Governance and Institutional Strengthening Project (GISP)
- Reference: P-ZW-KF0-005
- Approval date: 12/12/2013
- Start date: 01/04/2014
- Appraisal Date: 25/10/2013
- Status: OngoingOnGo
- Implementing Agency: GOVERNMENT OF ZIMBABWE MINISTRY OF FINANCE & ECON DEVELOPMENT
- Location: Nation
X.Proposed development objectives: The overall development objective is to strengthen public sector capacity for economic recovery through improving transparency and accountability in public finance and mineral resource management. XI.Project description and Implementation Arrangements 11.1 The project has three mutually reinforcing components:
(i) improved transparency in public finance;
(ii) enhanced capacity for economic management; and
(iii) project management. The major activities are summarized below. Component 1: Improved transparency in public finance (UA 3.2 million) a) Technical assistance to review the Public Procurement Act; b) Capacity building support to the State Procurement Board; c) Professional Development of procurement officers in line ministries; and d) Technical assistance to develop Treasury Instructions, Internal Audit Manual; e) Professional development and specialized training for internal auditors; f) Technical assistance to establish internal audit committee across government; g) Technical assistance to upgrading and install Core Banking Systems (GLOBUS); Central Securities Depository, Exchange Control, Electronic Document Management System and Treasury bill auction module
Component 2: Increased transparency in management of mineral resources (UA 1.5 million) a) Capacity building support to Geological Survey Department b) Technical assistance and analytical and advisory service to review and develop a mining sector development policy and regulatory framework
Component 3: Project Management (UA 0.5 million): Monitoring and evaluation, staff training, audit, PEFA assessment, and operating costs.
The objective is to improve transparency and effectiveness in public finance and economic management with emphasis on four mutually complementary interventions: (a) increasing transparency and competition in public procurement; (b) improving effectiveness in internal audit functions; (c) increasing transparency in mining revenue to create fiscal space for public investment; and (d) strengthening banking supervision for financial sector stability and economic recovery.
IX.Project Rationale 9.1.1 PRSP and CSPs priorities, key development issue(s) project is aiming to address. The rationale for the proposed operation is aligned with the country's Medium Term Plan (2011 - 2015) which outlines the priorities for economic recovery and inclusive growth. It recognizes strengthening governance and accountability is critical in the implementation of the MTP across all sectors of the economy. It also envisages mining sector as the main driver of economy. Government has identified policy measures for transparent management of mineral resource for socio-economic development. The emphasis on governance and institutional strengthening is in line with the overall thrust of the MTP to improve transparency and effectiveness to support the restoration of economic stability and growth in Zimbabwe. 9.1.2 The project is firmly anchored in the objectives and priorities of the Zimbabwe Country Brief (2013-2015). The Country Brief highlights the need to deepen and consolidate Bank's support for capacity building in the areas of Audit, Procurement, Reserve Bank of Zimbabwe, Mining and Tourism Sectors and Youth Development. The proposed operation is also consistent with the Bank's Long-Term Strategy (2013-2022) and ADF-12 operational priorities through deepening transparency and accountability in PFM and natural resource governance. 9.1.3 The project is also consistent with the PFM Improvement Roadmap (2013-2015), the policy priorities identified under the National Budget for 2013. The PFM improvement roadmap provides a comprehensive framework on which to base further development assistance. The first priority and target of the roadmap is to establish core PFM functions by focusing on financial compliance and control. The proposed project will contribute to implement key components of the PFM roadmap and directly address weakness in internal control and procurement (see Box 1 below). 9.1.4 The project aims to address institutional capacity constraints in the management of the mineral resource and maintaining financial sector stability in Zimbabwe. A major effect of Zimbabwe's economic collapse was the systemic weakening of key institutions caused by an unprecedented brain drain from the civil service, which is further compounded by dilapidated and outdated IT equipment, weak working systems, and salary scales that fall below the cost of living. In this regard, Government has requested the Bank to provide capacity building support to increase financial sector stability and transparency in the management of mineral resources. The capacity assessment recommends the need to strengthen: (a) the core banking system of the Reserve Bank of Zimbabwe to maintain a stable banking system and monetary policy; and (b) Geological Survey functions to better manage and publish geological information as well as support government to adopt and implement a revised mineral policy and mines acts, and the Extractive Industries Transparency Initiatives. 9.2 Why the Bank Group should intervene 9.2.1 The Project will help intensify and sustain reform efforts in Zimbabwe. Current gains must be consolidated and remaining gaps need to be addressed. A continuing reform in PFM, financial sector stability, and extractive industries transparency exists and needs to be pursued in order to keep the country in the path for economic recovery. Through well-targeted institutional capacity building intervention, this project will make a significant contribution to addressing capacity weakness in key institutions responsible for public finance and economic management. 9.2.2 Both development partners and the Government expect the Bank to take the lead role in the country's re-engagement with the international community. The Bank has been given unique mandate of taking leadership in economic policy advisory and dialogue to sustain reform implementation and the momentum attained during the life of the Government of National Unity. By strengthening institutions and transparency in public finance and economic management, the project will support the country's engagement with the international community including implementation of reform supported under the IMF Staff Monitored Program. 9.2.3 The proposed operation will complement the ongoing Capacity Building for Public Finance and Economic Management (CBPFEM) Project by focusing on audit, procurement, and Reserve Bank of Zimbabwe. The current program of donor support to PFM including the Bank is focused on budget, revenue management, accounting, and external oversight. However, there is need to complement the ongoing project by focusing on internal audit and procurement to strengthen financial compliance and control and also to ensure the existing PFM legal and regulatory framework is fully enforced to deliver fiscal stability and improved service delivery.
11.5 Social Impact and Poverty Reduction: The Project aims to rebuild government capacity to implement policy reform and improve public finance management. This will enhance and leverage the impact of the Country's Medium Term Plan on economic recovery and poverty reduction through increasing effectiveness of internal control, procurement, and transparency in management of mineral resources. The impact on poverty and all other cross cutting areas will therefore be indirect, but si gnificant. The project will promote gender balance through the training program, and support a gender auditing exercise in the procurement and audit units across government to establish the baseline data of the gender disaggregated professionals.
GEBRE-SELASSIE Kalayu - OSGE2