• Référence: P-SL-KA0-010
• Date d’approbation: 06/05/2009
• Date de début: 02/07/2009
• Date d'évaluation: 02/02/2009
• Statut: En coursOnGo
• Agence d'implémentation: MINISTRY OF FINANCE
• Emplacement: TERRITOIRE NATIONAL

11.1 Program design: In line with the ADB's support to country-led approaches and harmonization, the proposed operation adopts a SWAp-type programmatic approach in that it provides joint donor support to the MoFED and other PFM actors in the implementation of the GoSL's integrated PFM reform program . It will support reforms that start from the developments made to date in the core areas of PFM, and seeks to build up from those in a step-by-step manner.

11.2 Components: The proposed operation has two major components:

(i) General Budget Support for PRSP II, and

(ii) earmarked budget support to PFM. Component one provides additional resources to the national budget to enable government to make available resources for poverty reduction program. Component two provides an earmarked budget support to the IPFMRP. It supports GoSL's long-term vision and objectives of PFM that intend to achieve fiscal discipline; strategic, efficient and effective allocation and use of funds; value for money, and probity in the use of public funds. It will strengthen core PFM components relating to budget management, accounting, reporting, and scrutiny, and PFM capacity. The institutional responsibility for implementing these components is with the MOFED, MDAs, and the Parliament.

11.3 A number of strategic priorities for the core IPFMRP have been identified by GoSL, drawing in part from the analysis provided by the IMF mission of March 2008 as well as GoSL analysis and the PEFA assessment. Ongoing reforms supported by the development partners, including the Bank's ISP, will continue to be supported by the IPFMRP so that the present momentum will be maintained and the benefits fully realized. Earmarked budget support to IPFMRP comprises the following sub-components:

"Sub-component One - Strengthening fiscal and budget management. This will involve strengthening an annual and multi-year fiscal framework backed by realistic revenue forecasts, implementation of strengthened and streamlined commitment control and budget execution procedures, including cash flow planning and orderly in-year budget adjustment procedures; deepening implementation of the Procurement Act by rolling out the newly developed procurement rules and procedures and ensuring consistency with the procurement law across MDAs, improving transparency of procurement process; and strengthening debt and aid management capabilities. It also involves strengthening the payroll control.

"Sub-component two - Strengthening accounting, reporting, and external scrutiny. This involves

(i) strengthening of accounting and reporting by the Accountant General's Department (AGD);

(ii) improving management of accounting records to ensure a full audit trail, and timeliness and quality of periodic financial statements preparation and publication;

(iii) strengthening internal audit, and preparation and timely publication of PETS; and

(iv) develop external scrutiny through support to Parliament. This will include support to Budget and Finance Committee and Public Accounts Committees, and to capacity building of the parliamentary staff to analyze the budget and audit reports. Complementary support to strengthen external auditing or Audit Service of Sierra Leone is being provided by the Bank's ongoing ISP and DFID.

"Sub-component three - Systems, capacity, and organizational development for PFM. This component will design and fund a training scheme for PFM professionals in the areas of procurement, budget planning, fiscal policy, and internal audit. It will strengthen the PFM capacity and organizational development needed to support the various PFM functions envisaged under the first three components. It will include consolidation and roll-out the core treasury and purchasing functions of the Integrated Financial Management Information Systems (IFMIS) to the MDAs. A simple accounting package for local councils will also be implemented. The component will also include support for the establishment of an effective Information Communication Technology (ICT) function located in MoFED for systems development and maintenance. A further area of activity will be the updating of the legal and regulatory framework to take account of the changes to procedures that are developed in the other components of the project.

10.1 The overarching goal is to accelerate economic growth and reduce poverty. The program objective will focus on improving efficiency, transparency and accountability in the use of public resources as laid out in the country's PRSP II and IPFMRP. More specifically, the program will support key reform measures aimed at enhancing fiscal and budget management; procurement reform; and accounting, audit and oversight, payroll control, and PFM capacity development.

10.2 The measures supported by the proposed budget support operation are expected to have a positive impact on poverty reduction. The strengthening of PFM would enhance efficiency, transparency, and accountability in public investments and service delivery.

9.1 Sierra Leone's current social and economic situation has been shaped by the civil war (1991 -2002). The war paralysed the economy, caused the collapse of public services, destroyed the country's infrastructure, and incapacitated government institutions. Since the end of the decade-long brutal conflict, Sierra Leone has made very significant progress in building an enduring peace, reinforcing the unity of the nation, and re-establishing democratic institutions. Sierra Leone stands out among other post-conflict countries in having achieved, in 2007, a peaceful transfer of power from one elected government to another.

9.2 The challenge now facing the authorities is to deepen the reform program during a period of political consolidation following the 2007 national and 2008 local elections, and to do so in the context of a difficult global economic environment. This puts a premium on preserving the fiscal space available for poverty reduction and ensuring that available resources are used efficiently.

