Download Integrated Fiduciary Assessment and Public Expenditure

Integrated Fiduciary Assessment
and Public Expenditure Review:
Executive Summary
IFAPER Dissemination Workshop
The World Bank/Asian Development Bank
October 20, 2003
Main Messages
Strengthening resource mobilization
Reducing fiduciary risk to public funds
Rationalizing public expenditure policy and
management
Accelerating pay and employment reform in the
civil service
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Improving Resource Mobilization to
Ensure Aggregate Fiscal Sustainability
Cambodia has made good progress, as revenue/GDP
ratio has increased from 8.3% in 1998 to 11.7 in 2001
Continued improvement, on the order of what has
already been accomplished, is necessary to retain
public debt sustainability and to finance higher levels of
public spending
Government plans to raise revenues to 14 to 15 percent
of GDP by 2007 will require tax administration reform
that addresses key structural constraints
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Reducing Fiduciary Risk to Public Funds
It has become increasingly apparent that weaknesses in
the public expenditure and financial management
system (PEFM) not only have high costs in terms of
allocative and operational efficiency but also create
unacceptably high levels of fiduciary risk to public funds
– Weaknesses include cash management, budget execution,
and deficient accounting and reporting systems
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Reducing Fiduciary Risk to Public Funds
The system suffers from a weak control (e.g., internal
and external audit) environment
Compared to other low income countries the PEFM
system is below average, indicating the need for
substantial upgrading
The Government can address these concerns by
focusing on improving budget execution, cash
management, and the control environment
Some progress has been made with the support of
TCAP—building on and accelerating this reform is
necessary
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Rationalizing Public Expenditure
Policy and Management
Since 1998, the Government has significantly improved
the alignment of resources with its developmental
objectives by increasing allocations for priority sectors,
notably education and health
However, to implement the SEDP-II/NPRS and meet
the localized MDGs reallocation of resources away from
non-priority sectors and programs toward higher
priorities will be necessary
In order to reach the stated poverty reduction goals, it is
necessary to improve the effectiveness of spending by
linking it more closely to priority outcomes
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Rationalizing Public Expenditure
Policy and Management
Expenditures are targeted to the poor in education, but
less so in health and agriculture
Difficulties linking policy and expenditure have resulted
in significant sectoral differences in the effectiveness of
expenditures in improving social welfare outcomes
Weaknesses in formal and informal accountability
mechanisms have a negative impact on the efficiency
and effectiveness of public sector spending
Improving the management of external assistance to
ensure greater alignment with Government priorities is
also critical
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Strengthening Procurement
There is a need for a new procurement law or
strengthened procurement sub-decree
Institutional changes needed to improve procurement
are:
– A comprehensive procurement training program to be
introduced
– One agency to have sole responsibility for procurement
monitoring and training
– Line agencies to be fully responsible for all their own
procurement
The Country Procurement Assessment Report was submitted to the Government in
June 2003 and will be finalized shortly.
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Pay and Employment Reform in the
Cambodian Civil Service
Given the serious problems afflicting the civil service—
low pay, low skills, and thus low capacity—an
accelerated and sequenced civil service reform will
need to be initiated in the short term and carried out
over the medium term if the Government’s vision of
poverty reduction is to become reality
The World Bank’s CPIA ranks Cambodia below
average among fellow low income countries on issues
pertaining to public sector management and institutions,
indicating significant room for improvement
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Pay and Employment Reform in the
Cambodian Civil Service
The most pressing issue facing the Cambodian civil
service is undoubtedly the low level of pay for most civil
servants, in relation not only to wage levels outside the
service, but also to the cost of living
There is also room to improve civil service deployment
to and within the priority sectors
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Conclusion
The challenges to Cambodia over the medium and long
terms are great, and the reform agenda is daunting
However, Cambodia has undertaken a number of
important reforms over the past several years, and
reformers confronting the challenges ahead have a
foundation on which to build
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Conclusion
In order to carry this program forward the IFAPER finds
that it will be necessary to speed up the pace and
extend the scope of reform in four key areas:
strengthened resource mobilization
comprehensive public expenditure and financial
management reform
further rationalization of public expenditure policy
comprehensive and accelerated civil service reform
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Next Steps
Preparation of the Economic Action Agenda
Preparation of strategy and annual action plan
with development partners (including capacity
building strategy and performance monitoring
framework)
Coordinated development partner support/TA for
the Government’s reform agenda
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Thank you
The World Bank/Asian Development Bank
IFAPER team, as well as our partners from the
IMF, DFID, and SIDA, would like to very warmly
thank the Royal Government of Cambodia for its
support and close cooperation in this work,
especially the MEF counterpart team, and looks
forward to continuing to work together and to
supporting the Government in its reform program
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