93361 THE POWER OF PUBLIC INVESTMENT MANAGEMENT' Transforming Resources into Assets for Growth C O U N T RY C A S E S T U D Y Sierra Leone: PIM in a Donor- Dependent Post-Con�lict Economy Yusuf Foday, Douglas Addison, and Murray Petrie 2012 0 COUNTRY CASE STUDY: SIERRA LEONE 2012 ! PIM&in&a&Donor/Dependent&Post/Conflict&Economy THE AUTHOR Yusuf Foday The World Bank Douglas Addison The World Bank Murray Petrie Director, Economics and Strategy Group, Ltd. This case study is one of a number of country cases in the Public Investment Management Series. The country case studies accompany the volume, “The Power of Public Investment Management: Transforming Resources into Assets for Growth”, World Bank (2014), and apply a common methodology to assess PIM systems globally. T H E P O W E R O F P U B L I C I N V E S T M E N T M A N A G E M E N T& PAGE 1 COUNTRY CASE STUDY: SIERRA LEONE 2012 ! PIM&in&a&Donor/Dependent&Post/Conflict&Economy & This&chapter&summarizes&earlier&work&conducted&for&a&Public&Expenditure&Review&(PER)&in& 2009–10& (World& Bank& 2010)& and& subsequent& presentations& and& discussions& with& Sierra& Leonean& authorities.1&While&some&of&the&issues&raised&in&this&chapter&have&been&addressed,&new&issues&have& been& arising& due& to& sharply& increased& domestic& spending& on& infrastructure.& An& addendum& to& the& chapter&summarizes&these&issues.& Sierra& Leone& is& a& small,& fragile,& post/conflict& state& on& the& coast& of& West& Africa.& When& it& emerged& from& its& long& civil& war& at& the& beginning& of& 2002,& there& were& many& pressing& needs& for& recovery&and&reconstruction.&As&a&consequence,&Sierra&Leone&was&one&of&the&largest&beneficiaries&of& foreign& aid& as& a& share& of& GDP& and& aid& per& capita.& Projects& focusing& on& reconstruction& of& basic& infrastructure&and&on&capacity/building&for&reestablishment&of&core&government&functions&featured& prominently& in& the& Government’s& development& budget.2& The& post/conflict& infrastructure& gap& was& quite& large.3& More& than& 340,000& houses& were& completely& destroyed& and& almost& a& million& more& needed&rehabilitation.&Over&65&percent&of&school&buildings&were&damaged&or&burnt&down,&and&over& 76& percent& of& the& primary& health& care& infrastructure& needed& rehabilitation& or& reconstruction.& Hospitals&barely&functioned&outside&of&those&in&the&three&major&towns,&and&district&administration& effectively& ceased& in& all& but& a& few& government/controlled& areas& in& the& country.& Water& facilities,& many& already& in& disrepair,& were& rendered& unusable& by& the& dumping& of& cadavers,& and& sanitation& facilities& had& collapsed.& Roads& deteriorated& to& the& point& of& impassability,& thus& further& cutting& off& already&isolated&communities.& As&peace&was&consolidated,&the&level&of&external&assistance&has&gradually&declined&from&15.5& percent& of& GDP& in& 2002& to& 5.2& percent& of& GDP& in& 2008& as& donors& phased& out& their& post/conflict& allocations& and& the& nation’s& GDP& expanded& rapidly.& However,& social& indicators& remain& very& poor:& Sierra&Leone&was&ranked&180th&out&of&182&countries&in&the&2008–09&UN&Human&Development&Index.&& The&fiscal&stance&of&the&country&was&successfully&adjusted&in&response&to&the&reduction&in&net& external& assistance.& Overall& fiscal& balance& improved& from& & –8.3& percent& of& GDP& in& 2002& to& –2.0& percent&in&2007,&mainly&through+ a&gradual&reduction&in&the&GDP&shares&for&recurrent&consumption& and&interest&payments.&The&revenue&effort&was&very&low&by&international&standards,&with&an&average& of&only&11&percent&of&GDP&collected&between&2006&and&2008.&Tax&revenues&are&derived&mainly&from& import& duties.& The& country’s& exports& are& heavily& reliant& on& minerals,& diamonds& in& particular,& although&bauxite,&iron,&gold,&and&rutile&are&also&prominent.&& Sierra& Leone’s& economic& outcomes& were& seriously& affected& by& the& global& economic& downturn.&The&terms&of&trade&fell&by&almost&7&percent&for&2009,&exports&fell&substantially,&and&real& GDP&growth&was&estimated&to&have&declined&to&4.0&percent.&Fiscal&expenditures&in&2009&came&under& pressure& from& unanticipated& spending& needs,& including& additional& costs& associated& with& delays& in& completing& the& Bumbuna& Hydroelectric& Project& (continued& fuel& imports& being& among& these),& payments& to& an& additional& private& power& provider,& and& additional& counterpart& funds& to& key& road& T H E P O W E R O F P U B L I C I N V E S T M E N T M A N A G E M E N T& PAGE 2 COUNTRY CASE STUDY: SIERRA LEONE 2012 ! PIM&in&a&Donor/Dependent&Post/Conflict&Economy projects.&As&a&result,&the&overall&fiscal&balance&was&estimated&to&have&worsened&to&–4.4&percent&of& GDP.&& Looking& ahead,& the& Government& seeks& to& restore& a& high& rate& of& real& growth& and& poverty& reduction&through&increased&public&and&private&investment.& An#Agenda#for#Change,#Second#Poverty# Reduction#Strategy#Paper#for#2008–12&(PRSPII,&GoSL&2008)#set&out&a&vision&of&high&economic&growth& driven&by&increased&public&investment.&Specifically&it&set&a&minimum&goal&of&7&percent&of&GDP&to&be& invested& by& Government& on& infrastructure& alone,& with& additional& amounts& for& other& investments.& The& targets& for& public& investment& relied& on& high& levels& of& external& project& assistance.& Cumulative& external& financing& over& the& period& 2010–12& was& expected& to& cover& almost& three/quarters& of& total& public&investment.&In&recent&years,&however,&actual&external&project&support&has&been&less&than&60& percent&of&the&target&level.&& The& Government& does& not& operate& a& capital& investment& budget;& rather& it& maintains& a& development& budget& that& seeks& to& record& most& externally& financed& projects,& Government& contributions& to& those& projects,& and& expenditures& on& the& Government’s& own& projects.& The& development& budget& thus& captures& a& mix& of& recurrent& and& capital& spending.& External& donors& provided&80&percent&of&the&financing&for&the&development&budget&between&2003&and&2009.&To&date,& the& role& of& the& Parliament& in& selecting& or& monitoring& projects& has& been& minimal:& the& process& is& heavily&donor/driven.&The&case&study&in&this&chapter&is&based&mainly&on&work&done&for&the&2009–10& Public#Expenditure#Review&(World&Bank&2010).& Recent+Trends+in+Development+Spending+ The&composition&of&projects&appearing&in&the&approved&budget&has&changed&over&time&in&line& with& Sierra& Leone’s& post/conflict& transition.& Projects& related& to& immediate& post/conflict& needs& dropped&from&30&percent&of&budgeted&development&spending&in&2003&to&3&percent&the&next&year&and& 1&percent&thereafter&(see&table&X.1).&Spending&on&social&services&had&been&roughly&22&percent&of&the& total& development& budget& for& 2003–05,& but& dropped& sharply& in& 2006–07& to& make& room& for& increased&spending&on&governance&related&projects.&Spending&on&traditional&infrastructure&projects& (as&distinct&from&post/conflict&reconstruction)&almost&doubled&in&value&between&2003&and&2004&to&a& dominant&share&of&44&percent&of&the&total&and&has&been&generally&rising&since.&& Table+X.1:+Planned+Development+Budget+Spending,+2002–08+ 2002 2003 2004 2005 2006 2007 2008 Number of projects (planned) 70 75 73 68 88 103 102 Number of projects (% of total) 100 100 100 100 100 100 100 Productive sector 19 16 15 13 19 21 21 Capacity building 24 20 19 21 20 18 20 Post conflict priorities & security sectors 16 17 10 6 5 4 2 Social services 14 16 16 19 13 13 13 Infrastructure 20 23 27 24 24 28 28 Community development 1 3 5 6 5 3 3 T H E P O W E R O F P U B L I C I N V E S T M E N T M A N A G E M E N T& PAGE 3 COUNTRY CASE STUDY: SIERRA LEONE 2012 ! PIM&in&a&Donor/Dependent&Post/Conflict&Economy Governance related 6 5 5 10 13 11 13 Other/unclassified 0 0 1 1 2 2 1 Value of projects (planned) 290,153 332,446 335,847 326,750 446,862 333,275 Value of projects (% of total) 100 100 100 100 100 100 Productive sector 7 11 9 17 14 11 Capacity building 7 2 2 6 6 4 Post conflict priorities & security sectors 30 3 1 1 1 0 Social services 22 21 22 14 14 10 Infrastructure 24 44 45 41 47 54 Community development 8 13 12 2 9 12 Governance related 2 5 8 18 10 9 Other/unclassified 0 0 0 0 0 0 !Sources:!Ministry!of!Finance!and!Economic!Development!and!staff!calculations.! By&the&time&of&the&2007&elections,&some&aspects&of&infrastructure&provision,&in&particular,&the& Bumbuna&Hydroelectric&Project,&had&become&the&object&of&political&competition.&Key&political&parties& sought&to&portray&themselves&as&the&best&hope&of&urban&swing&voters&in&Freetown&and&the&provinces& as&they&sought&electricity,&waste&removal,&and&uncongested&roads.&By&2008,&infrastructure&took&up& more& than& half& the& development& budget& (54& percent).& Budgeted& spending& for& community& development& attracted& slightly&higher&shares&from&2004&onward,&when&the&Local&Government&Act& was&adopted.&Support&for&the&productive§ors&such&as&agriculture&has&fluctuated&without&a&clear& trend& between& 7& and& 17& percent& of& total& development& budget& spending.& Support& for& capacity/ building& has& also& fluctuated,& ranging& between& 2& and& 7& percent& of& total& budgeted& development& spending.