Many public resource reforms, especially those relating to taxes or concessions as in the SPBL, have political and economic implications and are often difficult to undertake without strong ownership. The SPBL implementation success is attributable to (i) a good understanding of the vested interests, (ii) the institutional capacity of government agencies, (iii) effective partnership and coordination between ADB and the government, and (iv) a strong sense of appreciation for the overall benefits of the program.
This special policy-based loan (SPBL) was developed in close consultation with the government and development partners, including the International Monetary Bank and the World Bank, and was designed through a holistic approach. The experience demonstrated that a comprehensive and holistic consultation process can ensure effective diagnosis of the issues, leading to a strong, relevant policy matrix that prioritizes reform measures and sets realistic timelines in collaboration with the development partners.
This program comprised 29 policy actions: 11 for subprogram 1 and 18 for subprogram 2. The total number of policy actions was significantly large, particularly in subprogram 2, and represented a challenge in monitoring and implementation. The number of policy measures should be limited so that ADB can monitor compliance with them effectively throughout the program.
PFM and SOE reforms to ensure fiscal sustainability, like those in the program, have political and economic implications and are difficult to undertake without strong ownership. The implementation success of such policies resides in (i) a good understanding of vested interests; (ii) the government’s strong commitment; (iii) the institutional capacity of government agencies; (iv) effective partnership and coordination between ADB and the government; and (v) a strong appreciation for overall program benefits. All these were observed in the program.
This program was developed in close consultation with the government and development partners including the International Monetary Fund, World Bank, Agence Française de Développement, and United Nations Development Programme, and was designed through a holistic approach. It demonstrated that a holistic consultation process can ensure effective diagnosis of the issues, leading to a relevant policy matrix that prioritizes reform measures in collaboration with the development partners.
This program supported the preparation of the medium-term framework (MTBF) and MTBF manual, including gender-responsive budgeting tools at the MOF. Program experience has highlighted that institutionalizing change-management practices among those charged with implementing reforms requires enhancing both technical and change management competency. It is also necessary to enable the government to sustain capacity development programs beyond the life of a program for instance, by providing training experts, particularly to develop soft capacities.
This program successfully tackled a wide range of highly complex, interlinked issues. In addition to the appropriate sequencing of reforms, its success was attributable to the development of adequate capacity among key stakeholders, including the Ministry of Finance (MOF), Central Bank of Uzbekistan, and State Asset Management Agency. Capacity development was made possible by the provision of ADB technical assistance.
The role and magnitude of the public sector in a small, island economy and sporadic wage increases for civil servants put pressure on recurrent expenditure. These make it difficult to manage fiscal expenditure over time. A small economic base limits areas for alternative employment opportunities. This could imply that the share of the public sector in the economy would remain large in the longer term. Thus, there is a case for considering the size of the public sector in any future reform program.
A program of short timeframe should adequately reflect the time lags that usually occur in implementing policy actions. It would be difficult for a short-duration program, even with up-front delivery of vital reforms, to achieve indicators involving external debt-togross domestic product, revenue mobilization, sustainable fiscal outturn, and improvements in Public Expenditure and Financial Accountability ratings due to time lags of these actions. The magnitude of the effects of these policy measures could be difficult to determine. As such, performance indicators would have to be realistically formulated when designing reform programs, taking into consideration the focus, timing and extent of the reform measures to be adopted.
The 34 policy actions for a crisis response operation stretched out the government’s capacity in absorbing a substantial reform agenda. Constraints to capacity were reflected in the delays in complying with the policy actions, in particular with the policy action on financial ratios, which resulted in waiver of this action. Institutional capacity to manage the reform process and to implement agreed-upon reforms should be factored into the program design and continue to be reassessed during program implementation. The need to continuously strengthen the technical and managerial capacity of institutions, in terms of translating policy actions into workable, concrete measures and assessing reform options, should be carefully considered in designing reform programs.
A steady, step-by-step pace of reforms may be more suitable in the Tongan context, given prevailing capacity constraints. The process of implementing reforms takes time, especially for reforms that require specialized skills, such as those in PFM and those that are structural in nature; these types of reforms take time to implement and cannot be completed by a single quick-disbursing stand-alone program. The program’s sequence of policy actions in the reform areas of PFM, PSEs, and business environment could have prioritized the binding constraints, such as the legal and regulatory issues, before getting into the operational aspects of the reform issues. However, this was not the case for the policy actions on social protection, which targeted vulnerable groups without an established system for identification, delivery, and monitoring. Also, ADB’s coverage of areas for policy reforms under the program could have focused on key needs and constraints. A gradual approach that considers more realistic timelines and proper sequencing could allow more flexibility in prioritizing and refining key policy actions in successive stages of the reform process. This could help strengthen the enabling environment for reforms, foster learning, and build capacity for policymaking and implementation.
