Public Financial Management Reform in the Middle East and North Africa

224 Pages·2012·5.25 MB·English

by  World Bank Group

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Reform in the Middle East
and North Africa
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Robert P. Beschel Jr. and Mark Ahern

W O R L D B A N K S T U D Y
Public Financial Management
Reform in the Middle East and
North Africa
An Overview of Regional Experience
Robert P. Beschel Jr.
Mark Ahern
© 2012 International Bank for Reconstruction and Development / International Development Association or
The World Bank
1818 H Street NW
Washington DC 20433
Telephone: [phone]
Internet: www.worldbank.org
1 2 3 4 15 14 13 12
World Bank Studies are published to communicate the results of the Bank’s work to the development
community with the least possible delay. The manuscript of this paper therefore has not been prepared
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ISBN (paper): 978-0-8213-9529-5
ISBN (electronic): 978-0-8213-9530-1
DOI: 10.1596/978-0-8213-9529-5
Cover image by Marsi Pandolf Beschel, used with permission.
Library of Congress Cataloging-in-Publication Data
Ahern, Mark E.
 Public fi nancial management reform in the Middle East and North Africa : an overview of regional
experience / [Mark E. Ahern, Robert P. Beschel, Jr.]
   p. cm.
 “Part I, Overview and summary, June 2010.”
ISBN 978-0-8213-9529-5 -- ISBN 978-0-8213-9530-1
 1. Finance, Public--Africa, North. 2. Finance, Public--Middle East. I. Beschel, Robert P. II. World Bank.
III. Title.
HJ1451.A44 2012
352.4’23670956--dc23
2012010606
Contents
Acknowledgments ....................................................................................................................ix
About the Authors .....................................................................................................................xi
Acronyms and Abbreviations ................................................................................................xv
PART I: OVERVIEW AND SUMMARY .......................................................................1
Executive Summary ...................................................................................................................3
Introduction ..........................................................................................................................3
MENA PFM Practices Compared Against Global Averages .........................................5
The Substantive Reform Agenda .......................................................................................6
Implementing Public Financial Management Reforms in MENA: An
Emerging Set of Promising Practices? ....................................................................10
1. Introduction: Public Financial Management Reform in MENA and Beyond ......19
The Importance of Public Financial Management ........................................................19
Beyond MENA: The Lessons from Global Experience ................................................20
What Is “MENA”? Selecting the Economies for This Study ......................................22
Using the PEFA Ranking to Evaluate PFM in MENA..................................................23
Where MENA Has Ranked Consistently Higher .........................................................26
Where MENA Has Ranked Consistently Lower ..........................................................27
MENA Economy Templates and Case Studies on PFM Reform ................................28
2. The Substance of Public Financial Management Reform: What Reforms
Are Needed and Which Are Working? ........................................................................30
Strategic Budgeting ...........................................................................................................31
Budget Preparation ...........................................................................................................35
Resource Management .....................................................................................................38
Internal Control and Audit ..............................................................................................43
Accounting and Reporting ...............................................................................................46
External Accountability ....................................................................................................50
3. Implementing Reforms in Public Financial Management: An Emerging Set
of Promising Practices in MENA? .................................................................................53
How Important Is Implementation to the Success of MENA’s PFM Reforms? .......53
Lesson 1: Know the Value—and Limitations—of Political Economy Analysis........56
Lesson 2: PFM Reform as Means and Not Ends ..........................................................58
Lesson 3: Context Ma(cid:308) ers, So Swim with the Current ...............................................59
Lesson 4: The Wisdom of “Muddling Through”—Grand Strategy versus
Incremental Change ...................................................................................................60
iii
iv C ontents
Lesson 5: Establish Basic Systems before Contemplating More Advanced
Reforms ......................................................................................................................62
Lesson 6: When Possible, Keep Reforms Quick, Simple and Mutually
Reinforcing .................................................................................................................64
Lesson 7: Be Wary of Large Financial Management Information Systems ..............66
Lesson 8: Internal Challenges: Leadership, Coordination, Skills, and Incentives ..68
Lesson 9: External Stakeholders—Useful, but Don’t Count on Them ......................72
Lesson 10: Lessons for Donors: Be More Strategic, Selective, Modest,
and Flexible .................................................................................................................74
PART II: INDIVIDUAL ECONOMY CASES ..........................................................79
4. Overview and Description of Economy Templates ...................................................81
General Overview .............................................................................................................81
Substantive Reform Agenda ............................................................................................82
Implementation Strategies for Reform ...........................................................................82
Political Economy of Reform ...........................................................................................83
5. Algeria ................................................................................................................................84
General Overview .............................................................................................................84
Substantive Reform Agenda ............................................................................................86
Implementation Strategies for Reform ..........................................................................90
Political Economy of Reform ...........................................................................................92
Key Conclusions ................................................................................................................93
6. The Arab Republic of Egypt ...........................................................................................94
General Overview .............................................................................................................94
Substantive Reform Agenda ............................................................................................95
Institutional Arrangements for PFM Reform ................................................................99
Key Conclusions ..............................................................................................................100
7. Iraq ....................................................................................................................................101
General Overview ...........................................................................................................101
Substantive Reform Agenda ..........................................................................................102
Implementation Strategies for Reform ........................................................................108
Political Economy of Reform .........................................................................................109
Key Conclusions ..............................................................................................................111
Annex: Iraq PEFA Assessment ......................................................................................112
8. Jordan ................................................................................................................................114
General Overview ...........................................................................................................114
Substantive Reform Agenda ..........................................................................................115
Implementation Strategies for Reform .........................................................................119
Political Economy of Reform .........................................................................................122
Contents v
