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The difficulty of pursuing a conventional market-oriented development strategy in the Palestinian territories led in the early part of the 2000s to a second-best reliance on public sector employment and wage bill expansion to boost aggregate demand. The main objective of this Programmatic Public Expenditure Review (PER) is to inform policy and institution-building efforts of the Palestinian Authority (PA) and its donor partners about improving the sustainability of public expenditures and the efficacy and efficiency in the provision of essential public services.In particular, this PER aims to provide an assessment of public revenue and expenditure policies offering specific policy and institutional measures to reduce the size of the Palestinian territories fiscal deficit and make it more sustainable.The fiscal situation of the Palestinian Authority is not sustainable.The difficult fiscal situation facing the Palestinian Authority today results from a unique confluence of challenges.As this report will argue, there is considerable further scope for reforms that would raise additional tax revenues, and reduce expenditures without compromising the quality of public services or negatively impacting public welfare.However, the PER notes that there are limits to what can be achieved by PA fiscal policy alone.The PER is organized as follows: Chapter one provides an overview of recent macroeconomic and fiscal developments; it also contains a brief assessment of priority fiscal policy issues facing the PA, and serves as an introduction to the in-depth analysis of the issues that follow in subsequent chapters. Chapter two analyzes the factors driving the size of the PA’s wage bill, and shows how these can be tackled. Chapter three reviews expenditures in the public health sector. Chapter four analyzes the Palestinian public pension system, and looks into how its sustainability can be assured. Chapter five assesses the quality of intergovernmental fiscal transfers, including net lending transfers. Chapter six reviews the way in which public investment projects are planned and implemented, and identifies steps to improve investment quality. Further details on health and pensions are provided in the annexes.

Lesotho is one of the poorest countries in Southern Africa, and has one of the highest income inequality in the world. Home to about 2 million people, Lesotho is surrounded by South Africa, the second largest and most industrialized economy in Africa. Lesotho generates income mainly by exporting textiles, water, and diamonds, and is a member of the Southern African Customs Union (SACU), the Southern African Development Community (SADC), and the Common Monetary Area (CMA). The national currency, the loti, is pegged to the South African rand. Lesotho's main trading partners are South Africa and the United States. The CPF will seek to mitigate four substantial risks to the implementation of the WBG program: (a) political and governance; (b) macroeconomic; (c) climate change and climate- induced disasters; and (d) operating risks (capacity and fiduciary). The lessons from the Country Assistance Strategy Completion and Learning Report (CPS CLR) will play an important role in addressing these risks. The CPF will give high importance to quality and risks at entry for new operations, and continue strong monitoring and supervision. These mitigation factors are essential for achieving sustainable results.

Ethiopia’s remarkable socio-economic transformation over the last decade has been marked by: a reorientation of expenditure from recurrent to capital; a significant devolution of resources from Federal Government to Regions; and a clear prioritization of infrastructure spending, while protecting spending on education at four percent of GDP. The Government of Ethiopia has also leveraged external resources to boost spending in pro-poor sectors, particularly health and social protection. As a result, Ethiopia is home to the largest social safety net program in Africa, and has also achieved remarkable health outcomes using cost effective approaches. Recent investments have seen a significant build-up of capital stock, with capital spending at sector level pointing towards increased service capacity. The current public investment-led strategy requires to be complemented by increased budgetary provisions in operations and maintenance so that new investments translate into enhanced service coverage and delivery. As Ethiopia lays the foundation to become a middle income country, and the changing global environment implies declining external assistance, it is imperative that domestic taxation activity support this transition. The current tax-to-GDP ratio is low compared to peer countries, and the tax structure would benefit from increased contributions by direct tax sources. Therefore, there is an immediate need for advancing tax reforms and improve capacity and quality of tax administration. Broadening the tax bases, through review of exemptions, as well as review of tax rates might be venues to consider. Additional revenues will create the much-needed fiscal space to increase funding for operations and maintenance for service delivery, and support fiscal sustainability. As a follow-up to this Public Expenditure Review, the Government of Ethiopia has asked the World Bank to provide further analytical support, with a view to enhance domestic revenue mobilization through simpler and more efficient taxation, while retaining equity priorities in public finances.

Since the Constitution (2005) provided for decentralizing powers and functions for the Governorates, the government of Iraq has enacted several legal, policy, and institutional reform initiatives, the intent of which is to shift political and administrative powers and responsibilities from the Central Government to the Governorates. The legal and policy framework for decentralization is yet to be followed through with efficient implementation. The Government of Iraq and the World Bank will like to assess the current status of decentralization and its implications for improving service delivery at the Governorate level. The objective of the assessment is to take stock of the current state of decentralization in Iraq with a view to identifying factors that contribute to weak service delivery performance at the governorate level. The assessment will also make recommendations for policy and process reforms that are deemed necessary to moving forward the decentralization process, thereby helping to improve service delivery performance by the Governorates. The assessment was carried out through a combination of desk reviews and field level consultations. This assessment provides a snapshot of the current status of the decentralization process. It identifies policy and process reform measures that are necessary to strengthen service delivery by the 15 Governorates of Iraq. Strengthening local accountability should be the key to strengthening the service delivery performance of the Governorates.

This paper proposes a new measure of public expenditure force that policy makers and budget analysts should track in detail over time in routine fiscal monitoring. The paper suggests that adopting the measure will not only warn policy makers of possible impending fiscal pressures, but will help them to differentiate between those budgetary pressures that are temporary and those that may require reforms. The main utility of the expenditure force measure will be in country fiscal analysis. Measuring force across the entire budget allows practitioners to monitor and decompose the micro drivers of public spending pressure, watch out for rapidly expanding spending lines, and identify priorities for reform before these pressures lead to macro fiscal problems. Yet by its construct, spending force is internationally comparable, and independent of expenditure levels or spending types. This could allow global monitoring comparisons and global research into the drivers of public spending force across particular types of country characteristics and economic conditions. In time, and as more data become available, researchers can use the force measure to compare and contrast the dynamics of expenditure types across countries. For example the measure can be used to explore what gives some spending types an initial impulse; whether underlying factors cause different public spending categories to grow faster than average, or to accelerate over time; and what successful countries have done to manage rising force without damaging public services. Since force seems to be a decent predictor of fiscal episodes, it is suggested that “speed limits” for spending might be a feasible component of fiscal rules.

