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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)

Stephen Sharples

21 March 2008

1 Palace Street, London SW1E 5HE

Abercrombie House, Eaglesham Road, East Kilbride, Glasgow G75 8EA

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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)


    • Highlight lessons and consider implications for PFM reform

    • Identify issues for discussion

      (prioritisation & sequencing and other issues)

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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

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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)

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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)

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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

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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

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Budget and Public Expenditure Management System earlier 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

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Introduction of Medium Term Expenditure Framework earlier system

  • 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

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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

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Some Lessons Sector

  • 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

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Suggested issues for discussion Sector

  • 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?