PEFA SUCCESS STORY
* PEFA Secretariat editorial note: Countries have used PEFA as a key element of the design for PFM reform strategies and programs. Belarus is a recent example of where PEFA has been used successfully in this way.
The Loan Agreement between the World Bank and Belarus was signed on April 1, 2016 to support implementation of the Public Financial Management Modernization Project. The US$10 million loan is aimed to improve policy alignment of the budget, consolidate cash balances, improve budget transparency and lay foundations for implementation of an Integrated Financial Management Information System (FMIS).
The project design is based on profound analytical work which was requested by the Ministry of Finance to provide Belarus Government with an objective up-to-date diagnostic of public financial management (PFM) performance and inform development of the national PFM reform strategy. The PEFA Assessment was carried out by the World Bank during 2013-2014 and showed that despite a very volatile macro-economic environment strong treasury function and control structures effectively helped the Belarus Government to maintain aggregate fiscal discipline. The assessment also revealed that efficient allocation and use of public funds were undermined by lack of multi-year perspective in budgeting, focus on compliance controls rather than performance, and limited ability to proactively manage cash flows.
PEFA assessment was not only about analytical report. It allowed both the World Bank and the Government to step back from routine work on preparation and execution of the budget and look at what PFM systems should deliver in terms of fiscal stability and efficiency, where they fail to perform best, and what could be done to address shortcomings. This is why dissemination of the report and engaging with the Government on discussion of findings was as important as preparing sound diagnostic. The result is comprehensive, government owned and consensus based PFM Reform Strategy.
“The report provides a general understanding of the public financial management performance and aspects of the system in need of improvement and will contribute to the design of the Government Public Finance Management Reform Strategy,” noted Mr. Maksim Ermolovich, First Deputy Minister of Finance of the Republic of Belarus at the public dissemination of report in November 2014. In December 2015 Belarus Government approved the Public Financial Management Reform Strategy, prepared under the strong leadership of the Ministry of Finance and responding to the PEFA assessment with an ambitious reform program in the areas of medium term budgeting, program budgeting, treasury, debt management, public sector accounting and audit. Implementation of this reform program will be supported by long term cooperation between the World Bank and the Government in Belarus.