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LESSONS:

Assam Governance and Public Resource Management Sector Development Program

sector: Public Sector Management | country: India

1. The sequencing of multifaceted fiscal reforms is of paramount importance in achieving sustainable outcomes. Regulatory changes in the tax system are a necessary, but not sufficient condition for successful fiscal consolidation. Revenue administration also needs to be strengthened. Increases in revenues should be complemented with more politically challenging measures to enhance expenditure management; budget prioritization and resource allocation; public sector enterprise reform; debt management, and public accountability. Subsequently, encouraging private sector investment through policy actions supports economic growth, and thus fiscal consolidation, by creating opportunities for public-private partnerships and reinforcing government’s regulatory function in the economy. Accompanying social programs are likewise necessary to offset the negative impact of the reforms on stakeholders.

2. Program design of this nature should focus on the core elements of the government’s fiscal reform agenda, and avoid numerous policy actions, with overarching themes, until fiscal consolidation measures generate positive results. Overly ambitious and complex conditions could lead to delays in tranche releases and program completion, undermining the achievement of fiscal outcomes. The careful configuration and sequencing of the policy actions through multiple tranches, using an appropriate time frame, provide the executing agencies with enough flexibility to meet specific targets and a gestation period.

3. A key consideration in achieving successful program implementation and sustainability in the long run is the development of competencies in government through capacity-building and training programs. Given the large capacity-building needs of Government of Assam in areas like the modernization of public finance management and information technology systems, the sector development program modality with a project loan component, rather than a regular piggybacked technical assistance, was an appropriate choice. Without such support, the executing agency could not have implemented the policy actions on time.

4. The active involvement of state government officials is a must for institutionalization of fiscal reforms. The commitment depends not only on the macroeconomic situation but also on the external and internal push for reform, preferably expressed in fiscal responsibility legislation, government’s tenure in terms of the electoral cycle, and on the need to maintain social cohesion. Sufficient time and resources need to be devoted to cultivating dialogue and building consensus among all stakeholders in designing, formulating, and implementing long-term fiscal reforms.

5. Building institutional memory strengthens the success of the implementation. Programs of this nature could not deliver the desired outcomes unless the program directorate achieves continuity of staff over the implementation period.

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