9.3 In spite of the setbacks resulting from the war, the GoSL has made significant progress in rebuilding and strengthening public expenditure systems with support from the international community since 2001. In 2002, a limited scope Country Financial Accountability Assessment (CFAA) was undertaken and since then, the regulatory framework for PFM has been transformed by a number of new laws and regulations, including (a) the Government Budgeting and Accountability Act, 2005; (b) the Financial Administration Regulations,1998, and revised in 2007, (c) the National Revenue Authority Act, 2003; (d) Local Government Act, 2004; (e) Public Procurement Act, 2004; and (f) the Anti-Corruption Act (2008).

9.4 As a consequence, the PEFA assessment of PFM in May 2007 indicated that from its very low capacity immediately following end of the conflict, Sierra Leone has advanced to about the average level for Sub-Saharan Africa. This is a significant achievement. However, substantial weaknesses remain; principal among these is the reduction in budget credibility and predictability that occurred in 2006 and particularly in 2007. The PEFA assessment and other recent analyses also point to the major weaknesses in budget control with emphasis on payroll control, internal audit, value for money and control in procurement, accounting and external scrutiny of public finance, and PFM capacity across MDAs.

9.5 Through the existing ISP, the Bank has been one of the GoSL's partners contributing to the development of PFM capacity. The Bank, EC, World Bank and DFID have all funded a number of stand-alone interventions in the area of PFM. However, these interventions have suffered from being fragmented and lacking in coherence and comprehensiveness. The GoSL has put together an IPFMRP outlining its approach to PFM reform over the next four years, and is seeking donor funding to implement it. The Government has highlighted the need to move to a unified joint donor intervention. The GoSL and development partners agreed to coordinate their efforts and to complement the poverty reduction budget support operation with additional resource channeled through basket/pooled fund to support core components of the PFM reform as defined in the IPFMRP . The proposed operation responds to the strong direction provided by the MoFED on the need for the current fragmented support arrangements to be replaced with joint donor support, in order to provide comprehensive support to the IPFMRP, to reduce transactions costs to GoSL, and to avoid donor-driven priority setting and direction. It will also help to maximize impact of the budget support.

9.6 Budget support alone is not enough, and a complementary financial and technical assistance to PFM reform and capacity building is crucial if Sierra Leone is going to make progress towards governance and poverty reduction. The government and development partners recognize the proliferation of project implementation units which are less coordinated, less effective and undermine capacity. The MOFED is keen for donors to develop a complementary aid instrument that can provide a coordinated and targeted financial and technical assistance to strengthen the country PFM systems. The proposed operation supports an integrated and coordinated donor support to PFM, and brings greater synergy between the aid instruments to maximize impact. This will also help to take forward the collaboration between the World Bank, EC, and AfDB in the coordination of budget support programs.

9.7 Potential alternative arrangements for the pooling of funds have been explored. This includes:

(i) direct provision of funds by each of the four Development Partners into a single pooled fund in Sierra Leone, and

(ii) via a trust fund for DFID and EC funds, executed by the MoFED and administered by the World Bank, with which IDA funds would be pooled in a single bank account in Sierra Leone. Donors are considering these options and details of the financial management arrangement will be reviewed and finalized during the joint appraisal mission with the World Bank in January 2009. The funding arrangements will be guided by a set of basic principles that have been agreed to by the participating development partners. These principles include

(i) a common program under government leadership,

(ii) a harmonized implementation mechanism,

(iv) common and joint monitoring and reporting arrangements, and

(v) common financial, procurement, and audit arrangements. General and technical pre-requisites for Bank Group funding of DBSL

9.8 Economic and political stability: Political stability has improved consistently since the end of the conflict in 2002. Peace and stability consolidated through national elections and local elections held in 2007, and 2008 respectively. Progress has been made in laying the groundwork for the rebuilding of state institutions and public financial management systems; and efforts at instituting a process of decentralisation for basic service delivery are well under way. Sierra Leone has successfully implemented a three-year arrangement under the IMF supported PRGF from 2001 -2005. In May 2006, the country accessed a second three-year arrangement under the PRGF. The first review was completed in December 2006 and the second review in July 2008. The delay between the two reviews was due to Presidential and Parliamentary elections as well as difficulties in reaching overly ambitious revenue targets. The Government's efforts to sustain macroeconomic stability are commendable in an environment with significant resource constraints, spending pressures and limited capacity. The multi-donor budget support program is crucial to enable the levels of pro-poor expenditure, sustain macroeconomic stability and enhance governance reform measures.

9.9 Government commitment: The new President declared his commitment to comprehensive public sector reform and fight corruption. In January 2008, the Public Sector Reform Unit was created and positioned within the Office of the President. There is evidence of a new commitment to implement governance reform including PFM, anti-corruption, decentralization, and justice sector reform. President Koroma's recent speech at the opening of the second session of the third Parliament promises Government commitment in a range of public sector governance and PFM reform.

9.10 PRSP and implementation mechanisms: The first PRSP was completed in 2005, based on extensive dialogue and consultation with civil society, non-government organizations, donors and community leaders. The second PRSP (2008-2012) articulates the President's long-term sustainable development plan, the Agenda for Change outlined in the Sierra Leone Vision 2025, which provides the over-arching framework for development planning and management. The PRS clearly sets out the priority development challenges of the country, and has a clear focus on MDG outcomes.

