1. Ed Mountfield East Asia PREM
Using Bank Instruments to Strengthen Public Expenditure Analysis and Management: The Case of Vietnam
Ed Mountfield
East Asia PREM

2. Current Bank Instruments Supporting Public Expenditure Reform in Vietnam

3. ESW - previous studies
A series of public expenditure assessments has been conducted:
UNDP-Bank PER – 1996
IMF-Bank fiscal transparency study – 1998
Joint Government-donor PER – 2000
Bank CFAA – 2001 and Bank CPAR – 2002
These have had important impacts including:
Influencing State Budget and Public Investment Program
Helping shape the Comprehensive Poverty Reduction and Growth Strategy (CPRGS – Vietnam’s PRSP)
Influencing the revised State Budget Law of 2002
Forming the analytical basis for the $71 million Bank/DFID-financed Public Financial Management Reform Project (PFMRP)…
… and helping to underpin three Poverty Reduction Support Credits
Capacity and ownership have developed and Vietnam is ready to integrate public expenditure analysis into its own budget process

4. PER-IFA: Objectives
At the end of 2003, the Prime Minister commissioned a Public Expenditure Review and Integrated Fiduciary Assessment (PER-IFA).
Objectives include to:
review public expenditure and its management, including strengths and weaknesses
align budget planning with the 5 Yr Plan and the CPRGS
provide analytical inputs to the 2005 State Budget, the 5 year Plan for 2006–10, and Medium-Term Expenditure Frameworks to be piloted as part of PFMRP
strengthen capacity to conduct public expenditure analysis across Government
provide an assessment of fiduciary risks for the Government, its financiers and donors, and its citizens

5. PER-IFA: Approach Status: Prime Ministerial Commission
1 yr time frame: April 2004 – April 2005
A participatory process and a joint report (approved both by the PM/Cabinet and World Bank management)
Government team: Finance, Planning, Education, Health, Agriculture, Transport +
Donor team: Canada, Denmark, Netherlands, Norway, Sweden, Switzerland, UK +
Bank team: PREM, HD, RD, INF, Financial Management, Procurement +
Also involved: international and Vietnamese consultants, research institutes and universities

6. PER-IFA: Scope Cross-sectoral studies:
Fiscal trends and sustainability
Trends in composition of public expenditure
Institutions for public expenditure management
Institutions for financial accountability & transparency (CFAA)
Decentralization to subnational government
Delegation to spending units
Public investment management
Public procurement management (CPAR)
Sector-specific studies:
Education sector expenditure
Transport sector expenditure
Health sector expenditure
Agriculture and rural development sector expenditure
National Target Program expenditure
The PER-IFA is pending approval by the Cabinet and Prime Minister and will be published and launched in May 2005

7. PFMRP and MDTF
The PFMRP is one of the Government’s and the Bank’s main vehicles for taking forward the PER-IFA agenda in Vietnam
Co-financed by IDA ($54 million) DFID ($10 million) and Government ($7 million)
Approved May 2003 and running for 5 years
Includes:
implementation of a new Treasury and Budget Management Information System
TA to strengthen planning of state budget and public investment (including MTFF and sector MTEFs)
TA to strengthen management of public debt and SOE fiscal risk
A Multi-Donor Trust Fund (MDTF) has also been established to coordinate donor support for wider reforms in the area of public financial management

8. PRSCs and SWAPs
PRSCs have served to help keep PFM reforms on track, with each PRSC including PFM as a key focus:
PRSC 1 – emphasis on publication of disaggregated budget data and strengthening role of Treasury
PRSC 2 – emphasis on approval of a new State Budget Law
PRSC 3 – emphasis on progressive implementation of new Treasury and Budget MIS and establishment of medium-term budget planning
PRSC 4 and 5 – under preparation
SWAP operations are also planned and under preparation at sector level – building on PER-IFA sector analysis, as well as sector-level MTEF work under the PFMRP:
Education SWAP will shortly go to the Board

9. Lessons from the PER-IFA
Ownership and participation are expensive, messy, time consuming and slow…
…but are the best way to build capacity …
…and the only way to ensure a PER influences plans and budgets
A participatory PER is a whole-of-Government process and a Bank-wide process
PERs can be integrated with CFAAs and CPARs… and not just stuck together
Donors need to be managed carefully and their role kept secondary to Government
Government should participate all the way through, and not just as reviewers of a near-final product
Ownership and participation are easiest to foster when PERs are repeated on a regular cycle

10. Lessons from Complementary Operations
In low-income contexts, public expenditure ESW can benefit from active follow-up and a degree of hand-holding
There is synergy between public expenditure ESW, PRSCs and SWAPs:
In low income country context, PRSCs and SWAPs can help push ESW follow-up along
PRSCs and SWAPs will become increasingly hard to sell if PFM reform falters
MTEFs can help form a basis for SWAPs
Strengthening public expenditure analysis and management takes decades not years