Transcript Tanzania: Public Expenditure and Financial

Tanzania: Public Expenditure and Financial
Accountability Review Mission 2006
----------------------------------------------Brief for the DPG
March 15, 2006
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CONTEXT
• PEFAR 2006: 2nd integrated external (to Govt) review of PE + PFM
+ PP (“One process, One assessment”).
• Joint exercise => WB, IMF/East AFRITAC, DFID, KfW, EU,
Finland, Ireland, Canada, NGOs – Haki Elimu, Water Aid, NPF,
REPOA + consultancy support (NB: synergy; resources –
manpower + financial; minimized overlap & duplication of effort;
lower transaction costs to Govt)
• FY06 is year 1 of MKUKUTA implementation => Support to
strengthen MKUKUTA-Budget links
• General elections & New Government
» Election-related expenditure pressures
» Budget implications of new structure of ministries
» Budget response to the priorities of the new Govt
• Emergency: Drought-related expenditure pressures
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COMPONENTS OF PEFAR 2006
(1) Evaluation of spending (FY05 & ½ FY06)
(Overall; economic & functional composition; some recent events)
(2) Fiscal Space for Infrastructure
(I: Key bottlenecks; prioritization; institutional framework; additional
fiscal space II: Funding needs for scaling-up & macro implications)
(3) MKUKUTA – Budget Links
(Lessons from Sector expenditure analysis; bdgt process &
stakeholder consultations; cross-country study; NGO views)
(4) PFM (+PP)
(Update of PEFA indicators; FM practices & risks at LG level;
cash/fund flow arrangements; accountability system; progress on
procurement reforms)
(5) Allowances and W-bill Allocation
(use of allowances; W allocation process & strategies)
(6) Zanzibar
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SOME KEY ISSUES COMING OUT OF THE
PEFAR MISSION
PRELIMINARY !!
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(1) EVALUATION OF PUBLIC SPENDING
•
Aggregate fiscals are on track (FD =4.4% of GDP)
•
Domestic revenue effort has improved (from 13% in
FY04 to 13.6% of GDP in FY05 ) but remains low
(Total expenditure = 25% of GDP; Others in the
region doing better). There is potential for more
revenue.
•
Revenue foregone through exemptions (VAT, donorfunded projects) on the increase
•
More tax expenditures envisaged under EPZs and
SEZs draft legislation
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(1) EVALUATION OF PUBLIC SPENDING (cont.)
•
Donor-dependency remains high (42% of total expenditure in
FY05)
•
Unpredictability of donor support & timing of disbursements.
•
Development Budget: Foreign resources account for 75% of the
devt budget but only 67% of actual devt expenditure
•
Drought-related increase in spending (Estim. 1.2% of GDP)
•
Budget deviations: One-off Vs systemic over/under-spending
•
Large under-spending for foreign financed devt expenditure
(Works -Tshs.56; Labor & Youth Devt – Tshs.40bn; President’s
Office – Tshs.23 bn; Education – Tshs.21 bn; Health –
Tshs.19bn)
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(2) INFRASTRUCTURE
» Lack of an objective project selection
process
» Coordination of investments between
infrastructure sectors is weak or lacking
» Major bottlenecks: (i) Run down state of
TRC causing serious take-off problems at
Dar port (ii) Energy crisis/load shedding
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(2)
INFRASTRUCTURE (cont)
» Potential areas for additional fiscal space:
curbing tax evasion; better cost recovery in
water & electricity; improving technical and
operational performance of PEs; Data
quality.
» Financing of infrastructure has increased
recently but less compared to social sectors
» Experience with private sector
participation is mixed
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(3) PUBLIC FINANCIAL MANAGEMENT - LG
• Value of Multi-year dialogue: Data on LG revenue &
expenditure is now available. Moving forward with analysis
of the data, checking quality + Visits to select LGAs to
assess actual FM practices.
• PFM systems are weak across LGAs (=> Need to improve
bank reconciliation, documentation - asset & imprest
registers, procurement contracts; frequency of internal
audit etc.)
• Very erratic funds flow to LGAs (CDG, OC) + Funds
transferred without instructions on what they are for +
Large sums sitting in LG accounts earning interest but no
instructions on how the interest should be spent.
• Transfers for school construction biased against remote
LGAs/schools
• Too many uncoordinated donor funding sources (24 to 28
different bank accounts for each LGA!!)
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(4) Public Procurement
• LG has yet to implement the new PP law
(Regulations still under preparation)
• Capacity is weak across all levels of govt
• Dissemination of the PP law not adequate
• No established procurement cadre
• Zanzibar: (i) No regulations & the law needs to be
amended (ii) No independent regulatory
authority (DPG push under PFMRP, PRBS/PRSC ?)
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(5) Allowances and W-bill Allocation
» Work still going on (Questionnaire on PIUs)
(6) Zanzibar
» Work on fiscals, PFM planned for next week
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7.
MKUKUTA – BUDGET LINKAGES
• Multi-country case study : a comparative
framework on PRS/budget linkages
• Preliminary views : Tz one of the most
comprehensive effort to redesign instruments of
PRS as well as policy content (cf draft JSAN)
• Positive assessment of innovations (SBAS year
2, harmonisation group agenda, Strategic
Planning and Budget Manual, ..)
• Need for consolidation and simplification of
existing instruments, tailoring highly ambitious
agenda to capacity constraints
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EXTERNAL FINANCING
• Key gap in budget process : effective review of
external financing projections
• Previously, MTEF projections used as base for
checking only aggregate finance and level of
budget support, not composition
• Need to look at (1) adequacy as MTEF
projections (2) fit with Mkukuta requirements (3)
consistency with JAS principles
• Next steps :Preliminary PEFAR team analysis >
GoT dialogue with DPs > consultation on
financing strategy in May consultations
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SECTOR REVIEWS
• PEFAR: looking at sector reviews through the
lens of institutional assessment of public
resource management
• Realistic assessment of multiple objectives:
instrument of sector planning, enhancing
domestic accountability, integrating external
financing (PRBS + sector)
• Clarifying principles developed in outline in the
PRBS/PAF redesign
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‘ONE PROCESS, ONE ASSESSMENT’
• GoT challenge to carry out budget analysis/ fiduciary
assessment within one process for combined Budget,
PFM review
• PEFA indicators as internationally agreed minimum
base for comparative assessment
• Complementarity with PEFAR process: (1) broader
analytic frame as context and evidence base for
indicators summary indicators, (2) PEFAR provides
frame for TZ specific analysis beyond minimum PEFA
(3) PER/PEFAR process provides for dialogue (Wg,
May consultations)
• Current PEFAR cycle : technical team to complete
05/6 indicators, review by full PEFAR team, dialogue
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with GoT in PEFAR WG, May consultations…..