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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 Context The Public Financial Management (PFM) interventions

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public financial management reform in ghana sequencing prioritisation

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

slide2
Coverage of Presentation
  • 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

    • Highlight lessons and consider implications for PFM reform
    • Identify issues for discussion

(prioritisation & sequencing and other issues)

ghana the context
Ghana - The Context
  • “Neo-patrimonial” character of State
  • Ineffectiveness of civil service major constraint (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
the pfm interventions
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)
the introduction of vat 1993 to 1995
The Introduction of VAT (1993 to 1995)
  • Features:
  • Government commitment
  • Independent VAT service
  • Good leadership
  • Effective TC provision
  • Legislation delayed (in Parliament)
  • Insufficient public education
  • High/difficult rate (17.5 %)
  • Bad timing
  • Result:
  • Focus for opposition
  • Rioting
  • Cancellation
  • Lessons:
  • Need realistic timescale
  • Factor in political processes
  • Consider political realities (content & timing)
the re introduction of vat 1997 to 2000
The Re-introduction of VAT (1997 to 2000)
  • Features:
  • Government commitment
  • Independent VAT service
  • Good leadership (previous project team kept together)
  • Effective TC provision (same providers - low key role)
  • Learned from mistakes:
  • - public education
  • - 10% rate
  • Result:
  • Revenue targets continuously exceeded
  • Rising revenue ((1999 – 3.85% of GDP, 2004 – 5.55% of GDP)
  • Good practices
  • Sustainable organisation
  • Some further support needed re computer system
integrated payroll and personnel database replacing earlier system
Integrated Payroll and Personnel Database – replacing earlier system
  • Features:
  • Payroll = 60% of expenditure
  • Old technology on verge of collapse
  • Underestimated internal resistance to reform
  • Selected too complex a solution
  • Insufficient attention to change management
  • Consultant & contractor selection badly handled
  • Result:
  • Project failed repeatedly
  • DFID cancelled twice
  • Approx £2.4 million spent – very little to show for it
  • Lessons:
  • Don’t let complex technology blind you to the basics
  • Postscript:
  • Recent new impetus
  • Use of 3rd party software to restore reporting/analysis capability
budget and public expenditure management system
Budget and Public Expenditure Management System
  • Features:
  • Central component of wider PUFMARP programme
  • Inadequate needs assessment
  • Technocratic and over ambitious
  • Consultant led (at least 40 international consultants involved)
  • Little government commitment outside Ministry of Finance
  • Poorly sequenced
  • Result:
  • “spent US$30 million and 8 years and still can’t produce basic budget reports” – senior manager from the project.
  • May have created a capacity gap - technology too sophisticated
  • Lessons:
  • Be realistic (technology & timescales)
  • Consider costs and benefits
  • Need clear institutional home for project
introduction of medium term expenditure framework
Introduction of Medium Term Expenditure Framework
  • Features:
  • Strong on participation
  • 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
  • Result:
  • 1st review – “so far what was achieved was extraordinary….”; but this did not last
  • 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
decentralisation of financial management within health sector
Decentralisation of Financial Management within Health Sector
  • Features:
  • Control of funds decentralised to Budget Management Centres (BMCs) meeting “readiness criteria”
  • 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
  • Result:
  • Not aware of specific evaluation of financial management aspects but overall, SWAP was regarded as best in Africa at the time
  • 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
some lessons
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
suggested issues for discussion
Suggested issues for discussion
  • Can we plan to move at the partner government’s 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?
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