Public Finance Management Institutional Support Project
- Reference: P-MW-KF0-002
- Approval date: 08/10/2013
- Start date: 24/03/2014
- Appraisal Date: 21/06/2013
- Status: OngoingOnGo
- Implementing Agency: MINISTRY OF FINANCE
- Location: Lilongwe, Malawi
X.Proposed development and project's operational policy objectives 10.1 Development objectives: the programme's overall objective is to improve macro-fiscal management, accountability and transparency in PFM and public oversight bodies- including progress in the efficient and effective use of resources through enhanced implementation of rules and regulations, optimal use of IFMIS functionalities and improved service delivery. XI.Project description and Implementation Arrangements 11.1 Project design and components: the programme is designed to enhance domestic resource mobilisation, promote efficiency in use of public resources, and improve internal controls, accounting, reporting and oversight of government finances in Malawi. It has six components, namely:
(i) Strengthening capacity in revenue administration;
(ii) Enhancing competition, efficiency and controls in public procurement;
(iii) Improving accounting and Financial Management systems;
(iv) Strengthening internal controls;
(v) Enhancing oversight functions; and
(vi) Strengthening PFEMRP management (Annexes IV and V). A planned Bank's regional Domestic Resource Mobilization Study covering Malawi, Mozambique and Zambia will come up with policy recommendations for broadening the tax base and increasing revenue. The programme will assist in sustaining the PFM reforms under the Restoration of Fiscal Stability and Social Protection Programme (RFSSP) which is a crisis response budgetary support operation. In this context, the ISP will strengthen PFM capacity to maintain fiscal disciple and strengthen strategic allocation and execution of the national budget which is essential for the ongoing economic management reform and social protection program supported under the RFSSP. The GoM has developed the framework for a coordinated donor approach to PFEMRP, and requested dev elopment partners to pool their resources into MDTF to reduce transaction cost and improve effectiveness of external assistance to PFM reform and capacity building. The project will involve the ADF making a grant contribution to the MDTF, which is administered by the International Development Association (IDA). The Bank will continue to work with the Government counterpart and the World Bank during the appraisal mission to determine the most appropriate modalities of procurement and financial management arrangement to ensure conformity with Bank's fiduciary obligations. 11.2 Implementation: Ministry of Finance (MoF) will be the executing agency. The PFEM Unit will oversee the programme implementation. The Unit will be responsible for procurement, financial management and programme monitoring. The individual components will be managed by relevant beneficiary institutions. The PFEM Steering Committee will be the highest level GoM body providing strategic policy guidance and oversight. The PFEM Technical Committee (PFEMTC) will provide technical inputs on project implementation. A Joint GoM/DP Committee will review and assess progress of the projects under the programme against set benchmarks. The ADF will co-chair the Committee with GoM on rotational basis with other DPs (Annex IX). The design and implementation arrangement will be reviewed at appraisal, taking into account cost to the ADF, value addition and visibility of the ADF (Annex VI). 11.3 Disbursement and financial management: the ADF grant disbursements shall be made to an IDA designated account. IDA shall maintain separate records and ledger accounts in respect of the contributions deposited in the MDTF account and disbursements made therefrom. The PFEM Unit will manage all financial management (FM) issues. A FM assessment of the PFEMU was found satisfactory to ensure that funds are used prudently. The Unit will submit quarterly FM reports and annual financial statements to be audited by an external auditor acceptable to DPs. A payment schedule for the ADF's contribution to the MDTF shall be agreed between the ADF and IDA in the context of the MDTF administrative agreement which will be signed between IDA and ADF. The details of the disbursement and financial management arrangements as well as the administrative fees applicable to all MDTF DPs will be negotiated during appraisal mission to ensure conformity with Bank's financial management requirement. 