Crisis Recovery Support Program
sector: Public Sector Management | country: Tajikistan
The program provides several lessons on structuring a crisis response operation. First, ADB has no modality for a financial crisis response operation for Asian Development Fund countries. The special program loan in the Program Lending Policy is limited to ordinary capital resources countries and can only used to address balance of payment crises. Likewise, emergency assistance under the Disaster and Emergency Assistance Policy (DEAP) does not include financial crisis response. As such, the program had to use the standard program grant modality and develop the design of program actions to allow quick processing and disbursement. While program preparation was shorter than for typical program grants and loans, preparation would have benefited from streamlined and abbreviated procedures similar to the countercyclical support facility and the DEAP, and would have been able to provide the support much earlier.
Second, during crisis episodes, while policy reforms are important, the government has urgent needs to quickly stabilize the economy, such as, providing urgent fiscal support to counteract the financial crisis. As such, crisis response operations should focus more on immediate responses to the financial crisis, such as maintaining critical social and safety net expenditures. However, as crises open opportunities for reforms, policy dialogue can be initiated for follow-up operations. But this should not delay the financial crisis recovery support.
Third, success of a financial crisis response operation is highly contingent on the government’s ability to quickly put together its own anti-crisis plan, which could be financed by ADB after exercising due diligence. In the case of Tajikistan, the government had an anti-crisis action plan and a crisis budget. Readiness to implement is also important.
Fourth, since the crisis response operations support government’s crisis mitigation measures, program monitoring could also benefit from technical assistance where country systems are weak, as in Tajikistan. The technical assistance could focus on expenditure tracking mechanisms, internal controls, and external audits; and be conducted in two stages. At the first stage, when monitoring capacity is still weak, experts could be engaged to monitor program-supported expenditures rather than relying on the government to submit monitoring reports. The second stage would focus on improving country systems to help transition monitoring tasks from external experts to government staff.
Fifth, the program provided lessons in allocating counterpart funds generated from program proceeds. Budget earmarking should only be considered if the government has adequate mechanisms to track expenditures. Otherwise, technical assistance is important to provide this capacity. Programs should also rethink strict budget earmarking. While placing strict conditions on how a government spends the funds seems desirable, implementation could be difficult when budget precision is low. In the case of the program, the government could not fully execute the strictly allocated utility expenditures because it had already maximized its spending below the budget allocation. A better solution might be to provide governments with sufficient flexibility in spending across several identified items. Also, the scope and coverage of independent audits of special accounts to fund specific items should be very clear and precise if they are to be useful.