Somalis face a daunting development challenge to overcome the legacy of two decades of sustained conflict and fragility, but substantial progress is now being made. Since 1991 and the collapse of the Siad Barre regime, Somalia has experienced cycles of conflict and fragility that fragmented the country, undermined legitimate institutions, and created widespread vulnerability. The new government that emerged following the Transitional Federal Government and the Roadmap to End the Transition in 2012 inherited a dysfunctional economy facing high levels of poverty and inequality, a youth bulge, high unemployment, and large infrastructure gaps. Against a backdrop of political progress marked by the emergence of new Federal Member States (FMSs) within the new constitutional framework and continued insecurity, the Federal Government of Somalia (FGS) has embarked on a process of structural, legislative, and institutional reform. The economy is starting to respond: Somalis are returning from abroad to invest, shops are opening, and the property market is booming. This is the first economic update for Somalia since the 2005 World Bank country economic memorandum for Somalia. The long conflict made monitoring of economic and social data nearly impossible since the late 1980s. With the relative stability of the past few years, new data have become available. The update is divided into two parts. Part one presents information on the social, economic, and governance status of Somalia. Part two focuses on intergovernmental fiscal relations.

Union Budget policies in Myanmar have undergone fundamental shifts since 2011 to accelerate delivery of essential public services. This first ever Public Expenditure Review (PER) for Myanmar tries to better understand these shifts and recommend ways to further align budget policies to development priorities. The Myanmar PER 2015 is divided into five parts: (i) sustainability of aggregate fiscal policy; (ii) rebalancing the composition of the Union Budget; (iii) improving coverage, quality and equity of education services; (iv) going from more to better government spending on health; and (v) a sound fiscal framework for sub-national service delivery. The book is arranged as follws: (i) chapter one starts with introduction; (ii) chapter two deals with sustainability of aggregate fiscal policy; (iii) chapter three focuses on rebalancing the composition of the union budget; (iv) chapter four deals with improving the coverage, quality and equity of education; (v) chapter five suggests from more to better government spending on health; and (vi) chapter six talks about fiscal framework for sub-national service delivery.

Natural resources offer opportunities, but also bring challenges. They have generally been linked to a series of negative outcomes like economic decline, corruption, and conflict. Oil and minerals reserves, in particular, are often very spatially concentrated, and their discovery becomes a potential source of conflict between the governments, the people of the producing areas, and those of the rest of the country. But can this increased risk of conflict be prevented? Are there ways for the government to change this course of events? This paper tries to contribute to this discussion by looking at the international practices in raising and sharing natural resource revenues (NRR) among different levels of government. The study observes that sharing NRR with subnational governments of the producing areas is the prevailing practice worldwide. There is a rationale to compensate the subnational government of the producing areas for the negative environmental, social, and economic impact of production activities. Assignment to all - including the non-producing - subnational governments is less frequent, although it is increasingly used (particularly in Latin America). This option increases the number of stakeholders and gives them incentives to exert control. This is a relevant argument, particularly in countries with a weak capacity of public scrutiny of government activities. The volatility of revenue or the low absorption capacity of small government units may nevertheless create problems. Similarly, the allocation of NRR to individuals with direct transfers, a complement to the intergovernmental allocation rather than an alternative, can increase the welfare of citizens by increasing their scrutiny of NRR use by government.

FYR Macedonia is a small, open economy with solid economic growth. It reached independence in 1991. Though it was the first among the six countries in South East Europe (SEE6) 7 to gain EU candidate status in 2005, it has not been able to start negotiations for EU accession, partly because of its name dispute with Greece. Yet, EU accession is the main anchor of its reform agenda and all major political parties and over 80 percent of the people support EU membership. Landlocked, with a population of 2.1 million, the country GDP per capita is USD 5371. FYR Macedonia has enjoyed macroeconomic and financial stability during the last decade. Growth has been solid with an annual real GDP per capita growth in PPP terms of 3.7 percent between 2006 and 2014. This was the second highest growth rate among the countries of South East Europe and far above the EU28 average of 1.4 percent during this period, enabling FYR Macedonia to increase its per capita income relative to the EU28 from 30.7 percent in 2006 to 36.6 percent in 2014. Contrary to other SEE6 countries, unemployment in FYR Macedonia has declined since the 2009, yet gains in poverty reduction seem to have been moderate. Fiscal stimulus was largely driven by revenue-reducing measures and public investment. Between 2006 and 2013, general government spending averaged about 34.5 percent of GDP, which is significantly below the SEE6 and the Europe and Central Asia (ECA) average. At the same time, general government revenues declined steeply from 33.8 percent of GDP in 2007 to 27.8 percent in 2014, one of the lowest in the ECA region as the government reduced its rates on the corporate income tax and personal income tax as well as social security contributions. Also, debt financed investments of SOEs increased. As a consequence, public debt increased, undoing the gains of previous fiscal consolidation but enabling FYR Macedonia to sustain growth in times of a difficult external environment.

