Public Expenditure Management: Applications

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Public Expenditure ManagementApplications
Bill Dorotinsky, PREM public sector group
PEAM Course March 21, 2005
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Informal Rules
Application
Dominican Republic Budget Deviation, 1996-2000
Identifying sources of weakness for further
investigation Identifying incentives at work
Source Dominican Republic PER 2003, background
data
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Exploringproblems
Above-the-waterline observation
100 clinics, but only 70 operating
WHY?
Budget not comprehensive
Budget fragmented
Cash triage
10 built with donor funds, donor funds
off-budget
10 built with domestic funds, capital budget
separate
10 funded in budget, but no cash allocated to
operate
WHY?
Weak budget law
Too rigid budget execution
Low public pay
WHY?
Donor ring-fencing for accountability
Line ministry gets flexible resource pool
Local staff seek higher PIU pay
And what can be done about it?
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HIPC expenditure tracking assessments 15
indicators, benchmarks of PEM system capabilities
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Relative need for upgrading PEM Systems
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Agreed Assessment
(8) Number of Benchmarks met
Bolivia (5) Cameroon (4) Ethiopia (6) Gambia, The
(5) Ghana (1) Guinea (5) Madagascar (7) Malawi
(7) Mauritania (7) Mozambique (5) Nicaragua
(5) Niger (3) Sao Tome Principe (4) Senegal
(4) Zambia (3)
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Benin (8) Burkina Faso (9) Chad (8) Guyana
(8) Honduras (8) Mali (8) Rwanda (8) Tanzania
(8) Uganda (9)
Substantial Upgrading Required
Some Upgrading Required
Little Upgrading Required
Source Actions to Strengthen the Tracking of
Poverty Related Public Spending in Heavily
Indebted Poor Countries (HIPCs), World Bank and
IMF, March 22, 2002. See http//www.worldbank.org
/hipc/hipc-review/tracking.pdf
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The results indicated the need to improve basic
aspects of PEM systems
(Percent of countries not meeting each benchmark)
100
Note Based on 24 countries Final Assessments
90
80
70
60
50
40
Timely functional reporting from class system
Meets GFS definition of general government
Audited accounts to legislature within 1 year
Projections integrated into budg. formulation
Quality of internal audit (effective or not)
Accounts closed within two months of y/e
30
Fiscal monetary data reconciled
Extra (off) budget expend.
20
Pov. Red. Exp. Identified
Data on donor financing
Classification of budget
Low level of arrears
Regular tracking
Month reports
Outturn close?
10
0
Benchmark number
1
2
3
4
5
6
7
8
9
10
11
12
13
14
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Execution
Formulation
Reporting
Source Actions to Strengthen the Tracking of
Poverty Related Public Spending in Heavily
Indebted Poor Countries (HIPCs), World Bank and
IMF, March 22, 2002. See http//www.worldbank.org
/hipc/hipc-review/tracking.pdf
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Why hasnt there been more progress?
Unhelpful donor practices Inadequate sequencing
of reforms, due to donor pressure or difficulties
for government to determine the path of
reforms Fragmented approach to reforms and
limited leadership in government -- PRSP and PEM
reforms separate Limited monitoring of progress,
mainly concentrated on inputs -gt did not allow
lessons learning and did not encourage focus on
results on the ground Capacity constraints Technic
al reform versus systemic/institutional
change BUT realism important on achievable pace
of change
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The Way Forward A Strengthened Approach

• A country-led agenda including a PFM reform
  strategy and action plan
• A donor coordinated program of support
  coordinated, coherent, multi-year program of PFM
  work that supports and is aligned with the
  governments PFM strategy
• A shared information pool a common framework
  and information set for measuring and monitoring
  results over time

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Whats different ?
What we dont want Government reform strategy
influenced by ad-hoc donors requests encourages a
fragmented approach to PFM reforms
A Strengthened Approach A government-led reform
strategy, supported by a coordinated program of
work by donors, facilitates an integrated and
sequenced reform process.
Donor 2
Donor 3
Government-led PFM Reform Strategy
External audit
Procurement
Donor 4
Budget preparation
Coordinated program of support by donors
Treasury reforms
Donor 1
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Operationalizing in Bank
Proposed
Recent Situation

• Country-owned PFM reform strategy
• Flexible ESW to support reform implementation,
  capacity-building
• Knowledge mandate (understanding of institutional
  environment into which Bank funds flow) tied to
  operational needs
• Country team determines form
• PFM Performance framework to monitor progress
• Country PFM team bridging networks and donors,
  planning and doing work
• Each country team needs to plan according to
  country need first, broad knowledge mandate
  second
• Country-level donor-client coordination
• More anchor support on lesson learning, reform
  approaches, PFM issues

• Corporate Mandate
• 3-core diagnostic products
• Three networks operating independently