Joint Staff Assessment of Progress in Implementation: Focus on planning, budgets and execution in Southern Sudan

1
Joint Staff Assessment of Progress in
ImplementationFocus on planning, budgets and
execution in Southern Sudan

• International Monetary Fund and World Bank
• Sudan Consortium
• Juba, March 21 2007

2
Overview

• 1. Context The MDG challenge
• 2. Key achievements
• 3. Systemic governance constraints and priority
  measures
• Public Financial Management
• Public Sector Management
• Decentralisation
• 4. 2007 budget highlights and new emerging
  challenges

3
Southern Sudan Scale of the Challenge

• Major challenges include the low starting point,
  sharp regional inequalities in outcomes and
  extremely limited access to services
• Primary school attendance rate ranging from 45
  in Western Equatoria to 4.3 in Unity, but with
  half the Southern States below 10
• Births delivered by skilled personnel ranging
  from 59 in Western Equatoria to less than 20 in
  North Bahr El Gazal

Primary Attendance Rates, Southern Sudan, 2006
4
Rapid Progress Needed to Reach the MDGs
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Overview of Key Messages

• GOSS has made significant progress including in
  terms of
• Establishment of institutions at all levels since
  July 2006
• More active accountability (eg. Parliamentary
  engagement in review during 2007 budget process)
• Capacity building efforts (eg. State Parliaments)
• Sectoral programs launched, representing major
  partnerships with international community through
  MDTF
• Increased and renewed commitments in 200 Day
  Action Plan
• However, delays in some key decisions created
  lags, and progress insufficient relative to the
  scale of the goals and challenges ? priorities
• Building institutions for good governance
• Establishing basic infrastructure links, enabling
  productive activities and delivery of basic
  services
• .

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3.Systemic Governance Constraints

• 1. Lack of capacity, including at lower levels of
  government, remains an overriding constraint
• 2. Weak public financial management systems and
  controls pose a risk to the whole development
  program ? adverse effects on implementation of
  plans, accountability and transparency.
• 3. Civil service effectiveness undermined by the
  lack of a functioning payroll, shortages of
  qualified staff and the absence of proper
  procedures for recruitment and incentives, and
  difficult working conditions
• 4. Fiscal decentralization not operationalized
  given lack of clarity on functions and finances
  at different levels of government and low
  capacity in states and counties

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Progress on Paris CommitmentsPublic Financial
Management

• Appointment of accounting and procurement agents
• Single Treasury System operational since late
  2006
• Capacity building in PFM initiated training
  facilities in accounting, budget and procurement
  being provided in GATC, Juba
• Several major sector programs follow
  international (WB) procedures for procurement and
  financial management
• Autonomous commissions in place with enhanced
  budgetary allocations and improved facilities.
• Significant step up in inclusiveness, impact and
  level of the budget debate

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Priorities Public Financial Management

• Enact legal framework for PFM (Public Finance and
  Accountability Act under preparation) including
  for states
• Step up efforts on budget implementation
• Fully operationalise cash management arrangements
• Align cash release with budget priorities and
  commitments
• Establish effective payroll control
• Establish commitment control for capital
  expenditures
• Cease extra-budgetary spending ? require ex ante
  approval or supplementary appropriation measures
• Capacity building in PFM and procurement at all
  levels

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Priorities Public Financial Management

• Reporting
• More timely and accurate accounting and reporting
  mechanisms need to be in place
• Quarterly reports to the SSLA on budget
  implementation (nothing now, planned from April)
• Regularise public expenditure reviews of plans
  and actual spending for scrutiny by parliament,
  media and civil society
• More generally, better dissemination of
  information, and support to accountability roles
  of parliament, media and civil society

10
Public sector management

• GoSS ministries and state governments established
  and operational with budget allocations, and
  staff in place under interim regulations
• An estimated 65,000 persons being on GoSS
  payroll, and estimated equal number in the
  states. But actual number unknown, and no formal
  verification of the payroll and large numbers of
  unclassified staff
• In adequate information and reporting systems
• Plus very large personnel costs possibly
  unsustainable, including future pension
  obligations

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PrioritiesPublic sector management

• Compile formal and comprehensive payroll of
  regular and appointed staff, and verify numbers,
  at all levels of government
• Results should inform measures to rationalise
  current payments
• Streamlining of personnel numbers, at all levels,
  in light of needs and revealed numbers ? develop
  appropriate redundancy rules and packages
• Establish legislative and regulatory framework
  for the public service
• Implement standardized administrative and
  personnel management processes
• Operationalize autonomous commissions by
  formulation of regulations, adequate staffing and
  technical support
• Extension of support to states
• assist states in establishing legal framework for
  public sector management
• formulate policy for integration and
  rationalization of state workforce
• build capacity of GoSS staff for effective
  service delivery