& Parallel& trends& can& be& seen& in& project& counts& by& category.& It& is& noteworthy& that& infrastructure&attracted&the&highest&number&of&projects&per&year,&averaging&25&percent&of&the&total.& Table+X.2:+Development+Budget+Spending,+2003–09+ ! 2003! 2004! 2005! 2006! 2007! 2008! 2009! ! ! ! ! ! ! ! ! As!a!share!of!GDP! 5! 5! 6! 5! 3! 6! 7! A.!External!financing! 4! 4! 5! 4! 3! 5! 5! B.!Domestic!financing! 1! 1! 1! 1! 1! 1! 2! ! ! ! ! ! ! ! ! As!a!share!of!total!government!spending! 18! 19! 24! 22! 20! 30! 31! A.!External!financing! 13! 15! 20! 18! 15! 24! 24! B.!Domestic!financing! 5! 4! 3! 5! 5! 6! 7! ! ! ! ! ! ! ! ! As!a!share!of!total!! 34! 43! 34! 33! 27! 42! 48! ! ! ! ! ! ! ! ! Sources:!Ministry!of!Finance!and!Economic!Development!and!World!Bank!staff!calculations.! Public&investment&proxied&by&actual&spending&from&the&development&budget,&fluctuated&over& time,&from&5&percent&of&GDP&in&2003&and&2004&to&6&percent&of&GDP&in&2005,&3&percent&in&2007,&and&7& percent& in& 2009& (see& table& X.2.)& Expenditures& were& unusually& low& in& 2007& due& to& macroeconomic& T H E P O W E R O F P U B L I C I N V E S T M E N T M A N A G E M E N T& PAGE 4 COUNTRY CASE STUDY: SIERRA LEONE 2012 ! PIM&in&a&Donor/Dependent&Post/Conflict&Economy constraints&and&distractions&prior&to&the&elections&held&in&that&year.&Expenditures&rose&in&2008&due& to&the&completion&costs&of&the&Bumbuna&Hydroelectric&Project,&and&they&then&rose&further&in&2009& due& to& construction& and& road& work,& much& of& it& financed& from& domestic& contributions& to& the& development& budget.& When& expressed& as& a& share& of& total& government& spending,& the& development& budget&increased&from&18&percent&of&the&total&in&2003&to&31&percent&in&2009.&Expressed&as&a&share&of& total& investment,& the& development& budget& accounted& for& an& average& of& 48& percent.& Most& of& the& development& budget& was& financed& by& the& Government’s& external& development& partners.& The& contribution& from& domestic& resources& remained& at& about& 1& percent& of& GDP& (aside& from& 2009,& in& which&it&was&2&percent&of&GDP),&or&just&under&a&quarter&of&total&development&spending.&& The& composition& of& external& aid& has& changed& substantially& in& the& last& several& years.+ & The& main&sources&of&external&assistance&in&2006&and&2007&were&budget&support&and&project&disburse/ ments&in&almost&equal&measures.&By&contrast,&project&disbursements&substantially&outpaced&budget& support& in& 2008& and& 2009& and& continued& in& this& fashion& through& 2012.& Project& disbursements& in& 2008&were&4.9&percent&of&GDP,&compared&to&budget&support&worth&2&percent&of&GDP.&In&2012,&actual& project&support&was&5.2&percent&of&GDP&and&budget&support&was&2&percent&of&GDP.& Aid& receipts& have& been& highly& volatile,& which& has& complicated& expenditure& management.& One& way& to& measure& the& volatility& of& aid& is& to& compute& the& ratio& of& the& standard& deviation& in& aid& flows&to&the&average&aid&flow,&referred&to&as&the&coefficient&of&variation.4&Between&2002&and&2008,& the&coefficient&of&variation&in&revenues&was&a&low,&non/volatile&0.05.&By&contrast,&the&coefficient&of& variation& in& project& disbursements& (grants& and& loans)& over& the& same& period& was& a& moderately& volatile&0.2.&The&coefficient&of&variation&in&budget&support&disbursements&was&0.44,&more&than&twice& the&volatility&seen&in&project&aid.&& On&average,&deviations&from&programmed&budget&support&explain&roughly&57&percent&of&the& budgetary& deviations& in& discretionary& primary& expenditures,& even& though& many& other& variables,& such&as&revenues&and&domestic&financing,&were&also&important&in&specific&years.&The&programmed& timing& and& amounts& of& budget& support& are& routinely& deviated& by& wide& margins.& For& example,& in& 2007&and&2008,&on&average,&16&percent&of&the&programmed&budget&support&was&expected&in&the&first& quarter,&55&percent&by&mid/year,&and&62&percent&by&the&end&of&the&third&quarter.&The&corresponding& outturns&were&only&4&percent&(by&the&end&of&Q1),&4&percent&(Q2),&and&34&percent&(Q3),&with&the&full& year&outturn&being&only&63&percent&of&budget.&& This& unpredictability& complicates& expenditure& management.& For& the& first& three& quarters,& Government& authorities& were& faced& with& a& choice& of& reducing& expenditures& or& gambling& that& they& can& borrow& domestically& and& repay& in& the& fourth& quarter& when& aid& receipts& were& expected& to& appear.5& The&Government&targeted&increased&development&budget&expenditures&in&spite&of&the&global& crisis.+ The&2010&Budget&Speech&(MOF&2010a)&set&out&an&aggressive&expansion&to&9.6&percent&of&GDP& in& 2010,& 10.2& percent& of& GDP& in& 2011,& and& 10.4& percent& in& 2012.& Half& the& expansion& was& to& come& from& higher& domestic& contributions,& primarily& directed& toward& construction& projects,& which& T H E P O W E R O F P U B L I C I N V E S T M E N T M A N A G E M E N T& PAGE 5 COUNTRY CASE STUDY: SIERRA LEONE 2012 ! PIM&in&a&Donor/Dependent&Post/Conflict&Economy increased& from& 1.3& percent& of& GDP& in& 2008–09& to& 2.8& percent& of& GDP& for& 2010–12.& The& share& of& public& investment& in& total& spending& was& expected& to& increase& by& 14& percentage& points,& from& an& average&of&26&percent&of&the&total&for&the&period&2005–09&to&40&percent&of&the&total&between&2010& and&2012.&Domestic&financing&was&expected&to&increase&from&average&1.3&percent&of&GDP&in&2007– 08&to&2.8&percent&for&2010–12.&External&project&financing&was&expected&to&grow&from&an&estimated&6& percent& of& GDP& in& 2009& to& 7.6& percent& by& 2012.& With& the& exception& of& 2008,& however,& actual& development& spending& almost& always& fell& short& of& the& budget& targets,& largely& due& to& lower& than& expected&external&project&financing.&& Institutional+Mapping+ The& main& modality& by& which& PIM& is& implemented& in& Sierra& Leone& is& through& central& Government&ministries,&departments,&and&agencies&(MDAs).&Local&councils&account&for&only&a&small& share& of& public& investment.& State/owned& enterprises& (SOEs)& do& occasionally& make& large& public& investments,¬ably&for&power,&water,&and&roads,&and&the&Government&does&make&loans&in&support& of&these&investments&from&time&to&time.&& As& yet,& there& are& very& few& public/private& partnerships& (PPPs),6& and& no& bundled& “resources& for& infrastructure”& projects.& The& PRSPII& indicates& the& Government& would& like& to& enter& into& more& PPPs,&and&the&Government&is&considering&a&stronger&legal&framework&to&support&this.&The&need&to& do&so&is&evident;&for&example,&in&late&2007&the&National&Power&Authority&(NPA)&entered&a&contract& with&an&independent&power&provider&that&it&could¬&sustain.&The&total&value&of&the&contract&was& estimated& at& US$65& million,& or& 3& percent& of& GDP,& and& the& Government& was& required& to& pay& US$6& million&in&extra/budgetary&payments&in&2009&and&another&US$6&million&in&2010&to&exit&the&contract.&& The&key&stakeholders,&defined&as&those&who&make&public&investment&decisions,&include&the& Office& of& the& President,& the& Ministry& of& Finance& and& Economic& Development& (MoFED),& the& local& Government& authorities,& the& implementing& ministries,& and& the& donors.& In& theory,& the& legal& framework&should®ulate&the&roles&and&authorities&of&these&stakeholders.&In&reality,&the&laws&and& regulations&are&incomplete&and&only&partially&observed.& The& President& and& his& direct& advisors& are& playing& a& key& role& in& the& strategic& orientation& of& public& investment& and& monitoring& project& implementation.& The& President& has& also& taken& a& very& active& role& in& driving& implementation& of& his& “Agenda& for& Change,”& as& set& out& in& the& PRSPII& (GoSL& 2008).&He&introduced&performance&agreements&with&each&of&the&ministers&with&specific&indicators& and& targets& understood& to& be& derived& from& the& PRSPII.& The& Strategic& Policy& Unit& (SPU)& in& the& President’s& Office& actively& monitors& performance& of& ministers& and& their& MDAs& against& the& performance&agreements.&The&SPU&has&six&senior,&highly&experienced&advisors&(with§or/specific& responsibilities),& supported& by& four& policy& analysts.& The& SPU& holds& regular& meetings& with& Project& Implementation&Units&(PIUs)&in&MDAs&to&discuss&progress&on&individual&projects,&and&it&attempts&to& resolve& bottlenecks& and& improve& cross/agency& coordination.& The& SPU& also& makes& occasional& site& visits& to& verify& reported& progress& on& projects.& It& has& been& actively& promoting& the& preparation& of& sector& development& plans& to& facilitate& implementation& of& the& PRSP;& for& example,& it& is& currently& working&on&a&Roads&Sector&Plan.& T H E P O W E R O F P U B L I C I N V E S T M E N T M A N A G E M E N T& PAGE 6 COUNTRY CASE STUDY: SIERRA LEONE 2012 ! PIM&in&a&Donor/Dependent&Post/Conflict&Economy Elsewhere& in& the& bureaucracy& the& key& player& is& MoFED.& In& 2008& the& Ministry& of& Finance& (MoF)&was&combined&with&the&Ministry&of&Planning&and&Economic&Development&(MoPED),&creating& MoFED.&This&was&the&third&time&that&a&merger&of&the&two&ministries&has&been&attempted&in&recent& decades,&this&time&successfully.