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March 05, 2010

Burundi: What Lessons Has the IMF Learned from its Technical Assistance?

Posted by Jean-Luc Helis 

Burundi is a very poor, post-conflict country in Africa with serious structural and institutional weaknesses, particularly in all areas of public financial management (PFM). Until 2005, progress in the implementation of PFM reforms was hampered in particular by the following factors: (1) there was a lack of ownership of the reforms by the Ministry of Finance (MoF); (2) reliable financial information was scarce; (3) procedures were not well defined, nor implemented in a transparent way; (4) there was no coherent overall strategy for PFM reform; and (5) the coordination of the donors’ technical assistance (TA) was ineffective.

In 2005, the Fiscal Affairs Department (FAD) decided to regularly provide TA to improve and develop the Burundian PFM system. This TA has been provided through: (1) missions from headquarters; (2) a PFM peripatetic expert financed by Japan to assist the authorities in strengthening budget execution, accounting, and fiscal reporting; (3) another PFM peripatetic expert, financed by the World Bank and later on by Belgium, to review the legal and regulatory framework for PFM; and (4) additional short-term TA from the Fund’s regional technical assistance center in Gabon, AFRITAC-Central (AFC), to improve cash management, and develop the computerized system for budget management (SIGEFI).

FAD has also taken the lead in assisting the authorities to coordinate the TA provided by several donors. Since May 2008, an FAD PFM resident advisor has been assigned to the MoF, co-financed by DFID and the Netherlands, to assist the authorities in: (1) developing a realistic PFM reform strategy and action plan based on existing studies, and (2) monitoring the implementation of the PFM action plan in coordination with the donors.

Since 2005, despite a relatively slow pace, much progress in PFM has been achieved in three areas: public accounting and fiscal reporting, and rationalization of government bank accounts; adoption and implementation of a PFM strategy and action plan; and the legal framework. In particular:

· In 2005, a Partnership Framework (Cadre de partenariat) between the government and donors, and of a Support Unit (Cellule d’appui) to assist the MoF in the preparation and management of the PFM reforms, were established.[1]

· The operations related to payroll and HIPC expenditures have been recorded in the government accounts; an Accounting Quality Unit was created within the Ministry of Finance (MoF) to improve accounting procedures. The quality of the final accounts has been significantly improved since 2008. Furthermore, the work on the re-establishment of a treasury single account (TSA) has continued.[2]

· A new Organic Law for PFM, elaborated with the assistance of the World Bank and the IMF, was promulgated in November 2008. Its implementation has started from January 1, 2009, and should be followed by the adoption in 2010 of the new regulation on the management of government budgets (règlement général de gestion des budgets publics—RGGBP), of an agreement between the MoF and the Bank of the Republic of Burundi (BRB) on its functions as cashier of the government, and of the corresponding regulatory framework.

· A PFM strategy and its corresponding action plan for the period 2009–11, was adopted by the Council of Ministers in May 2009. It has been designed to address PFM weaknesses identified in particular through FAD diagnostic work since 2005, the Public Expenditure Management and Financial Accountability Review (PEMFAR) finalized by the World Bank in February 2008, and a Public Expenditure and Financial Accountability (PEFA) assessment performed by the European Commission (EC) in December 2008.

Other improvements include: (1) the adoption of a new procurement code; (2) the development of a new timetable and rigorous procedures for budget preparation; (3) strengthened cash management; (4) the adoption and implementation of a sound system of budget classification and chart of accounts (COA), consistent with international standards; and (4) the development of new functionalities in the SIGEFI to allow for the tracking of budget execution.

However, much remains to be done. The large number of parallel spending procedures (current budget, capital budget, HIPC budget, externally-financed operations, extra-budgetary and government accounts) creates an opaque financial management system with serious risks of inefficient resource allocation, and misreporting of budget execution. Cash management is still fragmented and the monthly cash management plan is not regularly updated, and used as a budget management tool. The current legal and regulatory framework for PFM still needs to be reinforced and implemented. Functionalities of the SIGEFI need to be developed to integrate new accounting procedures.

Main lessons
The assessment that the experience has positive impact on the implementation of the PFM reform is shared by the authorities and other donors, in particular:

· The effective implementation of the Cadre de partenariat and of the Cellule d’appui, and the designation of FAD as lead agency to assist the authorities in developing and implementing the government PFM strategy and action plan, have made it possible to enhance coordination between the government and its partners, to better define the needs and objectives of the government to improve PFM, and to foster ownership within the MoF in particular.

· The current development of a new legal and regulatory framework for PFM allows clarifying the role and responsibilities of the various actors, rationalizing the revenue and expenditure cycles, and should help to limit the use of exceptional procedures outside the normal expenditure cycle, improve transparency, as well as the consistency of financial data.

· The focus of the TA on getting the "basics" right, regarding budget coverage, budget classification and COA, and IT infrastructure has already allowed to improve the quality, the reliability and the coverage of fiscal data.

However, the situation is fragile, and a lot of challenges remain:

· While promising initiatives have been recently implemented, including the installation of a Steering Committee chaired by the Minister of Finance, and of nine technical groups to implement the PFM reforms, the leadership of the reforms process within the MoF and to coordinate TA provided by donors will need to remain a point of attention.

· The sequencing of reforms is complex and difficult to design and implement, and the current weak capacities do not allow a timely and efficiently implementation of planned actions.

· Because of the slow pace of progress, signs of discouragement (from the experts), de-motivation (from the staff), and impatience (from the donors) are appearing, especially if it is considered that the “easiest” part of the reform has been done—strategy, action plan, laws, and decree in particular—and that the next step being a full and consistent implementation of all the provisions and actions developed in these various documents. 

· Long-term commitment and intensive TA from FAD in one country is an important responsibility and remains a challenge, considering its current capacities to manage from headquarters externally-financed projects, and backstop resident and peripatetic experts involved in multi-disciplined activities.

Against this background, the priority would be to strengthen the country’s capacities and ownership; the absence of adequate government commitment and talented human capital in Burundi, even significantly enhanced collaboration between the donors, would not ensure substantial progress on PFM reform in the future.

Successful implementation of the reform would also require substantial and consistent technical assistance during the next years to further detail the recommendations and actions of the PFM strategy and action plan, assist in their implementation, troubleshoot problems that may be encountered in the process, and ensure that the actions and outcomes are consistent with international practices. After four years of strong involvement, FAD is going to discuss during the next months with the Burundian authorities, AFR, AFC, and the donors’ community to define its future TA program and role in the process.

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[1] Currently, the members of the Partnership Framework are: Belgium, the Netherlands, DFID, France, the EC, the World Bank, the ADB, and the United Nations Development Program (UNDP).

[2] Around 35 bank accounts were closed in 2008, after 48 in 2007 and 80 in 2006, out of around 300.

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Comments

Most importantly we encourage the Fund to write more similar pieces on country case studies.
http://mtef.blogspot.com/2010/03/does-talking-about-ownership-and.html

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