Sustainability in PFM Capacity-Building in Post-Conflict Countries – Afghanistan’s Experience
Posted by Sailendra Pattanayak
Post-conflict countries typically lack both capacity and infrastructure in the area of public financial management (PFM). International institutions, donor organizations and NGOs play a crucial role in rebuilding the financial and fiscal institutions in such countries. Contributions generally come in the form of financial support and technical assistance (TA), through the funding of a large number of advisors/consultants to build PFM capacity. However, the continued heavy reliance on contracted technical assistance appointments (through donor-financed projects) for operational activities, raises the question of the sustainability of PFM capacity-building.
Afghanistan is a clear example of the pivotal role being played by international institutions and donors in the development of governance and public finance institutions in a post-conflict environment. The Ministry of Finance (MoF) has been a large recipient of TA from a range of donors and international organizations in fields such as strategic advice, operational support, and capacity-building. The use of TA has enabled significant gains in the PFM area, but there are considerable concerns about the effectiveness and sustainability of the current approach.
Much of the TA resources have gone into operational support. Donor-funded foreign advisors have frequently taken on line management positions and effectively carried out the work themselves, sometimes with limited involvement of their Afghan counterparts. Hundreds of consultants are presently active in PFM and related areas. For example, the various units within the Budget Directorate, which has a complement of some 133 staff, are mostly filled by donor-funded staff, although most of them are locals. Such assistance has in many cases been critical, but has not reduced the scope or complexity of support. It remains a threat to both the long-term viability of the reform program and the integrity/coherence of the financial management process. The complexity of reporting demands imposed by donors, and the variability and irregularity of information received from them, further adds to the
time and procedural demands placed on overburdened staff.
Although several efforts are underway to restructure the Afghan civil service under the Priority Reform and Restructuring (PRR) program, and to upgrade employment conditions and pay scales, the identification and recruitment of adequately qualified local staff into civil service positions continues to be a major challenge. The major obstacles are a general shortage of appropriate financial management and accounting skills amongst local staff, combined with the large gap (a factor of ten or more) in the levels of remuneration available to civil service positions compared to those offered by international and donor organizations. Poaching of MoF staff by other organizations, including donors, continues to jeopardize institutional capacity and sustainability. The problem is aggravated by unsustainable practices of hiring professionals for civil service jobs through consulting companies and international donors.
In this context, the experience of using advisors and interns in the Treasury and Budget Directorates of the MoF in Afghanistan presents interesting alternatives. The Deputy Minister of Finance is responsible for both of these Directorates, each of which is headed by a Director General. While the skill requirements between the Treasury and Budget are not fully comparable, a transition strategy in the Treasury Directorate that focuses on capacity-building of civil servants with some dependence on advisors, has proved highly effective. The Budget Directorate, by contrast, is yet to come up with an effective strategy that addresses both its current operational needs as well as longer-term sustainability objectives.
Unlike some other departments in the MoF, most of the Treasury staff are currently on the Tashkeel (Afghan civil service payroll). This is in contrast to several years ago when a large number of the national staff were directly supported by donors and a substantial number of international staff were performing line functions. The Treasury has taken measures to reduce dependence on donor-financed staff and internalize treasury management skills within the civil service. In particular, the Treasury started an internship program in 2008 and hired university graduates as interns with a view to train them on the job and to absorb them as part of the Tashkeel on satisfactory completion of the internship. This program was started under a World Bank project on capacity-building. The positive results of this program have helped the Treasury replace many donor-funded operational positions with civil service staff. Only a small number of key positions at the Treasury are currently funded by donors.
In the Budget Directorate, on the other hand, over 80 percent of staff positions are still funded by donors on an ongoing basis. This situation has not changed over the past five years. An initial attempt at a transition strategy (to have a more appropriate balance between donor-supported and regular government staff) under the UNDP’s Making Budgets and Aid Work (MBAW) project was made last year but has not yielded results so far. University interns were trained to ultimately replace donor-funded staff. Unfortunately, all but one of the initial 15 interns have resigned. Although there are several reasons for such an exodus of interns, one key factor has been the distorted labor market in Kabul, which is largely driven by donors and NGOs who can always out-bid civil service salaries. As a consequence, a high staff turnover is to be expected in the medium term. Low retention rates of interns also highlight the deficiencies of the existing approach. While the policy of using interns is appropriate, other supporting mechanisms are not in place to retain them.
The mixed experience of using interns in the Budget and Treasury Directorates highlights the need for developing a more effective transition strategy to gradually shift the bulk of donor TA from operational support to strategic advice and capacity-building. The donors also have a collective responsibility to support the authorities by adjusting their own strategy of recruiting advisors.