9.11 The PRSP II emphasizes the importance of sustainable economic growth through encouraging the private sector to play a greater role in the economy. Attention is also paid to the pre-conditions for achieving economic growth and poverty reduction through sustaining macroeconomic stability, consolidating peace and good governance. The PRSP II commits Government to take further action to improve public sector governance and public financial management, enforcement of an anti-corruption agenda, provision of access to justice and improvement in rule of law and human rights. Other issues that are being addressed are supporting local governance and the process of decentralisation, parliamentary and civic oversight, social inclusion (women and youth), and public sector capacity building.

9.12 Viable macroeconomic and financial medium-term framework: Each donor providing budget support requires a continuous assessment of the macroeconomic performance of government. The completion of the Second Review of the PRGF in July 2008 has helped to unlock the delayed external budget support and position Sierra Leone for continued growth and stability. Agreement was reached with the IMF for an extension of the PRGF arrangement, aimed at consolidating macroeconomic stabilization. The National Revenue Authority through improved customs valuation and the collection of tax arrears has stepped up revenue collection efforts. Discretionary duty waivers and other tax exemptions have been sharply reduced. Expenditure controls are being strengthened and the Government has agreed that the balance of domestic arrears accumulated in 2007 would be cleared in 2008, within the 2008 resource envelope, after they are audited. Poverty reducing expenditures have been expanded to include the provision of emergency power following the weak performance of the National Power Authority between 2006 and 2007. The government has worked very hard to address donor concerns about fiduciary arrangements, particularly bringing the backlog of published public accounts up to date.

9.13 Partnership among key donors: The Sierra Leone PRSP provides the framework for alignment and harmonization of donor interventions, including for capacity development. Important developments include joint missions, joint Multi-Donor Budget Support (MDBS), SWAp, and the sharing of economic and sector work among development partners and government. Sierra Leone signed the Paris Declaration in February 2007. Coordination of development assistance and government-donor dialogue is carried out by the Ministry of Finance and Economic Development. The budget support donors have signed an MOU with Government in late 2006 establishing a framework for MDBS. The MOU sets out jointly agreed criteria for the provision of budget support. These include:

"Continued good macroeconomic performance, as evidenced by satisfactory progress under an IMF program and by ongoing dialogue on macroeconomic and fiscal prospects.

"Satisfactory progress in PRSP implementation. This will be assessed based on annual PRS progress reports and the annual MDBS review of mutually agreed benchmarks.

"Continuous improvements in PFM. This will be assessed based on annual reports on the IPFMRP implementation and other applicable evidence.

9.14 Fiduciary review: The analytical documents that led to the design of this operation include: the PRSP II, 2007 PEFA Report, 2007 procurement audit, PRGF reviews, 2004 HIPC Assessment and Action Plan, and 2004 Public Expenditure Review. To address various issues raised in these reports, the government has embarked on a wide ranging series of reforms guided by the common PFM National Action Plan (NAP). The NAP underpins the framework for MDBS, and is designed to strengthen PFM. Overall, the government's commitment to PFM improvements and its performance in implementing the PFM reform program is showing adequate improvement. PFM has seen some remarkable improvement in Sierra Leone since the end of hostilities, as documented in the 2007 PEFA assessment, which compares favourably with other countries in the region. The legal and regulatory framework for PFM continues to be strengthened. The Financial Administration Regulation (1998) has been revised with the enactment of the Financial Management Regulation (2007) to support the implementation of the Government Budgeting and Accounting Act (GBBA) 2005. However, there is need to strengthen accountability at the local level, given the substantial amount of resources are continued to be disbursed to local councils. Efforts need continue to deepen the MTEF process with emphasis on strategic planning and performance-based budgeting to ensure that the budget activities are consistent with the PRSP objectives. Progress with the account reform has enabled clearing the backlog of annual financial statements and audit reports for 2002 - 2006. The 2007 annual financial statement has been audited and submitted to Parliament.

We anticipate budget support to generate several benefits, including:

"A stable macroeconomic environment conducive to pro-poor growth, and "More effective, responsive, and accountable government

11.6 As Sierra Leone's own resources are extremely limited, with 80% of domestic revenues funding wages and salaries and interest payments, provision of external resources into the national budget is crucial to allow Government to credibly develop and implement its priorities for poverty reduction. The availability of adequate resources to fund the second PRSP is critical for sustainable growth and poverty reduction in Sierra Leone. Within in the current MTEF, a sum of UA 1.4 billion is required for 2009-2011. Government and development partners have committed UA 0.8 billion, and there is a financing gap of UA 600 million. The MDBS partners are expected to disburse UA 97 million over the next two fiscal years (2009 and 2010) which includes UA 80 million in the form of General Budget Support and additional UA 17 million earmarked to PFM reform. Provision of the Bank's Budget Support Grant is expected to ensure that the GoSL has enough resources in the national budget to implement the strategic priorities set through the PRSP and the IPFMRP.

GEBRE-SELASSIE Kalayu - OSGE1

Source	Montant
Governement	UAC 223.000.000
Co-financier	UAC 97.000.000
Total	UAC 320.000.000