11.4 Procurement: The PFEM Unit will carry out all procurement management functions. It will be responsible for preparing procurement plans to be approved by a Joint GoM/DP Committee. The GOL has expressed a strong desire for the project to be implemented in a coordinated and harmonized framework. A parallel financing would require the use of two sets of rules (AfDB and World Bank), and this will create a significant administrative burden for Government and undermine the limited resources and capacity available to the project. In view of the capacity constraints and need for harmonisation, the Bank will continue to work with the World Bank during the appraisal mission to determine the most appropriate modalities of procurement management arrangement to ensure conformity with Bank's fiduciary obligations. Should there be a need for the use of other than Bank procurement rules and procedures, then the necessary waivers would be obtained from the Board of Directors. Under the Liberia's Integrated Public Financial Management Reform Programme approved by the Board in 2012, the ADF is co-financing a similar PFM reform programme and uses IDA procurement guidelines. 11.5 Monitoring Arrangements: The PFEMRP Monitoring and Evaluation (M &E) framework will be used to monitor progress in programme implementation. The M&E framework in Annex III captures the high level results that are expected to be achieved during the life of the project. The periodic performance assessment and the resulting reporting will be carried out jointly by the PFEMU and the DPs, including the Bank. The Government will submit bi-annual progress reports on the implementation of the project. The Bank's Field Office in Malawi will play an active role in the coordination, country dialogue, and program monitoring and evaluation.
IX.Project Rationale 9.1 PRSP and CSP Priorities, development issues to be addressed: The project is aligned to the improved governance and cross-cutting themes of the MGDS II. MGDS II recognizes that improving quality of public finances can contribute to increasing growth and that sound PFM systems are critical to effective public spending and increased revenue mobilisation. Pillar II of the CSP identifies PFM institutional support as an instrument for strengthening PFM systems and improving the business environment. By focusing on public financial and economic management reform, the project is aligned to the Bank's Long Term Strategy and Operational Priorities (good governance and inclusive growth) that seeks to build effective and capable institutions and promote transparency and accountability to enhance the quality of growth. 9.2 Why the Bank Group should intervene: The project is planned to address the existing capacity weaknesses and help to address financial management challenges experienced in Bank-financed projects. Through the project, the Fund will contribute to promotion and implementation of the PD Agenda and donor harmonisation. An improved PFM environment will, in turn, lead to increased DPs' use of country systems. The value addition from ADF in the MDTF is its financial contribution that enables widening of the programme's scope (par. 8.2).
11.6 Expected/designed cross-cutting issues/benefits 11.6.1 Social Impact and poverty reduction: the programme is expected to strengthen GoM's capacity to manage public resources more efficiently and effectively, thereby increasing Malawi's potential to reduce poverty and sustain economic growth. Transparent and accountable management of resources will lead to increased civic confidence in the GoM. The main beneficiary institutions are the MoF, the Accountant General's Department, Central Internal Audit Unit, Ministry of Local Government, ODPP, Malawi Revenue Authority, National Local Government Financing Committee, and the National Audit Office. The citizenry will also benefit from an improved service delivery arising from the PFEMRP. The programme will improve gender outcomes in areas of human resource development. Modalities for ensuring gender mainstreaming will be established during appraisal. Women will be given a better chance of being included in activities such as training. The programme will directly contribute to improved economic and financial governance in Malawi through improved capacity in public resource management and procurement. The project will result in improved tax administration, efficient and transparent procurement systems, improved financial reporting and oversight. 11.6.2 Impact on Environment: the programme will not have any negative impact on environment. It is thus environmentally free and has since been classified as Category 3 project. 11.6.3 Participatory process: Various stakeholders (MDAs, civil society organisations, DPs and the private sector) were consulted during identification. Consultations were held with the stakeholders to understand the gaps with a view to tailor components to country needs. The design of the PFEMRP was participatory and all key PFEM stakeholders were consulted. The bi-annual budgetary support reviews provided useful information for developing the programme.
KAMANGA Fenwick Dingiswayo - OSGE2