This paper is one of a series aimed at deepening the World Bank’s capacity to follow through on commitments made in response to the World Development Report (WDR) 2011, which gave renewed prominence to the nexus between conflict, security, and development. Nigeria is a remarkable illustration of how deeply intractable the cycle of poverty, conflict, and fragility can become when tied to the ferocious battles associated with the political economy of oil. This paper places the corpus of analytic and programmatic work concerning institutional reform in conversation with a now substantial body of work on resource politics and most especially, the debate over the politico-institutional character (sometimes called political settlements or pacting arrangements associated with the order of power) and reform landscape of the petro-state. Recent institution reform policy writing appears to have little to say about the political and economic conditions in which crises and institutional disjunctures may authorize, and thereby enable, agents to embark on institutional reforms. The authors focus on Edo state for two reasons. First, it does not on its face appear to be an obvious location in which to explore a reform experience, given its entanglement in the Niger Delta conflict and the maladies typically associated with state fragility. Second, Edo is of interest also because of the changes that its experience is contributing to the World Bank country team’s effort to engage operationally across all its instruments with the political economy of institutional reform in Nigeria, its largest client country in Africa.

Integration of knowledge with lending is an enduring theme in World Bank strategies at the corporate and country levels. It rests on the widely shared proposition that Bank lending instruments could be more relevant and produce better results if they incorporate key analytical, country level knowledge. To be successful, development interventions must be informed by evidence, and evidence comes from knowledge. This is the idea behind Bank as a ‘solutions bank,’ integrating financial instruments and knowledge products into ‘development solutions’ that deliver results. A recent Independent Evaluation Group (IEG) evaluation suggests that the Bank’s broad economic and sector work and technical assistance strongly inform Bank lending strategies (IEG 2008). PERs, for the purpose of this learning product, are identified as Bank knowledge products with a specific reference in their titles as Public Expenditure Review, whether they are multi-sector or single sector public expenditure reviews. They also include other analytical documents which deal with public expenditure issues, be they public finance reviews, studies of specific expenditure and debt issues, and even Country Economic Memoranda (CEMs) with a special focus on public expenditures. This broad definition should capture much (though not all) of the public expenditure-related analytical work at the Bank. Arguably, efficiency and allocation issues important in the design of DPOs and the reforms they support can only be addressed by such integrative, not partial or silo-type knowledge of specific subsector expenditures (e.g., tertiary education expenditure review).

The report is part of a series of learning products with limited objectives geared towards synthesizing existing knowledge as well as learning and gaining new insights into the factors that influence design, policy implementation, and performance of development policy loans. It aims to provide fresh insights and build on previous evaluations of Bank investment projects and research and analytical work (for example, recent independent evaluation group (IEG) work on development policy operations (DPOs) includes the evaluation of poverty reduction support credits (PRSCs), first and second financial crisis evaluations (which examined crisis DPOs), recent operations policy and country services (OPCS) DPO retrospectives, and new research presented in this report on aspects of DPOs using a combination of approaches). The quality of macro frameworks in DPOs alone has not been subject of in-depth study. This report aims to contribute to filling that gap with a: (i) preliminary analysis of the quality of macro-fiscal frameworks in DPOs, and (ii) a comprehensive database of project level DPOs and related country and economic policy and statistical information, which is a byproduct of the study.

The Republic of Congo (Congo) boasts numerous assets that can be harnessed to build a strong and robust economy. These assets are oil, ore such as iron and potash, arable lands, and a young population. Congo is the fourth largest oil producer among West and Central African countries, both in total production (260,000 barrels per day) and production per capita terms. In addition, the country is endowed with substantial iron and potash that are yet to be exploited; it has a vast arable lands that could be useful for agricultural development; and the country boasts a young population, which, if well-educated, could be a dynamic labor force helping to spur economic growth.

Madagascar’s education system exhibits severe weaknesses that leave a large number of children without the basic skills required to function in the labor market. Since the start of the political and economic crisis in 2009, progress made on key health indicators has stagnated or is being reversed with Madagascar falling off track to achieve the MDGs. The prevalence of chronic malnutrition among children under five is one of the highest in the world. Maternal mortality ratios also have remained relatively high and stagnant over the last ten years and the country.

Madagascar’s economic growth has been slow at 1 percent annually in the last five years and far inferior to sub-Saharan region’s average. Income per capita in 2014 fell to around USD 400 (2005 constant USD), losing about 20 percent from 1970 when per capita income reached the highest point since independence. The economic and social effects of the 2009 political crisis were intensified by the suspension of many donor activities which, in a country where international aid represented 40 percent of the government budget, led to significant cuts in investments and a sharp decline in the delivery of services. Macroeconomic stability was maintained during the crisis, as both fiscal and monetary authorities maintained prudent policies. A low public debt to GDP ratio (37.3 percent in 2014) and a low tax revenue (9.7 percent of GDP in 2014) contributed to hindering public investments necessary for development and adequate provision of public services. In a context of high poverty rates, low overall public resources to finance public services delivery, and continuous fragility, economic and political instability, how can public spending promote better outcomes in education and health? How can the Government of Madagascar and its partners support better access to improved quality of services, in particular for the most vulnerable? The Review of Public Spending in Social Sectors in Madagascar systematically analyses how education, health and nutrition have been financed over the past five years. It examines the amounts, distribution and impact of public spending, and formulates recommendations on how best to allocate future public spending with a focus on incremental resources.

Over the review period covered by this report (2003-2012), the budget allocated to agriculture increased noticeably more than the sector’s contribution to GDP. This reflects a notable effort by the Chad authorities to increase the budget to boost this sector’s development in recent years. In this proactive context, Chad signed its CAADP compact in December 2013 to continue supporting agriculture’s revival. The CAADP is being implemented in Chad even as the terms of the National Rural Sector Investment Program (PNISR, 2014-2020) are being finalized. Within the context of the CAADP, the Government of Chad (GOC) wished to undertake a review of public agriculture expenditures to learn from past budgetary implementation in this sector with a view to improving future program performance. Following a request by the Ministry of Agriculture and Irrigation (MoAI), the NEPAD planning and coordination agency gave Chad it’s backing for this review. This process was undertaken by the Program for Strengthening National Comprehensive Agricultural Public Expenditure in Sub-Saharan Africa, co-financed by the Bill and Melinda Gates Foundation and the CAADP Multi-Donor Trust Fund. This program, implemented by the World Bank, aims to improve the impact of the still-limited public resources available to governments in Sub-Saharan Africa to foster agricultural development and reduce poverty in rural areas, where most of the poor in these countries, notably Chad, live. This study follows and builds upon a number of similar studies conducted in recent years on public expenditure management, in particular in Chad the Action Plan for the Modernization of Public Finances (PAMFIP). However, these studies have focused on budget management as a whole, and none to date has looked at the agricultural sector specifically.