&After&the&merger,&former&MoPED&staff&remained&physically&in&their& old&building&some&distance&from&the&rest&of&MoFED&until&2009.&There&were&difficulties&in&reconciling& the&relative&seniority&of&the&former&Head&of&Planning&in&the&new&combined&structure,&and&little&was& done&to&integrate&the&former&MoPED&staff&structurally&and&functionally&until&recently.&& The& key& PIM& institutional& unit& within& MoFED& is& the& Central& Planning,& Monitoring& and& Evaluation& (CPM&E)& Department.& This& department& had& its& origins& in& the& Central& Planning& Unit& (CPU)& in& the& former& MoPED,& which& was& meant& to& appraise& all& projects,& central& and& local.& This& department&suffered&a&decline&in&capacity&over&a&number&of&years,&having&lost&skilled&staff&to&higher& paying& positions& in& Project& Implementation& Units& (PIUs).& Frustration& among& government& leaders& and& donors& at& its& lack& of& progress& in& coordinating& preparation& of& PRSPII& resulted& in& that& responsibility& being& transferred& on& the& authority& of& the& President’s& Office& to& the& Development& Assistance& Coordination& Office& (DACO)& in& the& Vice& President’s& Office.& DACO& was& subsequently& transferred& from& there& to& MoFED& in& 2009.& DACO& has& responsibility& for& maintaining& the& Development& Assistance& Database,& a& database& of& donor/funded& development& projects.& & This& is& documented&in&DACO&(2007).& Line&ministries&and&their&numerous&donor/funded&PIUs&also&play&an&important&role&in&PIM.& The& PIUs& are& staffed& by& contractors& who& are& paid& at& rates& that& are& multiples& higher& than& civil& servants.&In&general,&line&ministries&play&more&of&an&implementation&role&rather&than&a&policy&role,& and&have&weak&project&planning&and&appraisal&capacity&(although&there&are&one&or&two&exceptions,& such&as&the&Ministries&of&Health&and&Agriculture).& Parliament& plays& only& a& minor& role& in& considering& the& Development& Budget& when& it& is& presented& each& year,& due& to& capacity& constraints& (members& of& the& Finance& Committee& have& no& offices& or& support& staff),& the& lack& of& information& on& development& spending& they& routinely& receive& from& the& executive,& and& a& tendency& to& focus& on& constituency& impacts& rather& than& the& national& picture.&& On&the&donor&side,&the&four&major&donors—UK&Department&for&International&Development,& the& European& Union,& the& World& Bank,& and& the& African& Development& Bank—provide& varying& combinations& of& budget& support,& sector& support,& and& project& funding.& A& range& of& other& bilateral& donors,& including& non/traditional& donors& such& as& China,& also& provide& some& support.& Some& other& donors&are&non/resident&and&operate&through&NGOs.& The& laws& and& regulations& guiding& investment& decisions& by& the& central& Government& are& defined& in& the& Constitution,& the& Government& Budgeting& and& Accountability& Act& (GBAA)& of& 2005& (GoSL& 2005a)& and& the& Financial& Management& Regulations& (FMR)& 2007& (MOF& 2007).& The& Constitution& (Section& 112,& subsection& 1)& stipulates& that& the& Minister& of& Finance& is& responsible& for& preparing& and& submitting& to& Parliament& an& estimate& of& public& revenues& and& expenditure& for& the& T H E P O W E R O F P U B L I C I N V E S T M E N T M A N A G E M E N T& PAGE 7 COUNTRY CASE STUDY: SIERRA LEONE 2012 ! PIM&in&a&Donor/Dependent&Post/Conflict&Economy next&financial&year,&including&development&expenditure.&The&GBAA&(section&42:2)&and&the&2007&FMR& (section&2)&charge&the&vote&controller&to&ensure&sound&evaluation&of&projects&and&maintain&records& to&show&achievements&of&budgeted&activities&and&projects.&The&FMR&also&require&that&estimates&of& capital&works&which&extend&over&one&year&show&the&anticipated&expenditure&for&the&next&financial& year,&the&revised&estimates&(if&any)&for&the&works,&the&total&amount&actually&expended&so&far&as&the& accounts& are& complete,& the& total& amount& likely& to& be& expended& up& to& the& beginning& of& the& next& financial&year,&and&the&source&of&funds&and&the&anticipated&year&of&receipt&of&funds&for&each&capital& works.&& In& terms& of& the& broader& public& financial& management& (PFM)& environment& in& which& PIM& takes&place,&a&sustained&program&of&reforms&has&been&implemented&since&2003,&as&summarized&in& Box& X.1.& By& mid/2007,& the& adoption& and& implementation& of& these& reforms& placed& Sierra& Leone’s& fiduciary& arrangements& almost& on& par& with& the& regional& average.7& This& achievement& contrasts& strongly& with& the& steep& erosion& in& capacity& in& the& years& leading& up& to& and& during& the& civil& war.& However,& a& pressing& issue& with& regard& to& the& PFM& legal& framework& is& its& implementation.& Not& all& procedural&requirements&are&being&met,&particularly&with®ard&to&budget&execution.& Box+X.1:+Key+Reforms+in+Public+Financial+Management,+2004–08+ • Local& governments,& with& local& government& elections,& were& reestablished& after& the& war& through& the& adoption& and& implementation& of& the& Local& Government& Act& (2004),& with& regulations&issued&in&2005.&& • The& Public& Procurement& Act& of& 2004& replaced& a& wasteful& centralized& procurement& regime& with& a& decentralized& procurement& system& based& on& the& principles& of& competition,& transparency,&and&accountability.& • A& weak& legal& foundation& for& fiduciary& standards& was& strengthened& by& the& GBAA& in& 2005& (GoSL&2005a)&and&by&the&adoption&of&new&FMR&in&2007&(MOF&2007).& • The& Accountant& General& Department& was& strengthened& by& the& appointment& of& a& qualified& Accountant/General&and&eight&professional&accountants&after&years&of&low&capacity.&& • The&Annual&Public&Accounts&and&their&audits&were&brought&up&to&date&after&years&of&delays,& and& the& quarterly& publication& of& unaudited& accounts& has& become& a& normal,& routine& procedure.& • The& old& centralized& software& for& financial& management& was& replaced& with& a& new,& decentralized& system& (IFMIS)& that& should& both& empower& MDAs& and& increase& their& accountability.&& • The& capacity& for& external& audit& was& strengthened& by& enhanced& terms& and& conditions& of& service&for&the&Office&of&the&Auditor/General&and&by&new&recruitment&and&training.& & The&legal&framework&does¬&specify&arrangements&for&strategy&and&priority&setting,&cost/ effectiveness,&or&accountability,&although&it&does&set&out&institutional&responsibilities&and&financial& management& requirements& for& investment& projects.& Specifically,& there& is& no& requirement& that& the& T H E P O W E R O F P U B L I C I N V E S T M E N T M A N A G E M E N T& PAGE 8 COUNTRY CASE STUDY: SIERRA LEONE 2012 ! PIM&in&a&Donor/Dependent&Post/Conflict&Economy Cabinet&set&out&priorities&or&strategies&for&public&investment,&globally&or&at&the§or&level.&There& are& no& requirements& that& formal& standards& or& criteria& be& established& for& use& when& deciding& to& accept& or& reject& a& project,& nor& identification& of& institutional& responsibilities& for& such& decisions.& Finally,& little& is& required& from& MDAs& or& donors& with& regard& to& public& investment& purpose,& monitorable&outcome&and&progress&indicators,&or&implementation&requirements&beyond&financing.& The& net& result& is& that& the& Government& is& not& well& equipped& to& reject& low& priority& projects,& reject& projects&that&are¬&up&to&standards,&or&monitor&progress&towards&clearly&defined&objectives.&& In&such&circumstances,&the&formation&of&the&development&budget&tends&to&be&dominated&by& the&two&strongest&actors:&the&donors&and&the&Office&of&the&President.&In&fact,&these&two&actors&tend&to& both& select& and& monitor& projects& while& the& line& ministries& implement& them& and& MoFED& merely& records&the&transactions,&all&to&be&discussed&in&the&next§ions.8& Most&donor/financing&is&reported& in& budget& documents,& although& some& donor& projects& are& off/budget,9& as& are& many& projects& implemented&by&NGOs.& Performance+of+the+PIM+System+ This& section& provides& an& analysis& of& how& the& PIM& system& has& been& functioning& against& the& eight&must/have&features&and&diagnostic&indicators&discussed&in&Chapter&2.&+ Investment+Guidance+and+Preliminary+Screening+ In& theory,& the& PRSP& can& provide& high/level& strategic& guidance& for& public& investment.& In& practice,& in& the& immediate& post/conflict& phase& in& Sierra& Leone& most& investment& projects& were& largely& donor/driven& and& most& were& selected& in& response& to& urgent& post/conflict& reconstruction& needs.&The&Interim/PRSP&established&at&war’s&end&(GoSL&2001)&and&the&subsequent&first&full&PRSP& (GoSL& 2005)& were& used& primarily& as& a& means& to& attract& as& much& donor& support& possible,& thus& deliberately&avoiding&any&overt&prioritization&across&or&within§ors.&& By&contrast,&the&second&PRSP&was&originally&drafted&with&a&specific&call&for&prioritization&in& favor& of& infrastructure.& Subsequent& feedback& from& donors& concerned& about& the& continuing& poor& performance& in& the& social& sectors& convinced& the& authorities& to& set& out& a& more& balanced& approach& with& four& priority& areas:& transport,& energy,& agriculture,& and& human& development.