Bill Dorotinsky

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Assessing Public Finance System
Performance World Bank Experience with HIPC
Expenditure Tracking
WB-ICGFM Conference November 24, 2003
Bill Dorotinsky
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Approaches

• Black Box Outcomes
• Deficits
• Outcome to Plan
• System Objectives
• 3-level framework
• System Aspects
• Transparency (IMF Fiscal ROSC)
• Equity (PRSP vs. Budget)

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Assessment Approach Expenditure Management
Cycle.
I.8 arrears performance I.9 audit 8 (for ex
ante, 5, 6) I.10 PETS partial substitute for
I.9 I.12 timely reports performance of 7 I.13
tracking classn nature of 7 I.14 closure
nature of 7 I.15 audit timely performance of 8
Relations
Foundations Comprehensiveness (I.1 GFS, I.2
off-budget, I.4 donor, I.11
reconciln) National/sub-national
I.3 outturn relation of 4 6 I.5 bdgt classn
4, 5 I.6 poverty expend subset of 4, 5, 6,
7 I.7 MTEF 3
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The HIPC Expenditure Tracking Assessment centers
around 15 indicators, chosen as benchmarks of PEM
system capabilities deemed necessary for tracking
spending.
Assessment Approach
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Results of the March 2002 Board Paper
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
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The HIPC Expenditure Tracking paper illustrated
the need to improve public expenditure management
systems
Results of the March 2002 Board Paper
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Assessment Conclusions
Results of the March 2002 Board Paper

• Execution and reporting relatively weaker
• Institutional reforms
• require continuous engagement and monitoring not
  one-off
• Country commitment also fundamental
• Unless some of these addressed, other PEM reforms
  will have limited impact
• With limited policy space for reform, important
  to focus on a few key areas, rather than laundry
  list

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March 2003 Results
March 2003 Results

• Assessed status of action plan implementation for
  21 of the 24 original HIPCs1
• Fourteen countries have initiated or implemented
  more than 80 percent of all planned measures in
  their action plans
• Chad, Mali, and Rwanda initiated or fully
  implemented all measures
• Ghana has the highest percentage of fully
  implemented actions (47 percent)
• Seven countries have initiated or implemented all
  short-term measures in their action plans.

1 Benin, Bolivia, Burkina Faso, Cameroon, Chad,
Ethiopia, The Gambia, Ghana, Guinea, Guyana,
Honduras, Malawi, Mali, Mauritania, Mozambique,
Niger, Rwanda, Senegal, Tanzania, Uganda, and
Zambia. Madagascar.
Source Update on Implementation of Action Plans
to Strengthen Capacity of HIPCs to Track
Poverty-Reducing Spending, March 11, 2003,
SM/03/90 World Bank, March 13, 2003,
IDA/R2003-0043.
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Total Measures Fully Implemented or Initiated by
Country
March 2003 Results
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Examples of fully implemented short-term measures
March 2003 Results and Next Steps

• improving budget classification
• Cameroon, Ethiopia, Ghana, Honduras, Mali, Niger,
  and Rwanda
• identifying and tagging poverty-reducing spending
• Benin, Bolivia, Chad, Ghana, Guyana, Honduras,
  Mali, Mauritania, Uganda, and Zambia
• introducing more modern treasury operations
• Ethiopia and Cameroon
• strengthening audit
• Cameroon, Mali, Mauritania, and Niger

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Countries especially active in putting in place
short-term bridging mechanisms
March 2003 Results and Next Steps

• These mainly involve tagging poverty-reducing
  expenditures identified in the PRSPs.
• eleven countries have completed actions to
  improve identification of poverty-reducing
  spending
• four other countries have initiated similar
  actions
• Other areas of increased focus have been
• strengthening internal controls and audit systems
  
• improving in-year budget reporting.

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Progress in Reporting Poverty-Reducing Public
Spending
March 2003 Results and Next Steps

• An increasing number now reporting
  poverty-reducing spending
• Nineteen countries now compared to four in 2002
• Poverty-reducing spending increasing relative to
  GDP and total spending
• From 1999 to 2001, outlays increased, on average,
  by 1.4 percent of GDP
• And increased by 3.9 percentage points as a share
  of total government spending
• However, many budget systems are unable to
  provide disaggregated data by function or program
  (e.g., primary education and health) identified
  in PRSPs as poverty reducing.

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General conclusion
March 2003 Results and Next Steps

• At March 2002 comprehensive assessment,
  countries, on average, met between seven and
  eight benchmarks
• Based on the number of measures fully
  implemented, and assuming no slippage in other
  areas, staff would expect that, on average,
  countries have met one additional benchmark

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Next Steps
March 2003 Results and Next Steps

• comprehensive reassessment underway, jointly by
  the client, Bank and the Fund
• next update in late 2004 for 24 countries
• being rolled-out to other countries
• improve and streamline the assessment instrument
• broaden discussion of instrument with other
  parties
• Have already added a sixteenth indicators on
  procurement
• include assessment instrument in other analytical
  work
• Also, work underway to develop more comprehensive
  set of indicators

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References
Tracking of Poverty-Reducing Public Spending in
Heavily Indebted Poor Countries, Revision 1,
March 28, 2001, SM/01/16, and World Bank, March
30, 2001, IDA/SECM2001-0052/1 Actions to
Strengthen the Tracking of Poverty-Reducing
Public Spending in Heavily Indebted Poor
Countries, Revision 2, March 21, 2002, SM/02/30,
and World Bank, March 22, 2002, IDA/SECM2002-30/2
Update on Implementation of Action Plans to
Strengthen Capacity of HIPCs to Track
Poverty-Reducing Spending, March 11, 2003,
SM/03/90 World Bank, March 13, 2003,
IDA/R2003-0043. All available at http//www-wbw
eb.worldbank.org/prem/prmps/expenditure/hipc.htm