COSTING THE PRSP

1
COSTING THE PRSP

• Lessons from Country Case-Studies
• Kasirim Nwuke, ECA

2
Background

• ECA commissioned ten country studies
• Ethiopia, Kenya,
• Zambia, Malawi,
• Rwanda, Ghana,
• Sierra-Leone, Burkina Faso,
• Cote dIvoire, Senegal

3
Objectives of the Studies

• To assess the experience of a sub-set Africa PRSP
  countries with respect to preparing or
  implementing the PRSP
• On Content of the PRSP- To examine whether the
  growth strategies are pro-poor and the degree to
  which the social sector, especially health
  (HIV/AIDS), education are reflected in the PRSP
• On Financing of the PRSP To examine whether the
  PRSP is costed, its link with the MTEF, sources
  of financing it
• To assess whether capacity requirements for a
  successful implementation were duely considered
• To assess the degree to which donors were
  beginning to harmonize their policies and
  programs with the countrys PRSP.

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Ghana

• Costing of the PRSP is an issue
• The GoG appears not to have a coherent strategy
  on how it will pay for its programs
• Financing sources are public sector driven and
  will require greater domestic revenue
  mobilization effort.
• An effective and efficient public sector is
  required to meet these objectives. But Ghana is
  far from having this.
• Costing of policy options remains a difficult
  task and where it has been done, quality varies
  from sector to sector
• Implementation of the PRSP is therefore likely to
  be hampered as a consequence.

5
Zambia

• Estimates of financing resources based on
  projected domestic resources
• The underlying assumption of the estimates is a
  4.1 annual growth rate during the period
• The 17 sectors of activities identified are
  costed The total cost is 1.2 bln (down from
  the initial 4 bln)
• Only core priority activities are included in the
  current PRSP others postponed to later PRSPs.
• Financing Sources
• Tax revenues 18.5 0f GDP
• Non-tax revenues 0.4 of GDP
• External Assistance (project/programme grants)
  5.3 of GDP
• Deficit financing 3 of GDP
• Financing Gap 2.3 (95 mln in 2003), 1.6 (72
  mln in 2004) expected to be financed by donors.
• Lessons Projects were ranked and final cost
  arrived at through an iterative process.

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Kenya

• There is no evidence that the PRSP was adequately
  costed
• The financing gap is so wide (Kshs 70 bln) that
  it is considered a wish-list
• Bids are not appraised against available
  resources (weak priority-setting)
• There is no mechanism for balancing priorities
  with affordability
• Donors have reacted by asking the GoK to prepare
  an Action, GAP, outlining how it intends to
  implement the PRSP.

7
Sierra Leone

• Sierra Leone does not yet have a F-PRSP
• There is no evidence that the I-PRSP was costed
• Most of the financing for the I-PRSP came from
  external sources
• Projected financing requirements of the F-PRSP
  now being finalized 391 million (2002) and 337
  million (2003)
• Financing gap 89 million (2002) 76 million
  (2003)
• The gap is expected to be financed by external
  partners.

8
Malawi

• The PRSP was costed according to three
  categories Statutory (interest payments,
  pensions, gratuities), Statehood (defence, govt
  services), Poverty reduction
• Basis of costing targets and unit costs
  priority-ranking (limited to the GoM sector)
• The scope for costing was limited by
• Capacity constraints
• Poor assimilation and internalization of costing
  guidelines and methodologies
• Lack of will to make hard decisions
• Inadequate consultations
• Overall, an attempt was made to establish
  realistic estimates of cost.

9
Ethiopia

• Initial estimated total cost of the program is
  52.5 billion ETB for the period 02/03 04/05
• This has been revised downward in view of the
  magnitude of the resource gap that emerged to 37
  bln ETB.
• Revision based on re-proritization of programs
  and activities
• Financing sources reduction in defense
  expenditures increased domestic mobilization
  cuts in administrative and government services
  moderate external support.
• Domestic financing likely to be a problem because
  of low tax base, fragile growth foundations, etc.

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Some Lessons

• Countries are struggling with the problem of
  costing their PRSP. Some (e.g. Kenya) have not
  done so the PRSP
• Those (Zambia, Ethiopia) that have attempted to
  cost the program have done so iteratively
• It appears that this was not done systematically
  the emergence of a large resource gap appears to
  be the impetus for downward revisions in
  estimated financing needs
• The domestic resource mobilization assumptions
  are weak and the goals of increased domestic
  revenue mobilization unlikely to be met

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Some (Tentative) Conclusions

• The weak domestic resource base implies enhanced
  scope for donor support and perhaps for donor
  conditionalities
• Progress towards poverty reduction is unlikely as
  a consequence to be fairly rapid
• If PRSs are to be indeed country-driven and
  country-owned, they must be realistically costed,
  projects must be duely ranked and the ranking
  then should influence the content of the PRSP
  itself
• The costing problems arise either as an incentive
  problem (the amount of debt relief) or a capacity
  problem (countries lack costing capacity) or
  both.