& PRSPII& includes& detailed&goals&to&be&achieved&in&each§or,&along&with¬ional&cost&estimates.&Its&use&as&a&tool&to& guide& the& development& of& projects& is& limited,& however,& because& it& lacks& clearly& defined& sector& policies& and& programs& that& do& not& exceed& realistic& levels& of& external& assistance& which& are& accompanied&by&monitorable&progress&indicators&and&baselines.& An&Aid&Policy&introduced&in&2009&established&a&screening&committee&for&proposed&projects& and& sought& donor& cooperation& in& aligning& project& proposals& with& priorities& set& out& in& the& PRSP& II& and&various§or&strategies.&Some&key§ors,&however,&had¬&developed&adequate&strategies&at& the&close&of&2009.&In&some&cases,&Government&supported&projects&could&have&been&handled&by&the& T H E P O W E R O F P U B L I C I N V E S T M E N T M A N A G E M E N T& PAGE 9 COUNTRY CASE STUDY: SIERRA LEONE 2012 ! PIM&in&a&Donor/Dependent&Post/Conflict&Economy private§or,&for&example,&the&rehabilitation&of&sawmills&and&the&distribution&of&tractors&and&seed& rice.&& Formal+Project+Appraisal+ A& project& appraisal& system& is& in& place.& According& to& instructions& in& recent& budget& call& circulars&(MoF&2010b),&it&is&the&responsibility&of&the&requesting&agencies&to&prepare&an&appraisal&of& each&project&based&on&a&project&appraisal&template&provided&by&MoFED.&Their&findings&are&then&sent& to& MoFED& for& review.& The& appraisal& template& asks& MDAs& to& justify& the& need& for& proposed& project& spending& in& terms& of& basic& consistency& with& Government& policy& and& strategic& guidelines.& The& template& also& requires& detailed& technical& and& costing& estimates& based& on& previous& similar& project& performance&and&market&value&for&materials,&respectively.&The&requesting&MDAs&are&also&asked&to& justify&the&proposed&project&as&the&most&effective&modality&to&implement&the&related&policies.& In& practice,& only& a& small& proportion& of& project& proposals& are& carefully& appraised,& and& the& capacity& for& good& project& appraisal& in& Sierra& Leone& is& limited.& Agreement& by& a& donor& to& finance& a& project& is& tantamount& to& the& project& being& included& in& the& budget—subject& to& the& project& conforming& to& Government& priorities& as& they& are& understood,& and& any& required& counterpart& financing&being&affordable.&The&incentive&to&maintain&adequate&project&appraisal&capacity&is&reduced& in& aid/dependent& countries& like& Sierra& Leone,& since& major& donors& generally& conduct& their& own& in/ depth&appraisals.&& In& Sierra& Leone& too,& the& quality& of& domestically& financed& investment& projects& is& often& low.& MDA& budget& submissions& typically& lack& well/specified& and& well/justified& project& proposals.& MDAs& are& not& required& to& indicate& the& future& recurrent& cost& impacts& of& development& projects& on& their& budgets.& There& is& also& only& limited& appraisal& by& Local& Council& Planning& Officers& of& projects& to& be& financed& from& Local& Council& Development& Grants& (see& GOSL& 2006.)& & While& these& grants& currently& fund&small/scale&activities,&the&size&of&projects&was&expected&to&increase&and&some&selected&appraisal& by&the&local&planners&would&have&been&desirable.&& Project& appraisal& capacity& was& reduced& over& time& as& staff& from& planning& units& of& MDAs& (ministries,&departments,&and&agencies),&originally&allocated&there&from&MoPED,&have&joined&donor& financed& PIUs,& attracted& by& the& much& higher& salaries.& Some& important& line& ministries,& such& as& the& Ministry& of& Public& Works,& Housing& and& Infrastructure,& had& no& planning& unit& or& planning& staff& (for& example,& the& planning& function& related& to& road& maintenance& was& transferred& to& the& Sierra& Leone& Road&Authority&when&it&was&established&as&an&autonomous&entity).&The&Ministry&of&Education&had& one&staff&member&in&its&planning&unit&(although&there&is&a&large&number&of&staff&in&its&PIUs).&There& may&be&improvements&in&the&future:&The&Public&Sector&Reform&Unit&in&the&Office&of&the&President&is& preparing& an& implementation& plan& based& on& the& recommendations& contained& in& a& number& of& Management& and& Functional& Reviews& for& key& MDAs.& Among& these& recommendations& is& the& suggestion&that&Policy&and&Planning&Units&should&be&established&in&key&line&ministries.& Weaknesses&in&project&appraisal&are&of&considerably&less&concern&in&a&country&where&major& donors& generally& conduct& in/depth& project& appraisal.& However,& for& a& number& of& reasons,& a& sound& T H E P O W E R O F P U B L I C I N V E S T M E N T M A N A G E M E N T& PAGE 1 0 COUNTRY CASE STUDY: SIERRA LEONE 2012 ! PIM&in&a&Donor/Dependent&Post/Conflict&Economy PIM&system&requires&independent&capacity&by&the&Government&to&appraise&individual&donor/funded& projects.& The& reasons& for& this& are& as& follows:& (1)& to& ensure& that& full& account& is& taken& of& domestic& conditions&and&capacity&constraints,&local&impacts,&and&prospective&developments&of&which&donors& may¬&be&fully&aware;&(2)&possible&interactions&between&projects&that&require&some&adjustment&to& project&design,&such&as&sequencing&or&phasing&of&implementation;&(3)&donors&are&most&focused&up&to& the&point&of&physical&completion&and&handover&of&a&project,&whereas&the&Government&has&to&operate& and&maintain&the&assets&so&as&to&deliver&public&services&for&many&years&more;&and&(4)&some&donor& assistance& is& in& the& form& of& budget& support,& effectively& creating& a& reliance& on& domestic& appraisal& capacity.& In&addition,&some&donors&are&willing&to&finance&development&projects,&but&do¬&themselves& develop&and&appraise&the&projects.&In&fact,&some&donors&have&expressed&clear&interest&in&providing& financing& to& Sierra& Leone& but& have& not& done& so& because& there& are& no& projects& that& have& been& developed&by&the&Government&to&a&sufficient&stage&(such&as&a&feasibility&study).&The&lack&of&capacity& in&MDAs&and&in&MoFED&to&develop&projects&at&least&to&feasibility&stage&means&that&Sierra&Leone&has& been&missing&out&on&significant&additional&financing&from&these&sources.& Independent+Review+of+Appraisal+ Responsibility& for& independent& review& of& appraisal& lies& with& the& Central& Planning,& Monitoring,& and& Evaluation& (CPM&E)& Division& in& MoFED.& The& reliance& by& MDAs& on& donors& to& conduct& project& appraisal& is& repeated& in& MoFED.& Indeed,& interviews& with& various& officials& suggest& that&staff&in&the&former&MoDEP&often&did&rely&on&the&appraisals&done&by&the&donors,&irrespective&of& their&quality.&& The&CPM&E&Division&has&a&staff&establishment&of&around&20,&but&its&staffing&was&only&10&civil& servants,& plus& three& local& technical& assistants.& The& civil& servants& all& had& degrees& but& none& had& an& engineering°ree&or&a&similar&technical&background.&The&staff&had&inadequate&resources&and&they& lacked&motivation,&due&in&part&to&the&very&large&gap&between&their&remuneration&and&that&of<As&in& MoFED&and&the&PIUs.&The&division&is&marginalized&within&MoFED,&and&seems&unclear&of&its&role.&& There&would&be&many&benefits&to&building&the&capacity&for&independent&Government&review& of&donor/appraised&projects.&Such&review&of&individual&project&appraisals&is&desirable&to&counter&the& clear& empirical& tendency& to& “optimism& bias”& among& those& preparing& projects& (both& donors& and& MDAs)—that&is,&the&tendency&for&project&proposals&to&systematically&overestimate&the&benefits&and& underestimate&the&costs&of&projects.&& The&Government&also&needs&to&analyze&whether&the&overall&portfolio&of&individual&projects& constitutes& a& well/designed& program,& as& well& as& to& ensure& that& the& counterpart& costs& and& future& recurrent& cost& impacts& are& affordable.& Aggregating& projects& across& donors& to& form& an& overall& “program”&may&reveal&concerns&about&the§oral&allocation,®ional&distribution,&overall&impact& on& vulnerable& groups,& or& affordability& and& sustainability.& While& the& major& donors& now& coordinate& closely& at& a& strategic& level& and& align& their& project& portfolios& with& the& PRSPII& priorities,& this& is& less& T H E P O W E R O F P U B L I C I N V E S T M E N T M A N A G E M E N T& PAGE 1 1 COUNTRY CASE STUDY: SIERRA LEONE 2012 ! PIM&in&a&Donor/Dependent&Post/Conflict&Economy true&of&some&other&donors,&and&there&is&significant&activity&by&NGOs&outside&the&donor&coordination& framework.& Project+Selection+and+Budgeting+ Sierra&Leone’s&development&budget&continues&to&include&projects&with&recurrent&elements,& despite&Government&efforts&to&redefine&the&development&budget&as&a&capital&investment&budget&and& to& better& integrate& this& budget& with& the& recurrent& budget.& Currently& the& formation& of& the& development&budget&is&done&separately&from&the&recurrent&budgets&for&personnel&and&for&goods&and& services.&There&are&two&main&reasons&for&this&method:&(1)&donors&and&the&Government&are¬&well& informed& about& total& recurrent& costs& because& they& have& not& worked& out& a& way& to& monitor& the& distinction&between&recurrent&and&capital&costs&financed&from&project&disbursements&and&(2)&there& are& no& formal& requirements& to& consider& the& implications& of& project& entry& for& the& wage& bill& or& for& demands& for& goods& and& services—whether& in& the& year& of& entry,& during& implementation,& or& after& project&completion.