• Reference: P-SC-KA0-001
• Approval date: 20/07/2009
• Start date: 11/11/2009
• Appraisal Date: 10/04/2009
• Status: OngoingOnGo
• Implementing Agency: GOVERNMENT OF SEYCHELLES MINISTRY OF FINANCE
• Location: Republic of Seychelles

With regards to PFM, the GoS, with the assistance of the EC, undertook a Public Expenditure and Financial Accountability Assessment (PEFA) in May 2008. In spite of a relatively satisfactory scoring, the report identified a series of key weaknesses in the following domains:

(i) credibility, comprehensiveness and transparency of the budget;

(ii) external control of the budget and public debt management. Indeed, through the proposed budget support operation, the Bank intends to accompany the GoS in the implementation of reforms to address the above weaknesses namely: (a) Credibility and comprehensiveness of the budget: One critical conclusion of the PEFA assessment report is that the approved original budget was not a credible indication of actual expenditure. Actual expenditure deviated from budget expenditure by more than 15%. Government is fully committed to avoiding such budget overruns henceforth, in light of the country's alarming indebtedness level. Indeed, the GoS is currently carrying out an improved classification of expenditure exercise, with the assistance of the IMF. The Bank, via this operation, is also proposing to accompany the Seychellois authorities in strengthening the public administration's capacity so as ensuring budget expenditure monitoring. (b) External control of the Budget: One of the main constraints at present is the inability of the Auditor General's Office to undertake audits for all line ministries on a yearly basis. In addition, performance audits are not carried out. Further, although the budget classification has been improved to reflect best practices, the annual legislative scrutiny of the annual budget is still very limited since the time allowed for review by the Legislature is insufficient. Moreover, the Finance and Public Accounts Committee does not adequately carry out its mandate of oversight. Hence, the Bank will support the GoS in its efforts notably to improve the external control of the budget and in the effective elaboration and adoption of the draft Audit Act. (c) Public debt management: the country is currently under debt distress, with public debt accounting for around 180% of GDP. As part of the government debt management strategy, the Parliament adopted a new Public Debt Management Act in December 2008, which redefines the legal framework for public debt management, as well as the roles and responsibilities for the bodies responsible for contracting and managing public debt. Furthermore, the Seychellois authorities are finalizing their medium-term debt sustainability Strategy. The proposed Bank operation intends to support the execution of this medium-term strategy and support Government in the effective presentation of annual debt plans. (d) In terms of the public procurement system, the process suffers from weak standardized procedures, thus making it difficult to provide a coherent assessment on the methods used for award of contracts. The GoS has become increasingly committed to enforcing the highest standards of transparency and accountability in the public sector. As a result, a Public Procurement Act was enacted in December 2008, making provisions for standardized procurement procedures and harmonized regulations. The Bank proposes to accompany the GoS in the successful implementation of the Act, notably via the setting up of the new Tender Board and developing the required capacity in public procurement units across line ministries.

The program objective will be to enhance transparency and reinforce efficiency of the public finance management and public procurement systems in order to improve economic and financial governance.

The proposed General Budget Support (GBS) operation is being carried out in a context wherein the GoS is implementing a credible economic reform program, supported by the IMF's Stand-By Agreement. Whilst it is recognized that the Government is committed to its reform program, given the rapidity in which the bold reforms are being implemented, it is also evident that its own funds will not be sufficient to close the financing gaps. Hence, access to quick-disbursing finance during such a period is of paramount importance for Seychelles to support its efforts in debt re-profiling. This support and its timeliness are of particular importance since it will send a positive signal to commercial creditors.

It is noteworthy that the GoS recognizes the urgent need to improve the management of public finances as emphasized in the recent Budget speech (December 2008). Indeed, by focusing on strengthening the PFM systems and reinforcing the public procurement process, the proposed program is promoting efficient management of public financial resources, thereby contributing to making resources available to further support the Government's comprehensive reform program.

The development objective of the program is to promote macroeconomic stability and sustainable growth, by improving economic and financial governance. This overarching development objective would contribute in placing the country on a public debt sustainable. This would, in turn, release resources to allow the GoS to pursue its development goals.

CHINIEN Shirley - OSGE1

Finance source	Amount
ADB	EUR 12,885,380
Delta	EUR 70
Total	EUR 12,885,450