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Public Financial Management Reform in Ghana (sequencing & prioritisation)






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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
Public Financial Management Reform in Ghana (sequencing & prioritisation)

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Slide 1

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

Slide 2

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)

Slide 3

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

Slide 4

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)

Slide 5

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)

Slide 6

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

Slide 7

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

Slide 8

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

Slide 9

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

Slide 10

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

Slide 11

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

Slide 12

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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