tonga, and Malvina Singh, Risk informed Development Finance Specialist, UNDP Gov4Res.