Download Aid Effectiveness

Public Financial Management Reform in
Ghana
(sequencing & prioritisation)
Stephen Sharples
21 March 2008
1 Palace Street, London SW1E 5HE
Abercrombie House, Eaglesham Road, East Kilbride, Glasgow G75 8EA
Coverage of Presentation
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Context
The Public Financial Management (PFM) interventions
The main lessons
Some issues for discussion
(Observations & ideas drawn from documentation and personal
recollections. Interventions over the last 15 years)
Objectives
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Highlight lessons and consider implications for PFM reform
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Identify issues for discussion
(prioritisation & sequencing and other issues)
Page 1
Ghana - The Context
• “Neo-patrimonial” character of State
• Ineffectiveness of civil service major constraint
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(morale, incentives, politicisation, poor controls)
Pay consumes too much of budget and causes
over-runs
Internal resistance to change
High level of donor support with distortionary
effects (e.g. salary supplementation)
Macro-economic shocks (cocoa, gold, oil, currency)
Consolidation of democracy
Vibrant media and civil society have emerged
Recent positive developments
Page 2
The PFM Interventions
• Introduction of VAT
• Upgrading the Integrated Payroll and
Personnel Database system (IPPD)
• Budget and Public Expenditure
Management System (BPEMS)
• Medium Term Expenditure Framework
(MTEF)
• Decentralisation of financial management
in the health sector (part of a SWAP)
Page 3
The Introduction of VAT
(1993 to 1995)
Features:
•Government commitment
Result:
•Independent VAT service
•Focus for opposition
•Good leadership
•Rioting
•Effective TC provision
•Cancellation
•Legislation delayed (in Parliament)
Lessons:
•Insufficient public education
•Need realistic timescale
•High/difficult rate (17.5 %)
•Factor in political
processes
•Bad timing
•Consider political realities
(content & timing)
Page 4
The Re-introduction of VAT
(1997 to 2000)
Features:
Result:
•Government commitment
•Revenue targets
continuously exceeded
•Independent VAT service
•Good leadership (previous project
team kept together)
•Rising revenue ((1999 –
3.85% of GDP, 2004 – 5.55%
of GDP)
•Effective TC provision (same
providers - low key role)
•Good practices
•Learned from mistakes:
•Some further support
needed re computer system
- public education
•Sustainable organisation
- 10% rate
Page 5
Integrated Payroll and Personnel
Database – replacing earlier system
Features:
Result:
•Payroll = 60% of expenditure
•Project failed repeatedly
•Old technology on verge of collapse
•DFID cancelled twice
• Underestimated internal resistance
to reform
•Approx £2.4 million spent
– very little to show for it
• Selected too complex a solution
Lessons:
•Insufficient attention to change
management
•Don’t let complex
technology blind you to the
basics
•Consultant & contractor selection
badly handled
Postscript:
•Recent new impetus
•Use of 3rd party software to restore reporting/analysis capability
Page 6
Budget and Public Expenditure
Management System
Features:
Result:
•Central component of wider
PUFMARP programme
•“spent US$30 million and 8
years and still can’t produce
basic budget reports” – senior
manager from the project.
•Inadequate needs assessment
•Technocratic and over ambitious
•Consultant led (at least 40
international consultants involved)
•Little government commitment
outside Ministry of Finance
•Poorly sequenced
•May have created a capacity
gap - technology too
sophisticated
Lessons:
•Be realistic (technology &
timescales)
•Consider costs and benefits
•Need clear institutional home
for project
Page 7
Introduction of Medium Term
Expenditure Framework
Features:
Result:
•Strong on participation
•1st review – “so far what was
achieved was extraordinary….”;
but this did not last
•Lack of progress in related areas:
- delays to BPEMs
- civil service reform
- budget timetable
•Partial coverage (staff costs excluded)
•Problem of allowances / project enclave
culture not fully recognised
•External macro-economic shocks
•Revenue forecasting remained weak
•Change in budget preparation
but did not improve resource
allocation.
•Premature end to project
Lessons:
•MTEF credibility undermined if
no predictable funds releases.
•Detailed costing work of little
demonstrable value
•Process skills necessary but
not sufficient
•Danger of project enclaves
Page 8
Decentralisation of Financial
Management within Health Sector
Features:
Result:
•Control of funds decentralised to
Budget Management Centres (BMCs)
meeting “readiness criteria”
•Not aware of specific
evaluation of financial
management aspects but
overall, SWAP was regarded as
best in Africa at the time
•Local consultants assessed this
•Top management committed
•Extensive financial management
training at local level (+ MBAs in UK)
•Staff from best BMCs joined training
teams (recognition, travelling
allowances, ownership)
•Trusted adviser in Ministry
Lessons:
•Relate pace and sequence to
demonstrated capacity
•Importance of incentives
•Incentives don’t have to cost
a lot or involve civil service
wide changes
Page 9
Some Lessons
• Identify political economy issues up-front
• Importance of flexibility on timescales
• Importance of incentives - institutional and
individual (government and development partners)
• Doing well on the process of PFM reform cannot
make up for problems with the content
• Importance of the relationship between PFM reform
and civil service reform
• Easier to succeed where – small unit, clear mandate,
freedom from system wide constraints
Page 10
Suggested issues for discussion
• Can we plan to move at the partner government’s
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pace? Do our systems and notions of our own
accountability get in the way of this?
Is our approach to IFMIS too procurement
focussed? Does it undermine flexibility by forcing
too many decisions to be made up front?
How can development partners support government
programmes, rather than “their” projects within
government programmes?
How can PFM reform and civil service reform best
reinforce each other?
How can budget support change the dynamics?
Does it make it easier to work in partnership on
PFM reform?
Page 11