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Decentralisation -- status

• Constitutional framework established, but
• No clear strategy or policy, and no legislative
  framework for operationalisation eg no
  assignment of functional expenditure
  responsibilities across levels of government
• In 2006 and 2007, fiscal transfers to states made
  on very crude basis equal absolute amounts
  (10m) without regard to population, needs or
  local revenue and other criteria thus, for
  example, in 2006 block transfers below payroll
  needs to enable payment of teachers.
• Southern FFAMC mandate is limited..
  Responsibility for developing transfer formula
  etc not yet taken up
• No budgets at state level, no fiscal calender and
  no reporting or accounting by states for monies
  received general paucity of data.
• Risk of over-centralisation of resources (in
  2006, bias of public investments toward the
  centre (Juba)) and planning decisions (lack of
  state involvement)
• Core capacity (for planning, implementation and
  reporting) at state and county levels is weak

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PrioritiesDecentralisation

• Strategy for transition to the ICSS vision of
  decentralization
• Determine functional and administrative roles for
  all three levels of government consistent with
  available financial, human resources and physical
  infrastructure
• Clarify framework for fiscal decentralization
• Criteria for transfers need for debate on
  options (needs- versus incentive-based)
• accountability mechanisms,
• role of S-FFAMC, MOFEP, etc
• Support states in designing legal and
  administrative frameworks consistent with the
  phased decentralization ? roll-out capacity
  building

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4. Budget allocations

• Discussions should be informed by analysis of
  2006 performance relative to plans and goals
• 2006 budget plan broadly consistent with JAM,
  but evidence at mid-year suggested significant
  deviations in execution, with large
  extra-budgetary expenditures, misalignment
  relative to approved allocations, etc Final year
  accounts, when available, require full analysis
  and scrutiny.
• 2007 plans should be considered in this context

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2007 Budget Highlights
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2007 Budget highlights

• Large wage bill amounting to at least half of
  total budget
• Capital spending of 450 million, of which about
  10 m. is transfers to the states
• Complemented on-budget by MDTF (additional 88
  million)
• No reserves rolled over from 2006 (cf at
  beginning of 2006, amounted to 460m), planned
  level for 2007 minimal (48m)
• Real risks of running into aggregate deficit

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Emerging challenges

• Revenue -- shortfall relative to needs, plus need
  to diversify the base ?
• Develop non-oil revenue base
• Legislative framework and collection capacity
  needs to avoid disincentives to the nascent
  private sector
• Significant challenges in meeting ambitious
  non-oil revenue targets
• ? Risk of aggregate imbalances budget
  anticipates rise in non-oil revenue from less
  than 4 m. in 2006 to 235 m. in 2007

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Emerging challengesDebt strategy

• Short term borrowing for liquidity purposes is
  not justified -- it is expensive, and would not
  be needed if the public financial management
  system was operating effectively.
• Potentially justified for projects with high
  enough economic and social rates of return,
  especially for large or lumpy investments
  expected to have high returns, but exceed current
  liquidity. However
• only at concessional rates (grant element gt 35)
  and long maturity
• systems need to be developed to govern and
  discipline borrowing decisions at the cabinet
  level, and subject to scrutiny by SSLA
• every proposal should be subject to independent
  and professional scrutiny to ascertain the legal
  and financial soundness of the loan and
• decisions need to be guided by, inter alia,
  repayment capacity.

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Emerging challengesManagement of the defence
budget

• Large budget allocation for defence, but SPLA
  currently operates without modern accounts, no
  payroll, and no system of procurement, or a fully
  functioning finance department that can provide
  oversight and ensure proper accounting and
  reporting.
• ? Need to set up and design of a transparent
  public financial management system including cash
  management, payroll, payment system, procurement
  system, auditing and pension systems.
• Elements
• Establishing the financial management rules and
  procurement regulations to govern the defence
  sector, linked to the overall regulations
  developed for the GOSS
• Organizational structure, including a personnel
  management database, an electronic payroll
• Rules and regulations to operationalize the
  system (manuals and procedures).
• Capacity building

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Conclusions

• Southern Sudan has massive needs and faces
  enormous start-up costs in enabling the basic
  infrastructure and services required to get the
  economy going. Needs exceed available revenue ?
  critical role of sound planning, implementation
  and reporting to ensure best possible use of
  relatively scarce public resources.
• 2007 an especially challenging year in making
  strategic choices, and implementing commitments
  on public financial and public sector management,
  and effectively putting recent innovations like
  procurement agent and single treasury system
  smoothly into effect.