This study is highly selective and organized into four thematic chapters. Specifically, chapter 1 provides a snapshot of Burundi’s political and macroeconomic context, and reviews the evolution of the decentralization process to better understand how institutional, political, and bureaucratic dynamics have shaped the historical trajectory of decentralization and generated the outcomes observed today. Chapter 2 provides a systematic investigation of the status of fiscal decentralization in Burundi, and identifies key policy issues to be considered to ensure the medium-term sustainability of the reform process while at the same time addressing the short-term financial needs of communes. Chapter 3 provides an in-depth diagnostic of a key service delivery responsibility recently devolved to communes—the provision of land registration services—and discusses the challenges and opportunities related to ongoing efforts to scale up access to these land services across 116 rural communes and Bujumbura. Chapter 4 shifts the focus to the nature of statecitizen relations in an effort to better understand how citizen engagement in the decision-making process may be improved and local authorities held accountable for the provision of basic services.

The Timor-Leste health resource tracking study was undertaken in order to improve the flow of critical cash and in-kind resources to districts and health centers by identifying, and proposing how to relieve, the most critical impediments in the public financial management (PFM) cycle. The study follows these three inputs backwards through every stage of the PFM cycle in order to unearth the pertinent issues that impede the timely and sufficient delivery of inputs to frontline providers. It required the collection of data from a wide variety of sources and the use of diverse methodological approaches, including semi-structured district- and facility level surveys, one-to-one interviews, transaction analysis, document review, and analysis of the government's financial management information system (FMIS). The study findings are presented in detail, together with the supporting evidence and key related recommendations, in chapter one, operating cash, chapter two, fuel budget, and chapter three, vehicle repairs and maintenance. Chapter four presents a set of cross-cutting findings that affect all areas of the goods and service budget.

Sudan has the potential to become a dynamic economy and a bread basket for the Arab world and East-Central Africa. However, resource endowment is not sufficient to bring about sustainable growth and prosperity. Sudans macroeconomic conditions remain weak since the secession of South Sudan in 2011, despite some improvements. The repercussions of the secession of South Sudan present enormous challenges for Sudan with respect to managing the macro-fiscal adjustment and promoting a structural re-orientation of the economy. The signing in March 2013 of the implementation matrix of the agreement between Sudan and South Sudan provides some fresh financial relief to Sudan and creates a great opportunity for further policy reforms to address the post-secession challenges. Sudans growth strategy should involve policies aimed at improving the investment climate and broadening private sector-led growth, and diversifying the economy toward non-oil sectors such as agriculture, industry, export, and local trade.

This study analyzes the governance framework of the business portfolio of Mauritanian institutions and government agencies and offers avenues for reform. The report begins with an overview of the scope of work and performance of the portfolio mentioned using the term Para-Statal sector and identifies the main challenges represented by this sector. It then analyzes the governance framework of Para-statal sector of Mauritania through comparative references from the guidelines of the OECD. The diagnosis includes an analysis of the legal framework, the supervisory function, risk monitoring budget and performance in terms of delivery of services, advice to administration, transparency and dissemination of information. The report closes with a detailed and sequenced action plan compiled from observations in the diagnosis and offers a series of suggestions for appropriate reforms to the institutional context of Mauritania. The action plan focuses primarily on strengthening the monitoring of risk of the budget and proposes ways of sequenced reforms taking into account both international examples and the Mauritanian context.

Bhutan is situated between the Tibetan Plateau in the North and Indian plains in the south. The development philosophy in Bhutan is embedded in the concept of Gross National Happiness (GNH) that, as a public policy strategy, seeks to address a more meaningful purpose of development that goes beyond the fulfillment of material satisfaction. The concept is grounded in the four pillars of development; socio-economic, environment, culture, and good governance. Bhutan s record on growth and development has made it a top performer in the South Asian region. The average annual growth rate of GDP over 1980-2010 in country was more than 7.6 percent, one of the highest in the South Asian sub-continent (SAS). Bhutan, with a Gross Domestic Product (GDP) per capita of about US$2,000, is now classified as a lower-middle income country. However, one of the most notable features about Bhutan s macro economy is its lack of diversification, dependence on and exposure to external developments, and the high levels of year-to-year volatility in its economic growth. Public Expenditure Review (PER) begins with an overview of the macro-economic context (chapter two) and public sector management (chapter three) in Bhutan. This is followed by an analytical summary of achievements to date in the health and education sectors (chapters four and five). The PER concludes (chapter six) with policy options and recommendations which are intended to spur discussion and analysis among policy-makers in Bhutan as they look into different possibilities to increase fiscal space in domestic resources while enhancing the quality of expenditures and improving outcomes in the health and education systems.

The rural sector, defined here as the economic sector that falls under the scope of the Ministry of Agriculture and Water (MAH), the Ministry of Animal Resources (MRA), and the Ministry of the Environment and Sustainable Development (MEDD), is one of the pillars of the Burkina Faso economy. Although its contribution to GDP has decreased in recent times from 35 percent in 1999 to 30 percent in 2011 due to the development of the other sectors of the economy, agricultural activity still employs approximately 86 percent of Burkina Faso s labor force and is the main source of income for poorer populations. Consequently, the rural sector is among the primary beneficiaries of public expenditures by the Burkina Faso government and constitutes one of the pillars of the Strategy for Accelerated Growth and Sustainable Development (SCADD) adopted in 2010. The goals of this agriculture public expenditure review in Burkina Faso are as follows: draw lessons from the past in terms of budget execution in the agricultural sector in order to promote the design and implementation of public expenditure programs that are more efficient and more equitable and have a greater impact; initiate the implementation of the databases and methodology required to conduct similar reviews regularly and thus contribute to the institutionalization of the process; and contribute to establishing the conditions for increased support for the sector while encouraging the harmonization and alignment of support with respect for national strategies.

