Argentina - Provincial Pension Reform Adjustment Loan

 ICRR 10307 Report Number : ICRR10307 ICR Review Operations Evaluation Department 1. Project Data : OEDID : OEDID: L4116 Project ID : P044445 Project Name : Provincial Pension Reform Adjustment Loan Country : Argentina Sector : Other Non-sector Specific L/C Number : L4116 Partners involved : IDB Prepared by : Elliott Hurwitz, John Johnson, OEDCR Reviewed by : Alice Galenson Group Manager : Ruben Lamdany Date Posted : 06/14/1999 2. Project Objectives, Financing, Costs and Components : Objectives: The project’s objectives were to (1) significantly reduce the provinces’ consolidated fiscal deficit; (2) require participating provincial governments (8 of Argentina's 24 provinces participated) to meet strict eligibility requirements for transferring their pension funds to national administration (including structural adjustment and improved fiscal performance); (3) consolidate splintered pension regimes into a single system and bring vesting and benefit parameters into line with those of the national pension reform of 1994; and (4) eliminate fraud, lower administrative costs, and improve the efficiency of the national social security administration through a parallel program of institutional strengthening. Costs and Financing: The loan was a 3-tranche operation of US$300 million, with co-financing of US$320 million by IDB. It was closely associated with a technical assistance loan of US$20 million by the Bank, additional technical assistance by IDB, and counterpart funds from the Borrower to finance major institutional reforms in the national social security system. 3. Achievement of Relevant Objectives : Fiscal Deficit: Achievement of the first objective was rapid, with consolidated provincial public sector deficit of the 8 provinces falling from US$3.5 billion in 1995 to US$1.5 billion in 1997, with further declines projected. Structural Reform: Each province complied with project requirements by privatizing insolvent banks and at least one major enterprise, and also reduced public employment. Consolidating Pension Regimes and Strengthening National System: A substantial start was made on achieving this goal, as substantial support was received from participating provincial legislatures, and 68% of civil servants chose to contribute into their own individually-managed accounts, reducing the country’s implicit pension debt. Bolstering the National Pension System: The national social security system was strengthened, with substantial TA and restructuring advice. New managers were selected, new data systems installed, and new service standards met. 4. Significant Achievements : The project contributed to a high-priority government goal of reducing the financial vulnerability posed by unsustainable fiscal deficits in the provincial public sector. The project also succeeded in presenting a very positive example to the remaining 16 provinces, which are expected to seek transfer of their own pension systems. 5. Significant Shortcomings : There were no significant shortcomings . 6. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Highly Satisfactory Highly Satisfactory Institutional Dev .: Substantial High The ICR and OED use different rating systems, and these ratings are essentially equivalent. Sustainability : Likely Likely Bank Performance : Highly Satisfactory Highly Satisfactory  Borrower Perf .: Highly Satisfactory Highly Satisfactory Quality of ICR : Satisfactory 7. Lessons of Broad Applicability : For a sophisticated Borrower, providing analytical tools--so they can perform their own analyses--can be an effective way to help achieve "buy-in." Consistency of objectives and coordination between Bank operations help assure successful outcomes. The loan was designed to complement extensive technical work (at the provincial level) which had been performed in previous Bank operations. Strong link between the project and important GOA goals helps assure ownership. The GOA had established as high-priority goals the strengthening of its national pension system, and the reduction of its financial vulnerability produced by unsustainable fiscal deficits in the provincial public sector. Projects must design incentives around the needs of subnational borrowers to successfully complete projects. This project utilized fiscal savings, reduced administrative burden, and the removal of pressures to expand benefits as incentives to stimulate the cooperation of provincial authorities. The stakeholders were heavily involved and all parties acted in a coordinated manner. 8. Audit Recommended? Yes No Why? Successful project design /implementation may provide example of best practice . Also, successful work of Bank with provincial authorities and at sub -national levels may also provide best practice . 9. Comments on Quality of ICR : Overall, ICR is satisfactory. However, it omits: Table 6, Key Indicators for Project Implementation /Performance (which do exist on PCR system); Table 8a, Appraisal Estimate of Costs; and plan for further operation . ICR also is not clear as to whether TA benefits emanate from this project, prior adjustment operation, parallel technical assistance loan, or IDB loan.