&& The& guidance& provided& to& MDAs& regarding& the& inclusion& or& prioritization& of& investment& projects&in&the&development&budget&is&insufficient.&The&budget&call&circular&(MOF&2010b),&normally& issued&in&June&or&July,&provides&ceilings&for&each&MDA&for&the&coming&year&and&indicative&ceilings&for& the&following&two&years&as&guidance.&However,&the&MDAs&do¬&respect&the&ceilings&because&they& are&usually&later&revised&significantly,&and&because&the&BCC&is&issued&before&Cabinet&endorsement&of& the& Budget& Framework& Paper& and& before& the& macroeconomic& and& fiscal& forecast& is& finalized.& Consequently,& MDAs& treat& the& BCC& as& an& initial& form/filling& exercise& and& a& bid& for& resources& that& they&know&will&be&allocated&later.& Heavy& dependency& on& donors& for& public& investment& brings& an& additional& complication& for& budget& formulation.& Most& donor& agencies& do& not& have& strong& incentives& to& make& the& distinction& between& recurrent& and& capital& costs& associated& with& their& project& proposals& and,& even& when& such& information& is& available,& they& do& not& have& strong& incentives& to& seek& Government& assurances& that& recurrent& obligations& will& be& adequately& financed& over& the& full& lifespan& of& the& new& capital& assets& resulting& from& their& investments.& This& is& because& the& performance& of& the& donor& agencies& is& more& often&measured&in&terms&of&number&of&projects&completed&and&project&funds&disbursed,&rather&than& results&on&the&ground.&& The& Government& of& Sierra& Leone& has& long& intended& to& make& the& transition& from& a& development& budget& to& an& investment& budget& in& which& operations& and& maintenance& costs& associated& with& projects& are& included& in& the& recurrent& budget.& The& authorities& made& a& substantial& investment& in& a& new& computerized& management& information& system& that& should& facilitate& such& a& transition.& The& World& Bank& team& recommended& that& the& authorities& insert& specific& amendments& into&the&GBAA&and&FMR&that&would&mandate&the&clear&identification&of&recurrent&activities&financed& from& project& aid,& as& well& as& the& identification& of& recurrent& implications& of& capital& investments& and& that&they&back&this&with&a&comprehensive&program&of&training.& T H E P O W E R O F P U B L I C I N V E S T M E N T M A N A G E M E N T& PAGE 1 2 COUNTRY CASE STUDY: SIERRA LEONE 2012 ! PIM&in&a&Donor/Dependent&Post/Conflict&Economy Project+Implementation+ Until&2008&the&development&budget&was&consistently&underspent.&As&table&X.3&shows,&part&of& the& problem& may& have& been& overly& optimistic& targets& for& project& loans& and& grants.& These& progressively& came& down& over& several& years& to& the& point& where& actual& spending& exceeded& the& intended&targets&in&2008&and&in&the&2009&target&for&domestic&development.&& ! Table+X.3+++Development+Budget+Outturns,+2003–09+ Budget!category!! 2003% 2004% 2005% 2006% 2007% 2008% 2009% ! % % % % % % % Actual!as!share!of!planned!(%)! 39! 40! 61! 66! 39! 108! 93! A.!Project!loans!and!grants! 33! 36! 59! 60! 36! 106! 85! B.!Domestic!contribution! 77! 77! 79! 101! 51! 114! 132! Sources:!Ministry!of!Finance!and!Economic!Development!and!staff!calculations.! Almost& all& projects& suffer& delays& beyond& the& initial& estimated& time.& Examples& include& the& reconstruction&of&the&treasury&building,&construction&of&an&office&for&the&Vice&President,&and&building& of& the& Waterloo/Kent& road.& Table& X.4& shows& that& two& implementing& agencies& stand& out& with& especially& low& spending& rates:& the& Ministry& of& Education& and& the& Road& Authority.& Each& displays& average&annual&spending&rates&well&below&the&weighted&sample&average&of&13&percent&(and&the&un/ weighted&average&of&18&percent).& Table+x.4+++Project+Implementation+Status,+2003–08+ Average%Rate% a Number%of% Undisbursed% Financing% of%Spending% Selected%Projects ! Projects! Amount(US$)! (US$)! Utilized%(%)! per%Year%(%)! Agriculture!and!Forestry! 10! !101,942,800!! !78,893,560!! 23! 12! Power!and!Water! 8! !109,030,000!! !48,402,992!! 56! 17! Education! 7! !81,184,432!! !31,768,667!! 61! 9! Nat’l!Comm.!for!Social!Action! 7! !76,925,121!! !9,521,719!! 88! 25! Sierra!Leone!Road!Authority! 7! !122,375,000!! !112,112,268!! 8! 6! Finance!and!Economic!Dev’t! 4! !39,653,878!! !3,927,243!! 90! 23! Health!and!Sanitation! 4! !59,500,000!! !25,111,892!! 58! 27! Sierra!Leone!Water!Company! 3! !9,245,000! !5,594,323!! 39! 10! Office!of!the!President! 2! !763,260! !613,260!! 20! 27! Others! 9! 48,142,594! 15,674,571! 67! 21! Source:!Ministry!of!Finance!and!Economic!Development!and!World!Bank!staff!calculations.! Notes:!! a. From!a!sample!of!61!projects.!Some!sectors!and!donors!were!omitted.! T H E P O W E R O F P U B L I C I N V E S T M E N T M A N A G E M E N T& PAGE 1 3 COUNTRY CASE STUDY: SIERRA LEONE 2012 ! PIM&in&a&Donor/Dependent&Post/Conflict&Economy Most& of& the& delays& were& traced& to& poor& or& nonexistent& procedures,& low& capacity,& and& inadequate& funding.& In& the& case& of& domestically& financed& projects,& the& failure& to& ensure& adequate& resources& was& the& key& reason& for& delays.& In& the& case& of& donor/financed& projects,& delays& in& completing&projects&were&due&to&lack&of&counterpart&funding,&rigid&project&effectiveness&conditions,& the& complex& nature& of& some& project& designs,& slow& processing& of& withdrawal& application& forms,& delays& in& procurement,& issues& related& to& contract& management,& and& weak& capacity& in& the& implementing&agencies.&These&problems&generally&reflect&weak&implementation&capacity&within&the& MDAs.&Project&delays&often&result&in&significant&cost&escalation.&Some&of&these&issues&are&discussed&in& the&next§ion.& Anecdotal& evidence& of& numerous& abandoned& projects& was& widespread.& Reasons& given& for& abandoning&projects&were&changing&political&priorities&of&a&new&Minister,&interruptions&to&funding,& and&corruption.&This&situation&suggests&serious&weaknesses&in&project&reporting&and&monitoring,&as& well&as&a&lack&of&mechanisms&to&adjust&project&funding&during&implementation.&& The& 2004& Procurement& Act& requires& each& MDA& to& produce& a& detailed& procurement& plan,& while&the&2007&Financial&Management&Regulations&require&that&these&plans&be&submitted&along&with& the&budget&requests&from&each&MDA.&The&Budget&Bureau&reviews&and&approves&or&rejects&each&plan& from& central& Government& MDAs& in& consultation& with& the& National& Public& Procurement& Authority& (NPPA).& Some& of& the& requirements& associated& with& procurement& plans& have& been& met& quite& successfully.&By&early&2009,&25&major&MDAs&and&all&19&local&councils&had&produced&their&own&plans& compared&to&just&9&large&MDAs&in&2006.10&& However,& most& MDAs& provide& their& procurement& plans& several& months& after& submitting& their& budget& requests,& rather& than& simultaneously& as& the& FMR& requires.& Only& 50& percent& of& procurement&expenditure&in&2006&and&49&percent&in&2007&was&for&planned&items.&Only&59&percent& of& procurements& used& the& planned& procurement& modality& (competitive& bidding& or& sole& source& procurement)&in&2006;&this&share&fell&to&40&percent&in&2007&due&mostly&to&contract&splitting.&In&2006& approximately& 29& percent& of& the& number& of& contracts& over& the& small& purchase& thresholds& were& awarded&on&the&basis&of&open&competition,&that&is,&following&international&or&national&competitive& bidding.11& In& 2008& the& share& was& 69& percent,& showing& a& significant& improvement& over& the& 2006& baseline.&However,&aside&from&donor/funded&projects,&only&minimal&progress&was&achieved&toward& transparency&obligations.&The&result&is&the&vast&majority&of&goods&and&services&procured&through&the& recurrent&budget&go&unadvertised,&contract&awards&typically&go&unpublished,&and&quarterly&reports& from&the&NPPA&are&also&generally&missing&or&unpublished.&& While& the& NPPA& trained& many& mid/level& and& senior& Government& staff& to& serve& as& procurement& officers,& it& was& clear& that& this& was& not& sufficient& to& produce& good& results,& because& officers& after& training& are& often& transferred& to& other& jobs.& The& NPPA& examined& various& solutions& including&the&creation&of&an&independent&cadre&of&procurement&officers.&&The&President&announced& in& 2012& that& such& a& cadre& would& be& created.& & In& addition,& under& the& Public& Procurement& Act,& procurement& committees& within& each& ministry& or& agency& are& mandated& to& "review& and& approve& T H E P O W E R O F P U B L I C I N V E S T M E N T M A N A G E M E N T& PAGE 1 4 COUNTRY CASE STUDY: SIERRA LEONE 2012 ! PIM&in&a&Donor/Dependent&Post/Conflict&Economy evaluation& reports& and& contract& award& recommendations."& In& spite& of& this,& some& ministries& have& reportedly&attempted&to&overrule&the&recommendations&of&their&Procurement&Committees.&& It&was&evident&at&the&time&that&the&mainstream&project&reporting&arrangements&had&broken& down,&and&ad&hoc&arrangements&sprung&up&as&a&consequence.