Swiss Confederation Ukraine has extensive public infrastructure inherited from the Soviet times but much of it has fallen into disrepair over the past decades and needs major rehabilitation or replacement so that growth may continue. Creating fiscal space for investing more is one of the critical tasks that facing the country, but a constrained fiscal space together with the use of investments as a stimulus for growth call for more efficiency in public investment management practices. There are a number of fundamental issues that need to be addressed if Ukraine is to make progress in its reform ambitions for public investment management (PIM). The most significant are: (1) most projects avoid scrutiny due to loopholes in classification (lack of definition of a public investment project); (2) there is no effective economic appraisal and appraisal review procedures in place due to limited human resource (HR) capacity, and no common technical standards; (3) the PIM system does not seem to block new projects from entering the budget but allows ministries to delay ongoing ones and squeeze in new ones; and (4) lack of strategic guidance with which to prioritize complicates project selection. One of the fundamental building blocks of a sound PIM system is a clear, legal definition of what counts as a public investment project and what does not. It should be pointed out that this already high discrepancy is only a comparative measure of input values. Developing projects that are output and performance driven should yield even greater efficiencies. Between 2000 and 2008, Ukraine was an average growth performer in a fast growing region, with gross domestic product (GDP) growth averaging 7 percent. As the global financial crisis hit the Ukrainian economy it contracted by 15 percent in 2009, exposing its underlying macroeconomic and structural vulnerabilities. As a result of the insufficient structural transformation and impact of the economic crisis, Ukraine now faces substantial fiscal pressures that threaten economic stability and growth. The Government of Ukraine recognized the need for a modern public financial management (PFM) system and put considerable emphasis on several aspects of PFM reforms. Training for the development of capacity in the PIM system is tricky in Ukraine. It is becoming clear that due to the dynamic nature of the Ukrainian civil service, officials are rapidly moving from one area of the Administration to another.

Tanzania continues to stand out as a model of sound economic performance in the African continent, with a growth rate of over six per cent in 2011 and 2012, surpassing other regional economies and demonstrating impressive resilience to the global economic crisis. This is the second issue of the Tanzania economic update series. The series aim to engage a broad audience in a discussion of the state of the economy in general, as well as in specific debates of topical importance in Tanzania. The current issue seeks to get the discussion going on how to achieve the structural transformation of the rural economy so that rural households can also benefit from the country's remarkable growth performance.

Southeast Sulawesi is one of Indonesia's developing provinces and over the past five years has achieved one of the country's highest growth rates. In 2010, Southeast Sulawesi's economy grew at 8.2percent the third fastest in Indonesia. The poverty rate has declined significantly in the past 10 years and the unemployment rate is one the lowest in Indonesia. Per capita expenditure in Southeast Sulawesi has increased nine-fold compared to pre decentralization rates Southeast Sulawesi's consolidated per capita expenditure now falls in the top 10 in Indonesia. However, Southeast Sulawesi is still facing a range of challenges. The Human Development Index (HDI) has continued to lag at 25th in Indonesia over the past five years. Although regional Gross Domestic Product (GDP) has grown rapidly, in real per capita terms it is still far below the national provincial average. Southeast Sulawesi' poverty rate also remains above the national average. It will be important for the high and growing rate of per capita expenditure to be matched with improvements in public financial management capacity within the local government. In the context of overcoming these challenges and capitalizing on expanding opportunities, the local governments in Southeast Sulawesi and in particular the provincial government need to work harder to make the most of its budgetary resources. The development agenda and programs must be sharpened and budget allocations must be optimized to achieve development targets, especially in the strategic sectors of education, health, infrastructure and agriculture. This report contains findings and recommendations intended to support sub national governments in Southeast Sulawesi province to enhance their public financial management performance; improve the quality of evidence based planning and budgeting; and accelerate the achievement of existing development targets.

This report is the final product of a project financed by a grant from the World Bank's Youth Innovation Fund developed in conjunction with representatives of the Government of Sierra Leone (GoSL) spanning the period December 2011-June 2012. The report is an advisory document to assist the GoSL in advancement of its Public Sector Reform Program, particularly the initiative improving productivity through management and pay reforms. It provides the Public Service Commission (PSC) and Human Resource Management Office (HRMO) with options for the design and implementation of an entry-level leadership development program (ELDP) for the civil service, currently slated for implementation in 2014 as per government timelines. This program is herein referred to as the Sierra Leone Public Service Fellowship (SLPSF). The purpose of this document is address the identified organizational gap by offering technical guidance on the creation of a civil service fellowship that cultivates promising young professionals as future leaders. The proposed program targets university students in their final year of study and entices them to apply for graduate entry-level positions through a dedicated outreach effort and series of incentives. It selects candidates through a rigorous multi-stage assessment and matches successful candidate's interests with the needs of the Ministry, Department, or Agency (MDAs). It trains selected fellows in core civil service knowledge as well as a range of generalist functions and technical skills. It also offers fellows the opportunity to rotate in three different MDAs throughout the two-year period to develop a whole of government perspective. Throughout this initiative, the program offers fellows access to senior Government leaders and opportunities to grow professionally building a strong foundation for a successful career as a civil servant. Additionally, the program is bolstered by a number of public relations opportunities to raise its profile and showcase its achievements to Sierra Leoneans within and outside of Government.

