CDF Workshop, Senic, November 2005 CDF Workshop Nov Paying Government Salaries in Post-Crisis Situations UNDP Experience Katrin Kinzelbach

Overview AIAF – Afghan Interim Authority Fund LOTFA – Law and Order Trust Fund for Afghanistan EEMF – Emergency Economic Management Fund SEBSP – Somalia Emergency Budgetary Support Project  Set up as special initiatives under CPR TTF

Rationale Post-crisis administrations under pressure to deliver Short-term measures to prevent recurrence of crisis Salaries essential to build loyal civil service Payment of security personnel, esp. police, important to create conditions for peace building UN Secretariat supported with operational backbone

AIAF  Afghan Interim Authority Fund: Jan. – July 2002  US$73.4 million Bonn Agreement signed in December 2001 UN approach vs. leadership by group of donors UNDP offered TF services, but debate in-house SRSG for Afghanistan, Ambassador Lakhdar Brahimi Conceptualized as emergency fund for 6 months Handover to World Bank managed ARTF

AIAF Coverage Government salaries (including teachers and police) Office equipment and vehicles Essential repairs and winterization of ministries Support to special commissions (civil service, justice, human rights, Loya Jirga) Donors asked UNDP to exclude technical assistance

AIAF Challenges Lack of financial infrastructure and sanctions: physical transport of cash Jan. – Feb Inaccessibility of regions: geography and security Cash economy increased security risks Poor government oversight on issuance of currency and determination of exchange rate Payroll system: incomplete and not computerized Lack of functioning Civil Service Commission and inadequate personnel to verify payrolls

Salary Scale Existing salary scale was used Salary Components: + Grade salary + Position salary + Monetized food allowance + Professional incentive pay - 3% pension fund contribution 95% of aggregate salary = food allowance i.e. difference in pay remained minimal Decree on increased food allowance in May 2005: budget increase of US$ 8 million

AIAF Payroll Feb 02: provincial representative s petition for the transfer of AFS 44 billion (> US$ 1 mil.) without payrolls

AIAF Payroll Reintegration of civil servants dismissed by the Taliban, including former female employees

AIAF Impact Interim Authority enabled to execute its mandate Emergency Loya Jirga successfully implemented Payment of salaries and revitalization of essential services contributed to political stabilization Cooperation between UNDP and DPA  Capacity development: weakest impact  Even if conceptualized as an emergency measure, important entry point for governance programming

AIAF Exit Budgetary support for Interim Authority only Transitional Administration (after Loya Jirga) supported through ARTF (World Bank managed) Negotiations with World Bank on ARTF LOTFA (UNDP Law and Order Trust Fund for Afghanistan) set up to fund police salaries

LOTFA Managed by UNDP + Oversight Committee Coverage Payment of police salaries, allowances and benefits Non-lethal equipment, and related fuel + maintenance Rehabilitation of facilities Training and institutional development Evaluation Nov. 2005: Salaries alone: insufficient to achieve intended outcomes World Bank: major budget support required for 8-12 years Law and Order: sustainability requires more investment in infrastructure and equipment + reduction of payroll costs through computerization  Law and Order Trust Fund for Afghanistan: now  Approx. US$ 28 million

EEMF  Emergency Economic Management Fund: 2004 – 2005  Approx. US$ 7 million Military led coup d’état on 14 September 2003 Transition Government: Emergency Economic Management Plan and Emergency Budget for $18.3 mil. financial gap One year of accumulated salary arrears potentially destabilizing No more loans from IFIs EEMF developed by UNCT, IMF, WB, African Development Bank ECOSOC Ad-hoc Advisory Group and SC Working Group on Conflict Prevention and Resolution in Africa called for support Presidential elections July 05: end of transition New Government still fragile; EEMF support until Dec. 05 EEMF improved financial governance; budget deficit still 40% WB and EC consider providing budget support

EEMF Structure

EEMF Outputs Salary payments resumed for over 10,000 officials Support to General Directorate of Budget; the Treasury Committee; Secretariat of State for Public Administration Assessment of training needs / capacity gaps of MoF UNDP participates in meetings of Treasury Committee to monitor EEMF implementation and public finances Production of payroll lists and new civil servant card Registration of police and paramilitary personnel Improved fiscal management and revenue collection

SEBSP  Somalia Emergency Budgetary Support Project: 2005  Approx. US$ 6.7 million Formation of Transitional Federal Government Oct 2004 UN Fact Finding Mission and Donor Meeting in Stockholm Temporary measure for 2005: non-sustainability is recognized Support to TFG on revenue collection strategy and capacity Steering Committee: donors, UNCT, World Bank, TFG Management Committee (Prime Ministers Office, MoF, UNDP) UNDP has authority to deny disbursement of funding Use of Somali money vendors to effect payments in Somalia

Rationale + Coverage 1.six months salaries of executive and legislative staff (allowances) 2.six months salaries for police force and judiciary personnel 3.logistical support and funding for relocation of 987 delegates 4.logistical support for local governance and reconciliation 5.establishment office for Comptroller-General 6.issuance of national passports and ID cards 7.provision of technical assistance UN TF Peace-Building in Somalia excludes budget support Assist nascent Somali authorities and institutions Relocate Transitional Federal Government into Somalia Reinstate and reinforce national budget management

SEBSP Activities Provision of basic IT equipment Rehabilitation of office buildings Support to dialogue process Salary survey and registration – but no salary scale, yet Stipend system until agreement is reached on salary scale ! Because of political situation: no salary payments, yet Post-Conflict Needs Assessment November 2005 Assumption: January 2006 UNDP working on proposal for longer-term budget support

Conclusion  Due to in-country presence and flexible TF mechanism, UNDP niche: interim measures in challenging circumstances  Requires donor consensus and commitment  Partnership with IFIs and UN Secretariat  Engagement with IC on longer-term financing modality  Tension btw. short-term measures and capacity development: UNDP should resist exclusive focus on logistics/ finance  Structure, composition, policies and size of the civil service: important to the process of stabilization and peace building  Attempt to focus on essential public services  Accountability/ conflict risks not insignificant; exit is a challenge  BCPR: TTF and in-house expertise  To be viewed in broader context of direct budget support