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Madhya Pradesh Public Resource Management Program (Loan 1717-IND)

| country: India

Responding to the Iterative Nature of Reforms. The lesson from the Gujarat Public Sector Resource Management Program that a 2-year time frame is insufficient was reflected in the 3-year design of this program – which was completed within 39 months, including the delays resulting from bifurcation. However, the fact that a number of reforms are still incomplete in 2006 reinforces the long-term, iterative nature of fiscal reforms. This provides a challenge for ADB in terms of its ability to sustain involvement over a long period, its financing modalities, and its relevance to the client. Providing sufficient technical assistance for the duration of the Program is also a challenge, particularly when delays in implementation have resource implications for technical assistance. The availability of the cluster loan modality provides the flexibility to accommodate a longer-term commitment, and respond to changing political and reform imperatives. In addition, the use of the project loan modality for institutional strengthening and capacity development may provide similar opportunities, even under ordinary capital resources conditions.

Align Reform Targets. According to the Indian Constitution state level lending program by multilateral institutions must involve the Government of India, which is the Borrower, onlending to the states. Mechanisms need to be in place to align reform targets between ADB, the state government, and central Government. This also requires flexibility within ADB for Management to make adjustments required to achieve outcomes.

Anticorruption. As public resource management programs address fundamental aspects of government financial management, the opportunity to explicitly target revenue and expenditure reforms that support government’s anticorruption agenda has the potential to have significant flow-on effects.

Exogenous Factors. This includes the political economy (e.g., policy change by the Government) or natural disasters, and these will probably occur over the medium term. Mitigation measures, particularly related to political economy factors, need to be designed in the Program, with policy actions, conditions, and covenants individually assessed by clearly specifying a mechanism to change conditions in response to such factors.

Monitoring and Policy Dialogue. Complex reform programs require continuous monitoring and policy dialogue through the combined and well-coordinated resources of both headquarters and the resident mission. Where Management is unwilling to delegate such programs to resident missions, monitoring and policy dialogue arrangements need to specify clearly the different roles and responsibilities of headquarters and resident mission staff to maximize the use of staff resources.

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