&Quarterly&progress&reports&from&PIUs& were& regarded& as& unreliable.& & As& a& consequence,& a& number& of& agencies& had& become& involved& in& monitoring&progress&in&implementation.&In&2009&the&Multilateral&Donors&Section&in&MoFED&initiated& a&more&systematic&and&intensive&effort&to&monitor&project&progress,&including&frequent&site&visits.&As& noted& earlier,& the& Strategic& Policy& Unit& in& the& Office& of& the& President& also& conducts& regular& project& monitoring& meetings& with& PIUs& and& makes& occasional& site& inspection& visits.& Also& in& use& are& mechanisms& involving& regular& donor& oversight& and& regular& progress& meetings& with& PIUs& in& which& the&CPM&E&Division&in&MoFED&participates.& Donor& dependency& combined& with& delays& in& counterpart& funding& can& cause& substantial& harm&to&project&implementation.&As¬ed,&the&budget&process&tends&to&underestimate&counterpart& funding& requirements.& And& the& budgeted& counterpart& funds& are& not& always& provided& because& programmed&revenues&and&grants&often&fall&short.&The&consequence&is&that&all&but&the&most&favored& projects& end& up& getting& far& less& than& they& actually& need,& which& in& turn& can& trigger& a& substantial& reduction&in&external&financing&since&projects&are&often&geared&at&a&ratio&of&3&to&1.&The&outcome&in& 2007& is& a& good& example:& shortfalls& in& counterpart& funds& led& to& steep& reductions& in& actual& disbursements&relative&to&budget&targets.&The&best&solution&to&the&problem&of&resource&uncertainty& is& to& try& to& get& a& better& match& of& recurrent& spending& and& all& domestic& contributions& to& the& development&budget&with&domestic&revenues.&& Donor& reliance& on& PIUs& for& project& implementation& can& also& create& problems.& In& the& 2010& Budget& Speech& (MOF& 2010a),& the& Minister& of& Finance& criticized& the& PIUs& for& delayed& execution& of& projects,& and& indicated& that& MoFED& was& stepping& up& its& project& monitoring& and& undertaking& a& critical&assessment&of&PIUs.&The&concern&was&that&PIU&managers,&seeking&to&maintain&access&to&high& donor&paid&salaries,&tend&to&delay&project&completion&or&even&arrange&for&continued&funding&after&a& project&has&been&physically&completed.& Finally,&donor&dependency&can&create&situations&where&there&are&multiple&systems&of&project& implementation&and&reporting&that&can&undermine&the&Government’s&mainstream&institutions.&For& instance,& different& donors& have& their& own& project& implementation& manuals,& impose& their& own& procurement& standards& and& regulations,& require& technical& supervision& and& sign/off& by& foreign& consultants& rather& than& the& Ministry& of& Works,& and& require& reporting& in& their& own& formats.& The& cumulative&impact&is&that&there&are&no&national&(or&MDA/specific)&project&implementation&manuals& and& no& standardized& reporting& templates,& and& the& ability& of& the& implementing& ministries& to& fulfill& their&respective&procurement&and&technical&functions&is&compromised.&& Project+Adjustment+ There& are& no& formal& mechanisms& to& trigger& a& review& of& a& project’s& continued& justification& during&project&implementation.&& T H E P O W E R O F P U B L I C I N V E S T M E N T M A N A G E M E N T& PAGE 1 5 COUNTRY CASE STUDY: SIERRA LEONE 2012 ! PIM&in&a&Donor/Dependent&Post/Conflict&Economy Facility+Operations+ The&long/run&operation&and&maintenance&of&capital&assets&is&frequently&a&problem&in&Sierra& Leone.&Once&an&investment&is&complete,&donors&typically&hand&over&assets&in&good&condition&and&fit& for& purpose.& However,& complaints& arose& that& some& locally& supervised& construction& projects& for& schools& and& other& facilities& had& been& of& poor& quality.& Although& the& initial& quality& of& operation& of& assets,& whether& roads& or& hospitals,& is& generally& acceptable,& the& quality& of& operation& generally& deteriorates&over&time.&& Part&of&the&problem&is&poor&awareness&on&the&part&of&each&Ministry&of&all&the&assets&in&place& that& need& adequate& funding.& Asset& registers& are& infrequently& updated& and& generally& incomplete.& Another&part&of&the&problem&is&insufficient&funding&for&operations&and&maintenance.&Given&the&lack& of& information& at& the& appraisal& and& budget& formation& stages& regarding& recurrent& funding& requirements,& it& is& not& surprising& that& maintenance& funding& is& especially& inadequate.& Overall& allocations& to& maintenance& fell& from& 1.6& percent& of& the& total& in& 2006& to& 1.4& percent& of& the& total& in& 2008,& while& the& actual& shares& were& smaller,& falling& from& 1.1& percent& of& the& total& in& 2006& to& 0.9& percent&in&2008.&This&low&spending&creates&problems.&Expenditures&on&new&vehicles,&for&example,& are& almost& certainly& higher& than& necessary:& many& MDAs& were& given& allocations& to& operate& their& vehicles&without&any&corresponding&allocations&for&maintenance.&Within&the&health§or,&spending& on&the&maintenance&of&buildings,&equipment,&and&vehicles&was&very&small,&accounting&for&an&average& of&only&0.4&percent&of&total&spending&2006–08.&None&of&the&hospitals&spent&anything&on&maintenance& in&2008.&A¶llel&point&can&be&made&with®ard&to&staffing&requirements:&there&is&a&general&lack&of& qualified&technical&staff&to&operate&and/or&oversee&the&operations&of&the&various&facilities&and&other& capital&assets&of&the&Government.&& Project+Evaluation+ While&in&Government&many&units&are&titled&“monitoring&and&evaluation,”&in&fact&virtually&no& systematic&domestic&evaluation&by&Government&MDAs&has&been&taking&place.12& While&the&Economic& Affairs& Department& (EAD)& within& MoFED& has& a& mandate& to& monitor& projects,& it& does& not& have& the& capacity&to&do&so,&nor&does&it&have&a&mandate&for&evaluation.&The&GBAA&and&FMR&do¬&require&ex/ post&evaluation.&Moreover,&the&general&lack&of&documented&project&objectives,&projected&timelines,& and& appraisal& analysis& makes& it& almost& impossible& to& assess& whether& a& completed& project& has& achieved&its&intended&objectives&and&whether&the&objectives&were&met&on&time&at&the&approved&cost.& Ex/post&project&evaluation&is&usually&done&only&for&externally&funded&projects,&where&it&is&required& by&the&financing&institutions,&and&it&is&normally&carried&out&by&those&institutions’&staff&or&consultants& hired&by&them.&To&remedy&this&situation,&the&authorities&may&want&to&consider&amending&the&GBAA& and&FMR&to&require&ex/post&reviews&of&key&projects,&whether&conducted&by&appropriate&MDAs&or&by& the& donors.& They& would& also& need& to& back& this& requirement& with& strong& efforts& to& improve& the& quality&of&project&appraisal&and&record&keeping.&& T H E P O W E R O F P U B L I C I N V E S T M E N T M A N A G E M E N T& PAGE 1 6 COUNTRY CASE STUDY: SIERRA LEONE 2012 ! PIM&in&a&Donor/Dependent&Post/Conflict&Economy Conclusions,+Achievements,+and+Challenges+ Donor& dependency& has& multiple& consequences& for& PIM.& Governments& like& the& Republic& of& Sierra& Leone& may& seek& to& cast& their& nets& as& widely& as& possible& to& encourage& the& widest& range& of& donors&to&contribute&to&any§ors&that&are&of&interest:&prioritization&is&secondary&to&fundraising.& Capacity& to& appraise& projects& may& be& desirable,& but& the& incentive& to& pursue& capacity/building& is& minimized& when& donors& conduct& and& finance& their& own& appraisals.& The& leadership& within& MoFED& has& well& understood& the& need& to& identify& the& recurrent& requirements& for& operations& and& maintenance&and&replace&the&development&budget&with&an&investment&budget,&yet&donors&have&little& incentive&to&provide&the&necessary&information.&& Donor&rules&requiring&counterpart&funding—while&understandable&to&signal&ownership&and& burden/sharing—can&magnify&the&impact&of&resource&shortfalls&because&aid&is&often&geared&at&ratios& of&3&to&1&or&more.&Project&implementation&can&be&slowed&when&donor/financed&PIU&managers&fear& that&project&completion&means&the&end&of&their&above/average&salaries.&& Finally,&there&is&almost&no&domestic&evaluation&of&project&outcomes&by&Government&MDAs.& Ex/post& evaluation& of& projects& is& usually& done& only& for& externally& funded& projects& where& it& is& required& by& the& financing& institutions,& and& it& is& normally& carried& out& by& their& staff& or& consultants& hired&by&them.& While& challenges& exist& for& all& eight& of& the& “must& haves,”& the& binding& constraints& on& PIM& system&performance&at&the&margin&would&appear&to&be&weak&project&appraisal&prior&to&selection&in& the&budget,&and&weak&monitoring&of&actual&performance&in&implementing&projects.&Of&these&two,&the& fastest& gains& can& probably& be& achieved& through& more& intensive& and& systematic& review& of& project& implementation,& given& the& length& of& the& PIM& cycle& and& the& large& proportion& of& the& development& budget&taken&up&by&already/approved&projects.&This&could&help&to&significantly&improve&the&speed& and& quality& of& implementation& and& project& completion.& It& would& also& help& to& identify& the& key& problems&in&implementation&and&to&produce&the&pressure&and&impetus&needed&to&strengthen&these& elements.&The&lessons&learned&could&then&be&fed&into&improving&the&design&of&new&projects.