Using Bank Instruments to Strengthen Public Expenditure Analysis and Management: The Case of Vietnam

1
Using Bank Instruments to Strengthen Public
Expenditure Analysis and ManagementThe Case of
Vietnam

• Ed Mountfield
• East Asia PREM

2
Current Bank Instruments Supporting Public
Expenditure Reform in Vietnam
3
ESW - previous studies

• A series of public expenditure assessments has
  been conducted
• UNDP-Bank PER 1996
• IMF-Bank fiscal transparency study 1998
• Joint Government-donor PER 2000
• Bank CFAA 2001 and Bank CPAR 2002
• These have had important impacts including
• Influencing State Budget and Public Investment
  Program
• Helping shape the Comprehensive Poverty Reduction
  and Growth Strategy (CPRGS Vietnams PRSP)
• Influencing the revised State Budget Law of 2002
• Forming the analytical basis for the 71 million
  Bank/DFID-financed Public Financial Management
  Reform Project (PFMRP)
• and helping to underpin three Poverty Reduction
  Support Credits
• Capacity and ownership have developed and Vietnam
  is ready to integrate public expenditure analysis
  into its own budget process

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PER-IFA Objectives

• At the end of 2003, the Prime Minister
  commissioned a Public Expenditure Review and
  Integrated Fiduciary Assessment (PER-IFA).
• Objectives include to
• review public expenditure and its management,
  including strengths and weaknesses
• align budget planning with the 5 Yr Plan and the
  CPRGS
• provide analytical inputs to the 2005 State
  Budget, the 5 year Plan for 200610, and
  Medium-Term Expenditure Frameworks to be piloted
  as part of PFMRP
• strengthen capacity to conduct public expenditure
  analysis across Government
• provide an assessment of fiduciary risks for the
  Government, its financiers and donors, and its
  citizens

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PER-IFA Approach

• Status Prime Ministerial Commission
• 1 yr time frame April 2004 April 2005
• A participatory process and a joint report
  (approved both by the PM/Cabinet and World Bank
  management)
• Government team Finance, Planning, Education,
  Health, Agriculture, Transport
• Donor team Canada, Denmark, Netherlands,
  Norway, Sweden, Switzerland, UK
• Bank team PREM, HD, RD, INF, Financial
  Management, Procurement
• Also involved international and Vietnamese
  consultants, research institutes and universities

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PER-IFA Scope

• Cross-sectoral studies
• Fiscal trends and sustainability
• Trends in composition of public expenditure
• Institutions for public expenditure management
• Institutions for financial accountability
  transparency (CFAA)
• Decentralization to subnational government
• Delegation to spending units
• Public investment management
• Public procurement management (CPAR)
• Sector-specific studies
• Education sector expenditure
• Transport sector expenditure
• Health sector expenditure
• Agriculture and rural development sector
  expenditure
• National Target Program expenditure
• The PER-IFA is pending approval by the Cabinet
  and Prime Minister and will be published and
  launched in May 2005

7
PFMRP and MDTF

• The PFMRP is one of the Governments and the
  Banks main vehicles for taking forward the
  PER-IFA agenda in Vietnam
• Co-financed by IDA (54 million) DFID (10
  million) and Government (7 million)
• Approved May 2003 and running for 5 years
• Includes
• implementation of a new Treasury and Budget
  Management Information System
• TA to strengthen planning of state budget and
  public investment (including MTFF and sector
  MTEFs)
• TA to strengthen management of public debt and
  SOE fiscal risk
• A Multi-Donor Trust Fund (MDTF) has also been
  established to coordinate donor support for wider
  reforms in the area of public financial management

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PRSCs and SWAPs

• PRSCs have served to help keep PFM reforms on
  track, with each PRSC including PFM as a key
  focus
• PRSC 1 emphasis on publication of disaggregated
  budget data and strengthening role of Treasury
• PRSC 2 emphasis on approval of a new State
  Budget Law
• PRSC 3 emphasis on progressive implementation
  of new Treasury and Budget MIS and establishment
  of medium-term budget planning
• PRSC 4 and 5 under preparation
• SWAP operations are also planned and under
  preparation at sector level building on PER-IFA
  sector analysis, as well as sector-level MTEF
  work under the PFMRP
• Education SWAP will shortly go to the Board

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Lessons from the PER-IFA

• Ownership and participation are expensive, messy,
  time consuming and slow
• but are the best way to build capacity
• and the only way to ensure a PER influences
  plans and budgets
• A participatory PER is a whole-of-Government
  process and a Bank-wide process
• PERs can be integrated with CFAAs and CPARs and
  not just stuck together
• Donors need to be managed carefully and their
  role kept secondary to Government
• Government should participate all the way
  through, and not just as reviewers of a
  near-final product
• Ownership and participation are easiest to foster
  when PERs are repeated on a regular cycle

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Lessons from Complementary Operations

• In low-income contexts, public expenditure ESW
  can benefit from active follow-up and a degree of
  hand-holding
• There is synergy between public expenditure ESW,
  PRSCs and SWAPs
• In low income country context, PRSCs and SWAPs
  can help push ESW follow-up along
• PRSCs and SWAPs will become increasingly hard to
  sell if PFM reform falters
• MTEFs can help form a basis for SWAPs
• Strengthening public expenditure analysis and
  management takes decades not years