Lesotho is a small landlocked country with a homogenous population of 2.1 million. Lesotho's gross domestic product (GDP) per capita was 1,023 dollars and gross national income (GNI) per capita was 1,080 dollars in 2010. The country also faces numerous challenges to its social and human development. In this context, more attention on the role and quality of public investment is warranted. To improve public accountability and transparency, the Government of Lesotho (GoL) introduced the automated integrated financial management information system (IFMIS) in April 2009. The study directly responds to an explicit request of technical assistance from the ministry of finance and development planning (MoFDP) and aims at supporting the GoL in its major reform efforts to enhance the efficiency of public investment management (PIM) and increase the "value for money" in capital spending. The overarching objective of this study is to support the GoL in its efforts to prioritize public resource allocation and enhance efficiency in capital spending, with the ultimate goal of contributing to improved governance, service delivery, and economic growth. The work is aligned with the World Bank country assistance strategy (CAS) 2010 to 2014, in particular its first pillar on fiscal adjustment and public sector efficiency. This report emphasizes the complementary aspects of the institutions, incentives, capacity, and process-related constraints to the functioning of PIM. The focus of this report will also complement ongoing public financial management (PFM) support by other development partners. The report is presented in four chapters, which are organized as follows: chapter one offers a macro-level country analysis; chapter two presents recent trends in public investments; chapter three focuses on institution mapping and the diagnostic assessment of the PIM system; and chapter four concludes with policy implications.

This is a first for Indonesia: Program Keluarga Harapan (PKH) is the only household-targeted social assistance initiative to have designed randomized impact evaluation into the initial allocation of the program. This brings three major benefits for policymakers: 1) the evidence available for evaluating the impacts of the PKH program on household welfare is extensive and sound; 2) the program design and the impact analysis design have generated additional excitement, both nationally and internationally, about the program, its goals and social assistance initiatives in general; and 3) the results and underlying data will be made publicly available, which has already spurred interest in additional evaluations that will stock the shelves of social assistance policy research libraries. PKH's success in delivering real benefits to the very poor and in changing behaviors deserves further support and encouragement. PKH's initial weaknesses in implementation and delivery deserve continuing attention and thoughtful solutions for greater effectiveness. The Government of Indonesia (GOI) plans on expanding the PKH program to as many as three million households; while it is doing so, it should continue to refine implementation, coordinate and collaborate with affiliated service providers in health, education, and local government services, and continue developing a corps of organized, enthusiastic, and skilled facilitators who can assist very poor households in achieving healthier behaviors.

Direct cash transfers for vulnerable elderly and disabled populations have been provided by the Ministry of Social Welfare (Kementerian Sosial, Kemensos) since 2006; a similar cash transfer for at-risk youth was inaugurated in 2009. The Government of Indonesia's (GoI) pro-poor development initiatives, international agreements and domestic laws and regulations, and considerable experience delivering more general social assistance programs led to the creation of cash transfers for these historically neglected and difficult-to-reach groups. These programs Jaminan Sosial Lanjut Usia (JSLU), Jaminan Sosial Paca Berat (JSPACA), and program Kesejahteraan Sosial Anak (PKSA) for the elderly, disabled, and youth respectively transfer cash directly to beneficiaries. They account for increasing shares of the Kemensos overall budget, but subsidies directed to care and rehabilitation facilities as well as direct provision of institutional care still account for a noticeable portion of the Kemensos budget for these groups. Program support operations socialization and outreach; allocation, targeting and prioritization; monitoring and evaluation; and complaints and grievances have very small budgets and depend crucially on cooperation and enthusiasm from local governments and facilitators. A full range of safeguarding activities is spelled out in program guidelines but these have not been institutionalized at the local implementation level. There is variation in the content, methods, frequency, completion rates, and outcomes in all safeguarding activities, and no easy-to-use reporting process that would ensure information from implementation level reaches the central funding and policy agency, Kemensos. The note summarizes quantitative and qualitative evidence in order to build a sound foundation for evaluating the cash transfer programs JSLU, JSPACA, and PKSA provided by Kemensos. The evidence on which the evaluation is based here is composed primarily of first-hand observation of the programs in operation. Where possible information collected from administrative records, including monitoring and evaluation reports, and from Kemensos itself, is summarized. Design features, efficiency and effectiveness of program implementation and operation, and impacts (intended or not) the program produces for beneficiaries are all analyzed in as much detail as possible. Current policy planning within Kemensos assumes expansion of these programs in the coming years, so an evaluation of the programs' features is relevant for Indonesian policymakers and stakeholders.

Macroeconomic growth and incomes have been on the rise since the Asian Financial Crisis (AFC), but health service utilization and health outcomes in Indonesia have been slower to improve. Jamkesmas could provide valuable benefits by allowing cardholders to acquire preventative, curative, and catastrophic health care services without fees. When it promotes healthy households, keeps students active, alert, and participating in their education, returns adults to work sooner, and saves households from the high costs of healthcare, Jamkesmas' sizeable individual benefits should be matched by increased social benefits resulting from a healthy and productive population. Jamkesmas has been provided to poor households, but many non-poor have also received Jamkesmas benefits due to dual central and local targeting processes which have led to frequent mismatches and errors in coverage. Health service providers find Jamkesmas difficult and costly to implement resulting in fewer services provided, and funds spent, on Jamkesmas beneficiaries. Local regulations regarding public health center management often conflict with Jamkesmas mandates, leaving health service providers confused and unwilling to use Jamkesmas funds to provide Jamkesmas beneficiaries with planned services. The future costs of an improved Jamkesmas program have not been adequately publicized and Jamkesmas' financial, fiscal, and political sustainability is uncertain.