& On& the& other& hand,& the& weaknesses& in& the& planning& stage& of& the& PIM& cycle& are& particularly& important&to&address,&given&the&intended&significant&increase&in&the&scale&of&development&spending& under& the& PRSPII.& Weaknesses& in& project& appraisal,& independent& review& of& appraisal,& and& project& selection& and& budgeting& are& of& less& concern& when& the& bulk& of& development& spending& each& year& is& committed& to& ongoing& (already& approved)& projects.& This& has& been& the& case& to& an& extent& in& recent& years.&However,&the&intention&to&scale/up&spending&on&key&areas&of&public&investment&points&to&the& strategic&importance&of&strengthening&capacity&in&these&areas.&& The&Government&also&appears&to&be&missing&out&on&some&additional&aid&due&to&its&inability&to& develop&solid&project&proposals&for&consideration&by&some&donors.&In&addition,&developing&appraisal& capacity&could&help&to&identify&projects&that&should&be&halted&during&implementation&because&cost& increases&or&other&changes&during&execution&undermine&the&justification&for&the&project.& T H E P O W E R O F P U B L I C I N V E S T M E N T M A N A G E M E N T& PAGE 1 7 COUNTRY CASE STUDY: SIERRA LEONE 2012 ! PIM&in&a&Donor/Dependent&Post/Conflict&Economy The&Government&amended&the&GBAA&(2005)&in&2011&to&require&the&preparation&of&a&rolling& public&investment&program&(PIP)&with&the&annual&budget.&To&be&selected&into&the&PIP,&a&project&must& have& been& subject& to& appraisal& and& must& meet& specific& financing& criteria;& selection& into& the& PIP& would&be&a&pre/condition&for&inclusion&in&the&budget.&The&authorities&were&also&considering&revising& the& FMR& to& require& that& the& BCC& include& an& expenditure& ceiling& for& the& development& budget& and& provide& more& specific& guidance& about& the& criteria& for& project& entry& into& the& budget.& Specific& information& to& be& requested& by& the& BCC& could& include& well/developed& cost& estimates,& including& operating& and& maintenance& requirements& for& inclusion& in& the& recurrent& budget;& domestic& counterpart& funding& requirements;& a& procurement& plan& for& the& project;& an& annually& updated& financing& plan;& and& evidence& that& ongoing& projects& are& making& satisfactory& progress& against& approved&targets.&& Finally,&there&is&a&pressing&need&for&a&sound&policy&and&management&framework&to&be&put&in& place& for& PPPs.& Experience& in& Sierra& Leone& has& already& demonstrated& the& magnitude& of& the& risks& these& instruments& can& create& for& Government.& A& PPP& Act& was& drafted& in& 2013& but& had& not& been& adopted&at&the&time&of&this&writing.& Such& changes& could& signal& the& Government’s& commitment& to& reform& and& could& strengthen& MoFED’s& hand& in& dealing& with& MDAs.& The& introduction& of& a& PIP& has& the& potential& to& significantly& improve&the&quality&of&investment&planning,&provided&it&is&well&designed&and&duly&implemented.&It& can& help& the& Government& to& more& pro/actively& manage& the& allocation& of& donor/financing,& and,& provided&it&is&tightly&connected&to&the&PRSP,&could&be&a&useful&tool&to&help&“populate”&the&PRSP&with& well/designed& projects.& A& PIP& can& also& help& develop& a& more& forward/looking& approach& to& public& investment,&contributing&to&a&better&Medium/Term&Expenditure&Framework&&(MTEF)&and&thereby&to& enhanced&overall&fiscal&control&and§oral&allocation—provided&the&PIP&is&tightly&integrated&under& and&fully&consistent&with&the&MTEF.& Reforms& of& the& legal& framework& would& need& to& be& accompanied& by& significant& capacity/ building& efforts.& This& would& include& restructuring& the& CPM&E& and& Economic& Affairs& departments& within& MoFED,& recruiting& new& management& and& additional& professional& staff,& and& providing& in/ country&training&on&project&appraisal&and&project&implementation.&Substantial&technical&assistance& would&be&required&to&help&MoFED&successfully&implement&the&PIP.&& A& major& effort& would& also& be& required& to& build& capacity& in& MDAs.& While& the& initial& focus& might& be& on& building& capacity& in& MoFED,& efforts& should& commence& in& parallel& to& build& capacity& in& MDAs,&starting&with&those&that&are&key&to&the&PRSPII,&as&well&as&in&local&council&planning&offices.&In& the&medium&term&a&substantial&effort&is&likely&to&be&required&to&institutionalize&the&capacity&in&Sierra& Leone& for& training& in& project& appraisal,& implementation& and& monitoring& and& evaluation.& The& ongoing&effort&to&reform&the&PIUs&and&launch&effective&civil&service&reform&will&doubtless&be&critical& to&the&overall&capacity&building&objective. T H E P O W E R O F P U B L I C I N V E S T M E N T M A N A G E M E N T& PAGE 1 8 COUNTRY CASE STUDY: SIERRA LEONE 2012 ! PIM&in&a&Donor/Dependent&Post/Conflict&Economy Addendum++ By& 2011,& none& of& the& recommendations& made& above& had& been& rejected& by& the& authorities,& and& two& had& been& partially& implemented.& Amendments& to& the& Government& Budgeting& and& Accountability& Act& (2005)& were& tabled& in& October& 2010& to& reintroduce& the& concept& of& a& public& investment& program& and& to& tighten& up& the& criteria& for& entry& of& new& projects& into& the& budget.& This& welcome&change&was&backed&by&the&issuance&of&supporting®ulations&in&June&2012.&With®ard&to& capacity,& MoFED& added& a& few& new& staff& to& the& EAD.& This& first& step& needs& to& be& followed& by& a& program&of&sustained&training,¬&only&for&EAD&but&for&other&units&inside&MoFED&and&inside&the&line& ministries.&& Recent&fundamental&policy&changes&have&overshadowed&the&incremental&changes&described& above.& In& particular,& the& Government& sought& to& sharply& increase& its& investments& in& new& infrastructure&throughout&the&country&and&chose&to&do&so&mainly&from&domestic&rather&than&donor& financing.&&Specifically,&the&domestic&contribution&to&the&development&budget&in&2010&increased&to&a& peak& of& 45& percent& from& only& 24& percent& in& 2009.& & As& a& consequence,& the& domestic& contribution& grew&to&3&percent&of&GDP&in&2010&from&2&percent&in&2009.&&Expressed&as&a&share&of&total&government& spending,& the& domestic& contribution& grew& to& 17& percent& in& 2010& from& 7& percent& in& 2009.& & These& shares&have&declined&slightly&in&2011&and&2012&from&their&2010&peak&but&they&remained&well&above& the&2007/09&shares.&&This&expansion&was&part&of&the&reason&why&the&overall&fiscal&deficit&worsened& from&3.2&percent&of&GDP&in&2009&to&5.0&percent&of&GDP&in&2010&and&an&estimated&5.6&percent&of&GDP& in&2012.&&& Addendum%to%Table%2:%Development%Budget%Spending,%2007P12% ! 2007! 2008! 2009! 2010! 2011! 2012! ! ! ! ! ! ! ! As!a!Share!of!GDP! 3! 6! 7! 8! 9! 8! A.!External!Financing! 3! 5! 5! 4! 6! 5! B.!Domestic!Financing! 1! 1! 2! 3! 3! 3! ! ! ! ! ! ! ! As!a!Share!of!Total!Government!Spending! 20! 30! 31! 38! 42! 38! A.!External!Financing! 15! 24! 24! 21! 29! 24! B.!Domestic!Financing! 5! 6! 7! 17! 13! 14! !! ! ! ! ! ! ! As!a!Share!of!Total!Investment!a/! 27! 42! 48! 25! 21! 29! Domestic!Financing!as!a!Share!of!Total!Dev.!! 24! 21! 24! 45! 32! 37! !! ! ! ! ! ! ! Sources:!Ministry!of!Finance!and!Economic!Development!and!World!Bank!staff!calculations.! Notes:!!Actual!spending!on!the!development!budget.!Some!totals!do!not!sum!due!to!rounding.! a.!The!Government!share!in!total!investment!fell!in!2010!as!private!investments!in!iron!ore!projects!accelerated.! ! In&addition,&there&appears&to&have&been&some&institutional&fragmentation&of&responsibilities& for& the& PIP& that& took& place& in& 2010.& If& not& addressed,& this& fragmentation& could& pose& a& risk& to& the& fiscal&stance&as&well&as&the&quality&of&public&investment.&There&may&therefore&be&merit&in&reviewing& the¤t&situation&on&the&ground&with&a&view&to&consolidating&the&institutional&arrangements&for& T H E P O W E R O F P U B L I C I N V E S T M E N T M A N A G E M E N T& PAGE 1 9 COUNTRY CASE STUDY: SIERRA LEONE 2012 ! PIM&in&a&Donor/Dependent&Post/Conflict&Economy PIP.& In& this& context,& as& suggested& in& the& conclusion& to& the& chapter,& the& binding& constraints& on& PIM& system& performance& continue& to& be& weak& project& appraisal& prior& to& selection& in& the& budget,& and& weak&monitoring&of&actual&performance&in&implementing&projects.& These&changes&do¬&take&away&from&the&messages&in&this&chapter&concerning&donor&roles& and&responsibilities,&but&rather&they&add&to&the&urgency&of&addressing&the¶llel&point&made&here& with®ard&to&building&domestic/capacity&for&the&entire&PIM&cycle,&from&planning&to&evaluation&to& financing,& project& supervision& and& contract& management.& In& this& context,&it& is& important& to& ensure& that&MoFED&serve&as&a&full&partner&in&the&process&rather&than&merely&serving&as&financier.&& ! T H E P O W E R O F P U B L I C I N V E S T M E N T M A N A G E M E N T& PAGE 2 0 COUNTRY CASE STUDY: SIERRA LEONE 2012 ! PIM&in&a&Donor/Dependent&Post/Conflict&Economy Notes+ 1. The& chapter& also& draws& on& the& December& 2007& Public& Financial& Management& Performance& Assessment& Report& (RoSL& 2008);& comments& in& the& second& Poverty& Reduction& Strategy& Paper& (PRSPII,&GoSL&2008)&on&experience&implementing&PRSPI&(GoSL&2005b);&the&2010&Budget&Speech& (MOF&2010a);&and&a&number&of&other&government&documents&and&interviews&with&officials&and& donors&(see&References).