Bolivia - Public Financial Management Operation Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 6691-BO STAFF APPRAISAL REPORT BOLIVIA PUBLIC FINANCIAL MANAGEMENT OPERATION May 6,'1987 Projects Department Latin America and the Caribbean Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENT Currency Unit a Bolivian Peso ($B) - until 12/31/86 m Boliviano ($B) - after 01/01/87 $b 1,923,000.00 - US$ 1.00 - at 12/31/86 $b 2.00 = US$ 1.00 - at 03/31/87 SDR 1.00 = US$ 1.278 - at 03/31/87 US$ 1.00 = SDR 0.113 - at 03/31/87 FISCAL YEAR January 1 to December 31 ABBREVIATIONS BAB - Banco Agricola de Bolivia BCB - Banco Central de Boliv.a BANEST - Banco del Estado BAMIN - Banco Minera de Bolivia CGR - Contraloria General de la Republica COFADENA - Corporacion de las FF.AA. para el Desarrollo Nacional COMIBOL - Corporacion Minera de Bolivia ENDE - Empresa Nacional de Electricidad ENFE - Empresa Nacional de Ferrocarriles ENAF - Empresa Nacional de Fundiciones ENTEL - Empresa Nacional de Telecomunicaciones FONEM - Fondo Nacional de Exploracion Minera INE - Instituto Nacional de Estadistica IDB - Interamerican Development Bank LAB - Lloyd Aereo Boliviano SIDERSA - Siderurgica Sociedad SAFCO - Sistema de Administrdcion Financiera y Control UNDP - United Nations Development Program USAID - United States Agency for International Development YPFB - Yacimientos Petroliferos Fiscales Bolivianos  POR oMcIAL USE ONLy STAll APPRAISAL REPORT BOLIVIA PUBLIC PINANCIAQ OPUATION TABLE OF CONTENTS Is PROJECT SUNNARY oeCee.o,,ee,.,e.og..eo,e.e..e,.. 1 II. WOLIVIA'S PUBLIC SECTOR .................* .... e o.. 3 A. Policy Framework ................. 3..............., 3 3. Size and Structure of Public Sector .....e.,o.e.,e.e 4 C. Key Central Entities 7,***..*****.. 7 III. THE PROJECT wo *.eate*e* eev04e****4. 10 A. Project Origin and Objectives ......................... 10 B. Rationale for Bank Involvement ....e............... 10 C. Project Components *.....e.. ....................e 11 (i) Financial Administration and Control System *. 11 (ii) Tax Adminisiration .......................... 13 (iii) Banking System Reforms ................. 14 D. Project Cost and Financing .......................... 16 E. Justification ....... .................................. 18 F. Project Risks ....... .........................,...... 18 IV. PROJECT EXECUTION ....,..........................e.eo,.. 20 A. Organization and Management ........................ 20 B. Procurement and Consultant Services ................... 21 C. Effectiveness, Disbursements, Accounts and Audits ..... 21 V. RECODUNDATIONS . 22 This report is based upon the findings of an appraisal mission which visited Bolivia in January 1987. The appraisal mission comprised N. Barry, B. Buyck, E. Gomez-Eernandini (LCPPS), Messrs. T. Fauquier and C. Vallejo (Consultants). Mr. J. Rosenblut (LCPPS), Mr. N. Carter and Ms. E. Javier (LC2) participated in preparation missions. This document has a restrcted distribution and may be used by recipients only in the pefformaoce of their officil duties. Its contents may not otherwise be disclosed without World Bank authofltion.  Page no. Sise and Structure of Public Sector 1.1 Organizational Chart of Major Government Entities ,,..... 24 1.2 Organizational Structure of Key Central Entities *o****400 25 1.3 Salary Structure - Government of Bolivia, Monthly Salary for Selected Entities * **********.* 27 1.4 Number of Public Sector Employees ..................... 28 Financlal Administration and Control Systen 2.1 SAFCO - Summary Implementation Schedule.....,............. 29 2.2 SAFCO - Expected Results..............................,... 34 2.3 SAFCO - Summary of Consultants by Qualifications and Rssponsibilities............................. 38 2.4 SAFCO - Suimary Terms of Reference.e....................o.. 42 2.5 SAFCO - Main Problems with Accounting and AIS Systems in 18 Decentralized Entities Analyzed Under PPF .o....... 51 2.6 SAFCO - Breakdown of Estimated Costs and Sources of Finance ................. oo ooooo..oo 52 Tax Administration 3.1 Analysis of Bolivian 1986 Tax Reform ... ................... 53 3.2 Tax Administration, Phase II Activities and Summary TOR .................0.......... 60 3.3 Tax Administration, Phase II Consultants Requirements and Costs ........., ......... 66 3.4 Tax Administration, ,Phase I - PPF Inputs .................. 68  EgAmk4 system 4.1 Central Bank of Bolivia - Key Actions in Reorganization ... 73 4.2 Central Bank of Bolivia - Introduction of New Accounting Systems ****..*.*.............,. 74 4.3 Central Bank of Bolivia - Action Program for Economics Department ........ 76 4.4 Central Bank of Bolivia - Action Program for Bank Inspection e 77 4.5 Banking System Reform Component - Consultancy Requirements and Costs .........,........ 78 4.6 Banking System Component - Diagnoses Financed under PFF * *.**....,,.*.*.**,* ..,, *