The Changing Nature of PE work Managing Risks and Opportunities in a Growing Agenda Anand Rajaram, PRMPS PREM Learning Week June 17 th, 2002

Theory of Evolution, adapted The theory of punctuated equilibria states that the history of evolution is concentrated in relatively rapid events …. Most species during most periods do not evolve radically, but rather fluctuate aimlessly and within bounds given by expected spreads of statistical variation. – Stephen Jay Gould

PE Work: A Case of Punctuated Equilibrium? (with apologies to Stephen Jay Gould, R.I.P.) Until mid-1990s, PE agenda relatively stable and not central to Bank’s investment or adjustment programs Post 1995 – growth of interest in institutional underpinnings of PE – PEM (influence of Pradhan- Campos-Holmes) Late 1990s – Bank and donor recognition of budget as critical gateway to development impact – concept of fungibility - aid tied to PEM reform – policy-budget links –- PERC’s etc. In last two years, explosive growth of interest in PE work

Motivating factors Within the Bank and among bilateral donors –Concerns about tracking use of HIPC resources – Increased interest in external assessment of client budget/financial/procurement systems –PRSP emphasis on MTEFs, costing programs and allocating resources to priorities –Concern about development effectiveness leading to focus on outputs and development outcomes from PE –More gradually, sectors moving towards systemic analysis of policies, budgets and service delivery Within governments –Active desire to improve aid management –Passive acquiescence to new donor agenda

A Large Agenda: PE work and Poverty Reduction PE Analysis PE Management Fiscal Sustainability Allocative Efficiency Incidence Analysis Poverty Reduction ?? Budget Formulation Budget Execution Procurement Fiscal risk Reporting & oversight Policy Process Tracking surveys Service Del.survey Civil Service Reform Decentralization Related items

Coming Soon to a PER near you: Costing MDGs, Gender, Participatory Budgeting Might we Break the Camel’s Back? PE Analysis PE Management Fiscal Sustainability Allocative Efficiency Incidence Analysis Poverty Reduction ?? Budget Formulation Budget Execution Procurement Fiscal risk “Pro-poor PE” Reporting & oversight Policy Process (PRSP?) Tracking surveys Service Del.survey Civil Service Reform Decentralization Related items

The PE Arena: Many new actors, multiple agendas Cast, Props, Cameras, Action! –The country economists doing PERs –The accountants doing CFAAs –The procurement guys doing CPARs –The integrationists doing PEIRs/PEPFMRs/CIFAs –The HD economists doing SSEFRs –Political scientists doing IGRs –Sub national PERs of various hues Who’s directing this show? What is the plot? Where is the government in this scheme? Did the Butler do it?

A sampling of recent PE work PE work with SUBNATIONAL ISSUES PERs w/Intergovt.Fiscal – Czech,Thailand, Kazakh, Bosnia Provincial PERs – Pakistan, India, Indonesia, China Social Exp. Review: Kyrgyz Republic, Slovakia, Ethiopia (t.b.i) Local Social Services Delivery: Romania APPROACHES TO INTEGRATING PE Work The Unbundled approach: –PIR/BM report/CFAA/ CIFA: Russia –The Dedicated PEM report: Mozambique (2001) Coordinated PEIRs: Turkey, Macedonia, Croatia, Bosnia, FRY Fully bundled PEPFMR: Philippines PE Work SYNCHRONIZED W/GOVERNMENT PROCESS PE Reform support to MTEF: Albania (2001) Bank supplement to Govt PER: Malawi, Zambia Annual PERs – Tanzania, Uganda, Ethiopia (2001)

Risks of a poorly managed PE agenda Huge multi-volume reports attempting to do all at one go, or Fragmented, uncoordinated analysis by multiple networks with overlaps, gaps and potentially contradictory advice Either case, –high transactions costs for government –Difficult for government to absorb/contribute to/own such analysis –Lack of coherent Bank advice to client –Potential to miss important bits of analysis PE impact on poor/ outcomes Inappropriate sequencing of reforms –Sub-optimal use of Bank staff and resources –Poor integration into CAS

Issues needing attention How can we manage such a large PE agenda within an agreed common framework? –Over time –Across networks and other partners –To ensure it supports government’s decision cycle (PRSP etc.) –To derive an external assessment of budget systems –To inform our CAS How do we achieve internal Bank coordination? What are guideline rules for engagement with government/donors?