& 2. See&World&Bank&(2010)&Table&4.2.&Some&of&these&projects&had&begun&as&early&as&2000,&before&the& formal&declaration&of&the&war’s&end.& 3. The&estimates&that&follow&are&from&the&Sierra&Leone&National&Recovery&Strategy&Assessment&of& December&2003&(GoSL&2003).& 4. The&standard&deviation&is&a&measure&of&how&dispersed&data&are&around&a&mean&(average).&For& data&with&a&normal&distribution,&one&standard&deviation&above&and&below&the&mean&will&capture& 68&percent&of&all&observations;&two&standard&deviations&above&and&below&the&mean&will&capture& 95&percent&of&all&observations.& 5. Under& Sierra& Leone’s& program& with& the& IMF,& domestic& borrowing& targets& have& been& adjusted& upward&when&budget&support&falls&short&of&the&targeted&level.&The&2009–10&Public&Expenditure& Review&(World&Bank&2010)&discusses&additional&options,&including&a&better&alignment&between& revenues& and& expenditures,& multi/year& commitments& from& donors,& the& use& of& an& appropriate& fiscal&rule,&and&the&use&of&a&stabilization&fund.& 6. The& most& substantive& of& these& has& been& the& construction& and& operation& of& the& Bumbuna& Hydroelectric&Project.&The&terms&of&the&partnership&are¬&fully&transparent&and&have&evolved& over& time.& By& end/2012,& there& were& no& laws& or& regulations& that& set& out& clear& lines& of& responsibility&for&service&delivery,&financing,&and&risk/sharing.& 7. Sierra& Leone& received& a& total& score& on& 28& PEFA& indicators& of& 52,& compared& to& the& regional& average& of& 60.& This& score& is& arrived& at& by& giving& 4& points& for& an& A,& 3.5& for& a& B+,& 3& for& a& B,& etc.,& down&to&1&for&a&D.&The&maximum&score&on&28&indicators&is&112.&See&the&Sierra&Leone&External& PEFA&Assessment,&Final&Report&(GoSL&2007).&The®ional&average&is&calculated&from&the&most& recent&PEFA&scores&from&17&countries.& 8. This&is&an&oversimplification.&MoFED&does&maintain&an&Economic&Affairs&Department,&inherited& from&the&old&Ministry&of&Development&and&Planning,&that&is&meant&to&process&loan&withdrawal& applications&and&monitor&projects.&At&the&time&of&this&writing,&the&department&did¬&have&the& capacity&to&effectively&fulfill&its&mandate.& 9. An& example& is& the& UK& technical& assistance& to& the& armed& forces.& While& the& Sierra& Leonean& authorities&indicated&that&there&are&many&such&projects&in&several§ors,&they&were¬&able&to& provide&any&data&that&would&allow&an&analysis&of&their&magnitude,&composition,&or&impact.& T H E P O W E R O F P U B L I C I N V E S T M E N T M A N A G E M E N T& PAGE 2 1 COUNTRY CASE STUDY: SIERRA LEONE 2012 ! PIM&in&a&Donor/Dependent&Post/Conflict&Economy 10. There& are& about& 74& MDAs,& 19& local& councils,& and& 24& public& enterprises.& The& majority& of& procurement&expenditure&is&now&brought&within&NPPA&supervision.& 11. World& Bank,& 2010.& & From& the& assessment& of& procurement& indicator& PI/19,& with& revision& for& correct&thresholds.&Data&received&in&December&2009.& 12. Evaluation& is& defined& here& as& the& attempt& to& demonstrate& an& empirical& connection& between& government&spending&(or&other&intervention)&and&impacts&on&the&community,&such&that&there&is& a& basis& for& claiming& that& government& spending& (or& intervention)& “caused”& the& change& in& outcomes.& References+ + DACO&(Development&Assistance&Coordination&Office).&2007.&&Monitoring&and&Evaluation&Plan&for& Sierra&Leone&PRSP,&Final&Draft,&March&2007.&& GoSL&(Government&of&Sierra&Leone).&2003.&Sierra#Leone#National#Recovery#Strategy#Assessment:# Final#Report,&December&2003.&Government&of&Sierra&Leone,&Freetown.& ———.&2004.&Local#Government#Act.&Government&of&Sierra&Leone,&Freetown.& ———.&2005a.&Government#Budgeting#and#Accountability#Act#(2005).#Government&of&Sierra&Leone,& Freetown.& ———.&2005b.&Poverty#Reduction#Strategy#Paper#(SLNPRSP):#A#National#Programme#for#Food# Security,#Job#Creation#and#Good#Governance#(2005–2007)# ———.&&2006.&Local#Government#Development#Grants#Program,#Revised#Operations#Manual,&Local& Government&Finance&Department,&Ministry&of&Finance,&Government&of&Sierra&Leone,&Freetown.& ———.&2007.&Sierra#Leone#External#PEFA#Assessment,#Final#Report,#December,#2007.&Government&of& Sierra&Leone,&Freetown.& ———.&2009.&&An#Agenda#for#Change,#Second#Poverty#Reduction#Strategy#(PRSPII),#2008–2012.# Government&of&Sierra&Leone,&Freetown.# ———.&2009.&Aid#Policy.&Government&of&Sierra&Leone,&Freetown.# MOF&(Sierra&Leone&Ministry&of&Finance)&2007.&Financial#Management#Regulations.##Government&of& Sierra&Leone,&Freetown.& ———.&&2010a.&2010#Budget#Speech.#Government&of&Sierra&Leone,&Freetown.& ———.&2010b.&2010#Budget#Call#Circular.&Government&of&Sierra&Leone,&Freetown.& T H E P O W E R O F P U B L I C I N V E S T M E N T M A N A G E M E N T& PAGE 2 2 COUNTRY CASE STUDY: SIERRA LEONE 2012 ! PIM&in&a&Donor/Dependent&Post/Conflict&Economy RoSL&(Republic&of&Sierra&Leone).&2008.&Public#Financial#Management#Performance#Assessment# Report,&The&Republic&of&Sierra&Leone,&Final&Draft&Report,&18&June&2007.&RoSL,&Freetown.& World&Bank&2010,&Sierra#Leone#Public#Expenditure#Review,#Report&No.&52817/SL,&October&28,&2010.& World&Bank,&2010.&& Republic#of#Sierra#Leone:#Public#Financial#Management#Performance#Assessment# Report#(Central#Government).& & + T H E P O W E R O F P U B L I C I N V E S T M E N T M A N A G E M E N T& PAGE 2 3 COUNTRY CASE STUDY: SIERRA LEONE 2012 ! PIM&in&a&Donor/Dependent&Post/Conflict&Economy & & & + !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 1 !The!chapter!also!draws!on!the!December!2007!Public'Financial'Management'Performance'Assessment'Report' (RoSL!2008);!comments!in!the!second!Poverty!Reduction!Strategy!Paper'(PRSPII,!GoSL!2008)!on!experience! implementing!PRSPI!(GoSL!2005b);!the!2010!Budget!Speech!(MOF!2010a);!and!a!number!of!other!government! documents!and!interviews!with!officials!and!donors!(see!References).! 2 !See!World!Bank!(2010)!Table!4.2.!Some!of!these!projects!had!begun!as!early!as!2000,!before!the!formal! declaration!of!the!war’s!end.! 3 !The!estimates!that!follow!are!from!the!Sierra'Leone'National'Recovery'Strategy'Assessment!of!December!2003! (GoSL!2003).! 4 !The!standard!deviation!is!a!measure!of!how!dispersed!data!are!around!a!mean!(average).!For!data!with!a!normal! distribution,!one!standard!deviation!above!and!below!the!mean!will!capture!68!percent!of!all!observations;!two! standard!deviations!above!and!below!the!mean!will!capture!95!percent!of!all!observations.! 5 !Under!Sierra!Leone’s!program!with!the!IMF,!domestic!borrowing!targets!have!been!adjusted!upward!when! budget!support!falls!short!of!the!targeted!level.!The!2009–10!Public'Expenditure'Review!(World!Bank!2010)! discusses!additional!options,!including!a!better!alignment!between!revenues!and!expenditures,!multi`year! commitments!from!donors,!the!use!of!an!appropriate!fiscal!rule,!and!the!use!of!a!stabilization!fund.! 6 !The!most!substantive!of!these!has!been!the!construction!and!operation!of!the!Bumbuna!Hydroelectric!Project.! The!terms!of!the!partnership!are!not!fully!transparent!and!have!evolved!over!time.!By!end`2012,!there!were!no! laws!or!regulations!that!set!out!clear!lines!of!responsibility!for!service!delivery,!financing,!and!risk`sharing.! 7 !Sierra!Leone!received!a!total!score!on!28!PEFA!indicators!of!52,!compared!to!the!regional!average!of!60.!This! score!is!arrived!at!by!giving!4!points!for!an!A,!3.5!for!a!B+,!3!for!a!B,!etc.,!down!to!1!for!a!D.!The!maximum!score!on! 28!indicators!is!112.!See!the!Sierra'Leone'External'PEFA'Assessment,'Final'Report'(GoSL!2007).!The!regional! average!is!calculated!from!the!most!recent!PEFA!scores!from!17!countries.! 8 !This!is!an!oversimplification.!MoFED!does!maintain!an!Economic!Affairs!Department,!inherited!from!the!old! Ministry!of!Development!and!Planning,!that!is!meant!to!process!loan!withdrawal!applications!and!monitor! projects.!At!the!time!of!this!writing,!the!department!did!not!have!the!capacity!to!effectively!fulfill!its!mandate.! 9 !An!example!is!the!UK!technical!assistance!to!the!armed!forces.!While!the!Sierra!Leonean!authorities!indicated! that!there!are!many!such!projects!in!several!sectors,!they!were!not!able!to!provide!any!data!that!would!allow!an! analysis!of!their!magnitude,!composition,!or!impact.! 10 !There!are!about!74!MDAs,!19!local!councils,!and!24!public!enterprises.!The!majority!of!procurement!expenditure! is!now!brought!within!NPPA!supervision.! T H E P O W E R O F P U B L I C I N V E S T M E N T M A N A G E M E N T& PAGE 2 4 COUNTRY CASE STUDY: SIERRA LEONE 2012 ! PIM&in&a&Donor/Dependent&Post/Conflict&Economy !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 11 !World!Bank,!2010.!!From!the!assessment!of!procurement!indicator!PI`19,!with!revision!for!correct!thresholds.! Data!received!in!December!2009.! 12 !Evaluation!is!defined!here!as!the!attempt!to!demonstrate!an!empirical!connection!between!government! spending!(or!other!intervention)!and!impacts!on!the!community,!such!that!there!is!a!basis!for!claiming!that! government!spending!(or!intervention)!“caused”!the!change!in!outcomes.! T H E P O W E R O F P U B L I C I N V E S T M E N T M A N A G E M E N T& PAGE 2 5