Azerbaijan is a secular, majority-Shiite, oil and gas-rich country whose per-capita income quadrupled in real terms during the period 2004-10. While rising incomes have reduced poverty, steps towards a more secure, diversified economy are held back by a public sector that rests on vested interests, patronage-based incentive structures, and ingrained patterns of behavior that include significant rent extraction, particularly from the non-oil economy, with minimal checks and balances from Parliament, the private sector, and civil society. Bank engagement in Azerbaijan at the country level focused on areas which had government support. Some modest results have been achieved, even though in many cases modern laws and practices were adopted without adequate plans for implementation. At the project level, the Bank has supported the strengthening of project implementation units (PIUs) and tools for monitoring, and governance and institutional filters have signaled that Governance and Anticorruption (GAC) processes need to be embedded in the Bank projects. At the sector level, the Bank's work was highly relevant in supporting oil revenue transparency, primary education, roads, and the development of safeguards. It was substantially relevant in public financial management, and private sector development and procurement. Bank engagement was moderately relevant in decentralization, civil service reform, and accountability institutions.

Bangladesh is one of the world's poorest and most densely populated countries, and subject to annual cyclones and flooding. Despite these challenges, it benefits from strong economic growth, good performance on health and education, and poverty reduction, alongside weak governance and pervasive corruption. The reasons include strong macroeconomic policy, pro-poor spending, credible elections, export growth and remittances, improved capacity for managing natural disasters, and a stronger civil society than comparable countries. After over a decade of intense engagement with the Bank on governance, Bangladesh adopted in 2006 a governance-oriented Country Assistance Strategy (CAS) with four main objectives: to improve implementation capacity; to 'tackle corruption' by fully operationalizing the Anti-Corruption Commission; to lay the foundation for comprehensive legal and judicial reform; and to strengthen 'voice, empowerment and participation.' The choice of a wide range of instruments and areas of intervention was appropriate, given the political instability at the time of 2006 CAS preparation. The Bank signaled it was ready to engage in all areas, and could scale up or pull back depending on emerging political and bureaucratic commitment. The 2006 CAS yielded mixed results, and the subsequent Country Partnership Strategy (CPS) has been more selective on GAC issues. At the project level, governance has been a key priority, in line with the South Asia region's heavy emphasis on GAC-in-Projects. Investments in GAC-in-primary education, a local government project, anti-corruption efforts in the power sector, and projects strengthening the investment climate have yielded positive results. Investments in GAC-in-roads projects have had mixed results in terms of effectiveness. GAC activities were mainly adopted prior to the 2007 GAC strategy. Although Bangladesh was a Country Governance and Anticorruption (CGAC) country, the country team chose not to use CGAC funds because the country had already been intensively using GAC approaches well before the GAC strategy was adopted.

Moldova has suffered over the last two decades from rising poverty, territorial secession, armed conflict, and the spillover effects of a regional financial crisis, with declining population size and life expectancy, and an economy approximately one-half of what it was in 1990. The return of the Moldovan Communist Party (PCRM), which won two major elections after 2001, contributed to increasing centralization of governmental authority along with a reform agenda that emphasized greater state control over the economy, fiscal support to state enterprises and collective farms, land consolidation, economic protectionism, and the tolerance of monopolies in industry and energy. At the same time, the government has increased social expenditures, and taken major steps to improve public financial management. Bank engagement was moderately effective at the country and project levels, and substantially effective at the sector level. There was progress in several aspects of public financial management (PFM). Regulatory streamlining has reduced costs to business, although resistance to civil service reform has left much work to be done. The Bank has also helped achieve progress on Governance and Anticorruption (GAC) issues in primary education, roads, and private sector development. Education progress is highly uneven across regions, for example, overweight trucks continue to tear up roads, and private investment is not enough to make a dent in high unemployment. A graduated approach to country systems and road sector technical audits help address GAC issues at the project level. The overall impact of GAC strategy implementation was moderate. The GAC committees set up at the regional and sectoral Bank department levels are particularly useful mechanisms for disseminating practices from the GAC Council. Staff has been proactive in using Country Governance and Anticorruption (CGAC) resources. However, three applications for window one funding were not approved, reducing the ability of this small program to seize opportunities.

This case study summarizes the findings of desk reviews and a field visit carried out in January 2011 as part of IEG's evaluation of the 2007 Governance and Anticorruption (GAC) strategy. The case study sought to evaluate the relevance and effectiveness of Bank support for GAC efforts over the FY2004-10 period, to assess the contributions of 2007 strategy implementation, and to identify early outcomes and lessons. This Background Paper is based on findings of the mission that visited Liberia in January 2011. The team is particularly grateful for informative meetings with officials from the Government of Liberia, Bank staff, and members of civil society. The evaluation aims to help enhance the Bank's approach to governance and anticorruption and to improve its effectiveness in helping countries develop capable and accountable states that create opportunities for the poor. Pursuant to this objective, the evaluation assessed the relevance of the 2007 GAC strategy and implementation plan, as well as the efficiency and effectiveness of implementation efforts in making Bank engagement with countries and other development partners more responsive to GAC concerns. It also sought to identify early lessons about what works and what does not in helping to promote good governance and reduce corruption. The Liberia case study is based on an extensive desk review as well as a field visit to Monrovia from January 17-22, 2011. It evaluates the relevance and effectiveness of Bank support for governance and anticorruption efforts since the launch of the Bank's GAC strategy in 2007. It elaborates on a desk review of the GAC responsiveness of the Bank's Liberia program and reviews the following GAC entry points: core public sector reform (public financial management and decentralization); demand for good governance (including social accountability issues); GAC in the road sector; and the investment climate. The case study also examines the extent to which the Bank's GAC Strategy has made a difference in staff attitudes toward addressing GAC issues in their operational work. The mission interviewed government, Bank, donor, and nongovernmental organization (NGO) staff based in Washington and in Monrovia.

