Ghana - Economic Management Support

 ICRR 10264 Report Number : ICRR10264 ICR Review Operations Evaluation Department 1. Project Data : OEDID : OEDID: C2224 Project ID : P000940 Project Name : Economic Management Support Country : Ghana Sector : Economic Management L/C Number : C2224 Partners involved : UK OED (Overseas Development Administration ) Prepared by : Fareed M. A. Hassan, OEDCR Reviewed by : Laurie Effron, OEDCR Group Manager : Ruben Lamdany, OEDCR Date Posted : 04/21/1999 2. Project Objectives, Financing, Costs and Components : The Credit -SDR 10.7 million, equivalent to US$15 million - was approved in March 1991 and closed in June 1998, after it was extended five times . A small undisbursed balance was canceled . The Economic Management Support Project (EMSP) was, as its name implies, a Technical Assistance (TA) project, designed as a continuation of Bank's effort to strengthen Ghana's institutional capacity and to support the reforms of SAC III (Credit No. 2682-GH). The specific objectives of EMSP were to build analytical and administrative capacity in four broad areas : (i) economic policy analysis, by strengthening the Ministry of Finance (MOF) capacity to analyze policy issues; (ii) fiscal management, by supporting improvements in budget preparation, expenditure monitoring and cash management; (iii) domestic resource mobilization, by increasing tax revenues, streamlining of customs procedures, and lowering costs of revenue collection; and (iv) civil service reform, by supporting the Government's Civil Service Reform Program of retrenchment, reforming the pay and grading structure, and improving personnel management . 3. Achievement of Relevant Objectives : Some objectives of the project were achieved . The project was successful in restoring and improving some administrative functions, namely tax collections, accounting and audit through the clearance of backlogs, very basic computerization, and the resumption of regular training programs at the Internal Revenue Service and Customs, Excise and Preventive Service . On fiscal management only rudimentary steps were taken (e.g., the office of the Controller-Accountant General utilizes a custom -built computer system to obtain total government cash position ). Only a few components of the economic policy analysis objectives (e.g., timeliness and dissemination of economic statistics and improving the capacity for effective debt and aid management ) were partially achieved. 4. Significant Achievements : Good progress was made in the resource mobilization component; tax revenues increased from an average of 12 percent of GDP in 1989-1992 to 16 percent of GDP over the period 1993-98. Also, more recent efforts through the Public Financial Management Reform Program, which was partially funded under EMSP, have resulted in progress in budget procedures (e.g., the preparation of 1999 budget using a three-year Medium-Term Expenditure Framework, emphasizing the need for medium to longer term budget planning and prioritization ). 5. Significant Shortcomings : The project covered many areas, but with insufficient depth in individual components . There were significant delays in the accompanying third adjustment credit and the Government did not complete the public expenditure and civil service reforms that were included both as conditionalities in the credit and as activities in the EMSP . Fiscal discipline proved to be temporary in the wake of large wage increases given to the civil service in the run up to national elections in 1992 and 1996. A critical component of the civil service reform - redeployment and manpower control - was undermined by lax control of recruitment across most of government service, leaving public service, including newly created agencies, with even greater manpower size than in the past . Also, the project left largely unfinished the more crucial objectives of reforming the pay and grading structure and strengthening personnel management practices. 6. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Unsatisfactory Unsatisfactory Institutional Dev .: Partial Modest These are equivalent ratings Sustainability : Likely Uncertain The sustainability of the various programs and activities supported by the project will depend on (i) the local capacity to manage them (including the ability to retain skilled staff), and (ii) maintaining strong program ownership. The poor implementation experience of this project reflects the weak program ownership in an environment characterized by fluctuating political support as well as weak administrative capacity. Bank Performance : Deficient Unsatisfactory These are equivalent ratings Borrower Perf .: Satisfactory Unsatisfactory The Borrower underestimated the capacity of its implementing agencies and adopted a poorly designed project -- with no project appraisal, deficient supervision, and no strong monitoring and evaluation mechanism. This created the impression, at the implementing agencies, that the project was a financial support facility secured and managed by MOF rather than a TA project with specific objectives . As noted earlier, the borrower's ownership was limited. Quality of ICR : Satisfactory 7. Lessons of Broad Applicability : Capacity building and institutional development are slow processes that require up -front assessment of borrower's ownership of programs as well as administrative capabilities to implement the intended reforms . Apparently, EMSP presented a complex management task (evidence by the wide breadth and lack of depth of its components ) that exceeded the capacity of borrower's implementing agencies as well as the Bank's supervision teams . Furthermore, it is hard to maintain program ownership in an environment characterized by fluctuating political support . Major policy reforms such as fiscal management and civil service, which require greater public sector implementation capacity and commitment, may have been more appropriately addressed through policy reform instruments ( e.g., changes in institutional incentives) rather than technical assistance . 8. Audit Recommended? Yes No 9. Comments on Quality of ICR : The ICR is of satisfactory quality . The preparation of the ICR was undertaken by the Resident Mission Staff, so there is no aide -memoire associated with a mission mounted from Washington . The Borrower provided its own Implementation Completion Report, which is included as an attachment .