Integrating Climate Action into Public Financial Management: Lessons from Paraguay and Costa Rica

The integration of climate action into public financial management is a complex task that must be approached in an orderly manner, maintaining a medium-term perspective. This publication shows two cases of applications of the public financial management assessment methodology for climate change (PEFA-Climate) that together illustrate how to design a roadmap for integrating climate issues into the planning, programming, execution, and accountability of public resources. The selected cases correspond to the Ministries of Finance of Paraguay and Costa Rica, countries that have already been making significant improvements in the rules, processes, and systems governing public financial management. More recently, they have embarked on incorporating the climate dimension into ongoing modernization processes and reforms. The paper shows how to structure a strong plan, using as a basis the incremental improvements proposed by the PEFA-Climate methodology and international best practices in the field. The study concludes by highlighting the importance of including the climate module in assessments based on the PEFA methodology, so that public financial management modernization efforts comprehensively incorporate the climate dimension into all regulations, processes, and systems that support public financial administration.