Papua has abundant natural and fiscal resources but also faces great development challenges. On the one hand, Papua currently has the largest per capita fiscal capacity after West Papua. Papua is rich in natural resources such as non-oil-and-gas minerals and forest products. On the other hand, development challenges in Papua are significant, including geography, terrain and demography. In general, Papua is still underdeveloped both socially and in economic terms compared to other regions in Indonesia. This underdevelopment is evident in most poverty, education, health, and infrastructure indicators. The economy and investment in Papua are dominated by the mining sector and, in a distant second place, the agricultural sector. Between 2004 and 2007, the mining sector accounted for more than 50 percent of the Papua's gross regional domestic product (GRDP). As a consequence, economic growth was determined by fluctuations in mineral commodity prices. The second largest sector is agriculture, which accounts for about 14-18 percent of GRDP. This sector absorbed the most workers in Papua province until 2008. Meanwhile, industry continues to lag and contributed less than 10 percent to GRDP. The PEA is a part of the PEACH (Public Expenditure Analysis and Capacity Harmonization) program. This program is an initiative of the Government of Papua to continuously improve its public financial management performance. Consequently, the analysis contained in this report addresses issues that are the region's main focus. Today, the Government of Papua is trying actively to achieve a 'New Papua' through implementing the following agenda: a) restructuring the local government; b) developing a prosperous Papua; c) developing a safe and peaceful Papua; and d) improving and accelerating the development of basic infrastructure and facilities.

Public investment to facilitate growth and poverty reduction is paramount to Sudan's development challenge. The acute need for rebuilding the country's deteriorated infrastructure and service delivery framework underscores the importance of more active and effective public investment. The disproportional composition of the spending adjustment raises particular concern on pro-poor and public investment spending during the subsequent fiscal adjustment period expected to follow. Under the growing fiscal decentralization trend, the state governments have taken up the primary responsibility to provide basic public service deliveries to the poor; in such a decentralized constellation, reduced support from the federal budget could seriously jeopardize the provision of basic services at the state and locality level. In particular, public investment expenditure now has to effectively address service delivery needs and the broader development agenda, while at the same time the overall resource envelope is declining. This note is the result of a rapid assessment of Sudan's public investment portfolio in the context of the anticipated fiscal adjustment. It is not a full-fledged review on public investment projects or the public investment management system. The main scope of the assessment is: to quickly identify available information on public investment projects from existing sources; to provide an contextual overview of the overall public investment portfolio in light of the imminent needs for rationalizing the public investment portfolio; and to outline conceptual guidelines for public investment adjustments and to propose longer-term tasks to improve public investment management.

Sustainable economic growth and strong institutions are interlinked, and the present report summarizes recent economic and fiscal developments in West Bank and Gaza (WB&G) as well as providing a broad overview of institutional accomplishments to date. The present report begins by discussing the apparent slowdown in economic growth in WB&G and the current fiscal crisis facing the Palestinian Authority (PA)-resulting partly from lower-than-expected external support this year. A further drop in donor funding would likely reduce growth, which would in turn further aggravate the fiscal situation in the coming year. A protracted fiscal crisis, in turn, risks jeopardizing the gains made in institution-building and thereby losing what has been painstakingly achieved over the past years. In addition, the report highlights that in order for the PA to sustain the reform momentum and its achievements in institution-building, remaining Israeli restrictions must be lifted and any reductions in international aid flows must be carefully calibrated and managed. Economic growth in WB&G has slowed down in 2011, and together with the shortfall in external financing, this has led to a fiscal crisis for the PA. Economic growth in WB&G remains robust but appears to be slowing due to economic and political uncertainty, so that the International Monetary Fund (IMF) has revised the projected real Gross Domestic Product (GDP) growth rate for 2011 from 9 down to 7 percent. Despite some improvement, unemployment remains stubbornly high and labor force participation low in WB&G.

This paper develops a framework to assess organizational performance in the delivery of social safety nets. Specifically, it provides guidance to task teams and program managers for identifying indicators of governance and service quality in targeted cash transfer programs. The paper identifies governance issues along the results chain of service delivery and suggests policy and performance indicators for assessing program inputs, human resources, financing and resource management; and program activities, operational procedures, Management Information Systems (MIS) and control. It also suggests indicators of organizational performance and the quality of outputs, including demand-side accountability mechanisms.

North Sulawesi province is one of the most developed provinces in eastern Indonesia. Far-reaching development has taken place over the past ten years. Presently, North Sulawesi province has the second highest Human Development Index score in Indonesia, and its poverty rate is low in comparison with other provinces. Over the past decade, per capita gross regional domestic product (GRDP) has doubled and sub-national government spending has increased significantly. Nevertheless, there remain various development challenges to address as well as various potential resources and opportunities to pursue. North Sulawesi's performance in regional financial management has been relatively good, but discrepancies remain in the performance and capacity of different work units within each regional government and also between different regional governments in the province. To address challenges, take opportunities, and increase development performance, sub-national governments in North Sulawesi, particularly the provincial government, need to better utilize their fiscal resources. Clearer vision, mission, indicators and development targets must be accompanied by greater efforts to prepare a more directed budget, and to formulate higher quality programs and activities more consistent with planning targets. This report is an effort to assist North Sulawesi's sub-national governments to improve their regional financial management performance, to improve the quality of planning and budgeting, and finally to contribute to local development performance. The report results from strong cooperation between sub-national governments in North Sulawesi province, the Economics Faculty of Sam Ratulangi University, which was supported by CIDA, the Australian Agency for International Development (AusAID) and the World Bank. North Sulawesi Province BAPPEDA (Head of the Regional Development Planning Agency) played an important role in facilitating the preparation of this report. It is expected that this report will benefit North Sulawesi's sub-national governments, sub-national governments elsewhere in Indonesia and the central government by serving as a reference for efforts to improve sub-national financial management performance and the regional development process. Finally, this report can contribute to better and more effective sub-national financial management and governance. Overall, North Sulawesi's strategic sectors (health, education, infrastructure and agriculture) are performing better than in other provinces in eastern Indonesia.