Reimagining Public Finance

The Case for Digital Public Infrastructure

The World Bank’s Reimagining Public Finance (RPF) initiative asks us to shift the focus of financial management away from process discipline and towards outcomes. It is not enough to ask whether budgets have been followed or rules respected. The deeper question is whether public finance is actually enabling literacy, improving health, or building resilience. In this sense, finance is not an end in itself but the architecture through which the state mobilises and distributes resources to improve lives.

This is a compelling vision. Yet in low- and middle-income countries (LMICs), where resources are scarce, the lived reality often moves in the opposite direction. Scarcity tends to drive systems toward control rather than empowerment. To prevent leakage or waste, governments add more mandates, centralise budget authority, and design monolithic systems that enforce uniformity. Compliance becomes the dominant concern, while choice and diversity of solutions are reduced. The paradox is clear: in trying to protect scarce resources, states create rigid systems that undermine the very outcomes those resources were meant to achieve.

At the heart of this paradox lies a trust problem. Scarcity by itself is not enough to explain the shift toward control. What really drives it is the absence of trust: governments do not trust local governments, schools, or clinics with discretion; citizens do not trust that allocations are fair; and donors often bypass country systems entirely. The cycle is self-reinforcing: scarcity breeds control, control erodes trust, and weakened trust justifies even more centralisation.

Breaking this cycle requires rebuilding trust into the very infrastructure of public finance. This is the role of Digital Public Infrastructure (DPI). Far more than a technological upgrade, DPI creates shared rails for identity, payments, registries, and data exchange that lower the cost of fairness and transparency. With a digital identity system, governments can trust that benefits reach the intended person. With a digital payments rail, funds flow directly into the right account without leakage. With interoperable data exchange, ministries and local authorities work from a common picture of reality. Registries of citizens, properties, businesses, and assets provide shared records that everyone can rely on.

Together, these rails act as trust infrastructure. They create a machine-enforced baseline of integrity that allows governments to relax heavy-handed mandates. When the rails guarantee fairness, rules can be lighter, more empowering, and more adaptable. This is the essence of unbundling: separating the rails that enforce trust at scale from the rules that set policy priorities.

The implications are best understood through examples. In education, scarcity and distrust often lead to centralised textbook procurement, uniform curricula, and rigid allocations to schools. A DPI-enabled approach could instead use a national student registry and payments infrastructure to let funding follow each student, while allowing multiple content providers and teaching models to plug into the system. In health, centralised drug procurement often collapses under leakage and shortage. With digital health IDs and supply chain registries, patients could access essential drugs through a wider network of public and private pharmacies, ensuring integrity without sacrificing diversity. In local government finance, transfers from the centre are commonly earmarked and tightly controlled, leaving little room for local discretion. Digital rails for transfers, combined with transparent reporting visible to citizens and auditors, could restore trust and enable discretion without losing accountability.

Seen this way, the next frontier for Reimagining Public Finance is not only to design outcome-oriented frameworks but also to build the institutional infrastructure of trust that makes those frameworks work in practice. Scarcity without trust will always produce centralisation and rigidity. Scarcity with trust infrastructure can produce fairness, choice, and resilience.

Digital Public Infrastructure provides the rails. Policy provides the rules. Together, they allow LMICs to escape the scarcity–control trap and realise the promise of public finance as an enabler of inclusive development.