Key Conclusions ..............................................................................................................123
Annex: Jordan PEFA Assessment ..................................................................................124
9. Lebanon ............................................................................................................................126
General Overview ...........................................................................................................126
Substantive Reform Agenda .........................................................................................127
Implementation Strategies for Reform .........................................................................132
Political Economy of Reform .........................................................................................133
Key Conclusions .............................................................................................................134
10. Morocco ............................................................................................................................135
General Overview ...........................................................................................................135
Substantive Reform Agenda ..........................................................................................136
Implementation Strategies for Reform .........................................................................143
Political Economy of Reform .........................................................................................144
Key Conclusions ..............................................................................................................144
Annex: Morocco PEFA Assessment ..............................................................................145
11. The Syrian Arab Republic ............................................................................................146
General Overview ...........................................................................................................146
Substantive Reform Agenda ..........................................................................................147
Implementation Strategies for Reform .........................................................................149
Political Economy of Reform .........................................................................................150
Key Conclusions ..............................................................................................................151
Annex: Syrian Arab Republic PEFA Assessment ........................................................152
12. Tunisia ..............................................................................................................................153
General Overview ...........................................................................................................153
Substantive Reform Agenda ..........................................................................................156
Implementation Strategies for Reform .........................................................................161
Political Economy of Reform .........................................................................................163
Key Conclusions ..............................................................................................................164
13. The West Bank and Gaza ..............................................................................................165
General Overview ...........................................................................................................165
Substantive Reform Agenda ..........................................................................................166
Implementation Strategies for Reform .........................................................................170
Political Economy of Reform .........................................................................................172
Key Conclusions ..............................................................................................................173
Annex: West Bank and Gaza PEFA Assessment .........................................................175
14. The Republic of Yemen .................................................................................................177
General Overview ...........................................................................................................177
Substantive Reform Agenda ..........................................................................................178
vi Contents
Implementation Strategies for Reform .........................................................................184
Political Economy of Reform .........................................................................................186
Key Conclusions ..............................................................................................................186
Annex: The Republic of Yemen PEFA Assessment .....................................................188
Appendix .................................................................................................................................191
Bibliography ...........................................................................................................................197
Boxes
Box 1. Ten Principles of Implementation for PFM Reforms in MENA .............................11
Box 3.1. Ten Principles of Implementation for PFM Reforms in MENA ..........................56
Box 3.2. History of the Iraq IFMIS System .............................................................................67
Box 7.1. The Iraq Financial Information Management System .......................................105
Box 8.1. Defi nition and Scope of the MTEF ........................................................................117
Box 8.2. MOF Strategy as of 2009 ..........................................................................................120
Figures
Figure 1. MENA PEFA Averages Compared to Global PEFA Averages for
Comparable Lower-Middle-Income Economies ............................................................5
Figure 2. Reforms at Diff erent Stages of the Budget Cycle ...................................................6
Figure 1.1. MENA PEFA Averages Compared to Global PEFA Averages for
Comparable Lower-Middle-Income Economies ..........................................................26
Figure 2.1. Reforms at Diff erent Stages of the Budget Cycle ..............................................31
Figure A.1. MENA PEFA Averages Compared with World Averages for
Comparable Economies ..................................................................................................193
Figure A.2. MENA Economy Scores on Individual PEFA Criteria ..................................193
Tables
Table 1. Breakdown of Successful and Challenging PFM Reforms in MENA .................10
Table 1.1. Basic Statistics on MENA Economies Selected for PFM Analysis ....................22
Table 1.2. PEFA Scores for the MENA Economies in the Study .........................................25
Table 2.1. Relevant PEFA Scores for Strategic Budgeting....................................................31
Table 2.2. Relevant PEFA Scores for Budget Preparation ....................................................35
Table 2.3. Relevant PEFA Scores for Resource Management ..............................................38
Table 2.4. Relevant PEFA Scores for Scope of Budget ..........................................................43
Table 2.5. Relevant PEFA Scores for Accounting and Reporting .......................................46
Table 2.6. Relevant PEFA Scores for External Accountability .............................................50
Table 3.1. Breakdown of Successful and Challenging PFM Reforms in MENA ..............54
Table 3.2. Donor Support for PFM Reforms in MENA ........................................................75
Table 7A.1. Overview of the Performance Indicator Set ....................................................112
Table 8.1. Summary of Jordan’s PEFA Indicator Scores ....................................................115
Table 8A.1. Overview of the Performance Indicator Set ....................................................124
Table 10.1. Morocco Abbreviated Summary of PEFA Indicator Scores ..........................137
Table 10A.1. Overview of the Performance Indicator Set ..................................................145
Contents vii
Table 11.1. Syrian Arab Republic Abbreviated Summary of PEFA Indicator
Scores .................................................................................................................................147
Table 11A.1. Overview of the Performance Indicator Set ..................................................152
Table 12.1. Budget Execution Rates ......................................................................................156
Table 13.1. West Bank and Gaza Abbreviated Summary of PEFA Indicator
Scores .................................................................................................................................166
Table 13A.1. Overview of the Performance Indicator Set ..................................................175
Table 14.1. The Republic of Yemen Abbreviated Summary of PEFA Indicator
Scores .................................................................................................................................178
Table 14A.1. Overview of the Performance Indicator Set ..................................................188