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LESSONS:

Public Sector Reform Program

| country: Solomon Islands | region: Pacific Islands

Careful country analysis and diagnosis of issues are essential to identify and prioritize ADB interventions and to design programs.

Downsizing of the public service and restructuring of public enterprises are more likely to succeed in a favorable macroeconomic environment, where the government has financial strength and alternative employment opportunities are available. The Economic and Public Sector Reform Program (EPSRP) was designed and undertaken at a time of substantial economic uncertainty, a declining domestic currency exchange rate, rapidly increasing domestic prices, few employment opportunities, and the loss of the Tonga Trust Fund. Such an adverse environment made a large cut in public sector employment politically, socially, and culturally unacceptable.

The complexity and long-term process of the economic and public sector reform need to be recognized. One short-duration program loan cannot achieve lofty goals involving gross domestic product (GDP) growth, inflation rate, fiscal balance, efficient and effective use of resources by public enterprises, and improved public services. When designing reform programs, outputs, objectives, and development goals need to be more realistically linked with policy conditionality.

The program lending modality has limitations in its ability to bring about structural changes. To ensure successful implementation of a program, adequate attention has to be paid to the implementability of the policy conditions. This, however, has to be done, very often, by focusing on specific actions rather than on underlying incentives or institutional capacities. For instance, the Economic and Public Sector Reform Program (EPSRP) required actions like corporatization, but had to leave corporate governance unaddressed.

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