For the envisaged impact to be fully achieved, the government should be encouraged to engage with ADB and other development partners. The IDP housing that the evaluation team visited was intact and in good condition, based on a cursory inspection. Schools, banks, and stores, among other support facilities, have since been established and appear to be functioning well. A more in-depth assessment of the resettlement sites would help to determine the overall success of the resettlement program. It would also confirm the status of the safeguard issues that were not previously considered under the program. A comprehensive analysis of development constraints should also be undertaken to identify binding constraints on economic growth that the government and ADB can focus on, given the active presence of other development partners in the country. This could provide a sound basis for a more strategic support framework moving forward.
The stakeholders met by the evaluation mission indicated that before the 2008 conflict Georgia’s economy was relatively well-managed by the government. The government had a good track record with development partners and this was instrumental in securing substantial support after the twin crises. Development partners interviewed during the evaluation mission noted that negotiations with government for the post-crisis support went smoothly, despite the fact that the government had to deal with multi-donor support delivered through numerous support modalities and channeled through many stand-alone assistance schemes with varying timelines, execution structures and delivery methods. For ADB’s GRSP, the reforms and policy actions stipulated under the loan (and in the JNA) were complied with by the government, more quickly than expected.
The 2008 conflict caused the development partners to engage collectively with the government in designing the crisis response and policy discussions. The NBG said this collective engagement encouraged the government to discuss the crisis response measures and policy actions seriously. As this was an emergency situation, the discussions, negotiations, approvals, and transfers happened quickly. The World Bank and the United Nations Development Programme took the lead in convening the development partners and ADB actively participated, although it did not play a lead role. The collective effort from the development partners helped to alleviate the financial crisis, limited economic contraction, and addressed constraints arising from infrastructure damage, investment climate deterioration, financial difficulties, and worsening social conditions of IDPs.
However, the regional TA was not implemented and the envisaged fiduciary arrangements were no longer monitored under the GRSP. Nevertheless, other development partners have taken related initiatives. The World Bank, Department for International Development of the United Kingdom, Government of the Netherlands, and the Swedish International Development Cooperation Agency provided $15.00 million for public sector financial management reform, the United States Agency for International Development provided $3.29 million to support foreign reserves and payment systems, and the European Union provided €11 million to support a second phase of public financial management reform. The completion report for the World Bank project noted that the MOF had strengthened its strategy and annual budget planning processes and improved arrangements for monitoring and oversight of budget implementation through capacity building provided by the project. Capacity and procedures for strategic expenditure planning, budget preparation, and budget management were also strengthened in line ministries. An internal budget policy and public expenditure review process was introduced and capacity building and training strategy for staff in the MOF Budget Department and line ministry budget units were developed and implemented. The World Bank project also supported an external audit of central government spending. This suggests that the coordination among the development partners under the JNA framework worked well for Georgia.
Providing fiscal resources was clearly urgent to ensure uninterrupted service and to reconstruct houses after the political disturbances. However, providing funds for undamaged but old water supply and sanitation systems was not as urgent and should have been completed as a separate project.
Despite fielding 13 missions, ADB failed to learn of the government’s efforts to undertake component 3B, indicating a possible lack of communication, which needs to be improved.
ADB’s Project Administration Instructions stated that the use of conditions for withdrawal should be limited to the extent possible. In this program, four disparate conditions were included as conditions for disbursement without discussion or justification in the RRP.
This is to identify a plausible causal relationship between investments and actions taken by the program and a change in the performance indicators. This was not the case in the performance indicators under output 1. Even under the most optimistic scenario, it is difficult to envisage that the financing of the 2016 national budget could have impacted the contribution of medium- and small-medium-sized enterprises sector to GDP, labor productivity in agriculture, and the volume of nonresource exports by enterprises in the same year.
Procurement of IT systems—including hardware, software, and related communications equipment— requires the involvement of specialized personnel. However, this is not a full-time job, and on-call consultant support could have been considered for the executing agency.
The DMF was not well designed and had deficiencies in the measurement of performance indicators for the project impact and outcome. Target dates should have been indicated; and the five outputs of the project involved the implementation of three components. These should have been integrated more closely with the outputs of the DMF.
Knowledge of procurement procedures is a key aspect of most ADB funded projects and a lack of understanding of the two-stage process should have been rectified earlier. Further training should have been provided to the executing agency, especially since it had limited exposure to ADB procedures and to the prices of the goods and services to be procured under the project.
PFMR is multifaceted and requires sufficient time to implement. Supporting TA and project implementation should go hand in hand. The PMO was established to manage the procurement process with TA support. However, central treasury staff had to carry out both project-specific tasks and their day-to-day functions. This led to competing priorities between their own jobs and project requirements, and delays in dealing with project issues.