Ghana - Public Sector Management Reform Program

Report No. PID7458 Project Name Ghana-Public Sector Management... Reform Program Region Africa Project ID GHPE50615 Borrower Government of Ghana Implementing Agency NIRP-Secretariat, Office of the President Dr. Appiah Koranteng, National Coordinator P.O. Box 1618, Accra/Ghana Phone: +233-21-780295, Fax: +233-21-780294 Date PID prepared March 22, 1999 Project Appraisal date February 1999 Projected Board date May 4, 1999 1. Country background Though the experience with fiscal adjustment since 1994 has been mixed, Ghana has recently made strong progress in restoring macroeconomic stability. In 1997, the domestic primary surplus (defined as domestic revenues less domestically financed non-interest expenditures) increased by an unprecedented 3 percentage points of GDP; and the rate of inflation was brought down from 40 to 20 percent. The macroeconomic situation has continued to improve in 1998 despite the energy crisis that hit the country particularly during the second quarter of the year. Real GDP growth in 1998 is expected to be strong (4.5 percent). The annual rate of inflation declined to 15.7 percent at December 1998. Medium-term projections for Ghana assume further economic stabilization, and strong economic growth averaging 5.5 percent per annum. 3. Sector background In 1994, the Government of Ghana (GoG) created the National Institutional Renewal Program (NIRP) in order to focus and give strategic direction to the many reform activities taking place within the public sector. The program includes efforts to reform financial management, a new remuneration and grading system, reform of the subvented agencies (implementing agencies which derive their funding from public subsidies), and a proposal to strengthen policy formulation and the decision making process within the administration and the Cabinet. To further articulate and specify a clear vision for Ghana indicating the long-term direction of the development, in 1995 the GoG published the "Ghana: Vision 2020" document. The major objective of this strategic document is to systematically reduce poverty through macroeconomic stability and to promote sustained accelerated economic growth. A pre-condition for achieving this objective is the existence of an efficient public sector which designs and implements consistent policies and creates an enabling environment for private sector-led development. In October 1997 the NIRP Secretariat issued the "Public Sector Re-invention and Modernization Strategy for Ghana: Transforming Vision into Reality" (PUSERMOS). In this strategic document government has committed itself to  reform the public sector, in particular review and reform public sector institutions in terms of their mandate, approach and scope of activities. The document provides a framework for integrating, sequencing and monitoring the reforms which address the key weaknesses of the public sector: lack of qualified staff in critical areas such as economics, finance, policy analysis, general management and information systems combined with inadequate incentives; confused regulatory and organizational environment; weaknesses in systems for planning, budgeting, implementation and monitoring combined with an inefficient management regime. 4. Program objectives The objective of the Public Sector Management Reform Program is to improve efficiency, effectiveness and quality of public services in Ghana. It aims at: - Redefining the role and functions of the state, - Designing appropriate institutions and systems to implement this role, and - Rationalizing the existing structure and systems to meet the new design. 5. Program description The program would assist the GoG in its efforts to move from the planning to the implementation stage of the reform agenda. It develops a critical path for public sector reform in Ghana which integrates the various activities at the different levels of government and provides guidelines for the step-by-step implementation of the reforms. The program targets the central government level which it aims to restructure in line with the decentralization policy of the GoG. It will be coordinated with sector related activities of the Bank (particularly health & education) and other donors (decentralization). The program will address three different areas which have been identified as the essential elements for the public sector reform agenda: - Reform of Subvented Agencies (SAs) This component aims at making the sector cost-effective and reducing the financial burden on government budget by critically reviewing the mandates of about 150 subvented agencies, closing down those without a clear mandate, and restructuring those with a viable mandate; - Adjustment of central government structures and organizations This component would critically review the mandates, responsibilities and operational objectives of central management agencies, ministries & departments based on a functional analysis. It will remove duplications and overlaps, develop new roles & missions, and realign functions in line with the decentralization policy with the staff size adequately curtailed. It aims at improving service delivery and performance orientation based on clearly defined output targets, and at enhancing skills and capacity for efficient public sector management; - Improvement of systems and processes This component will specifically target systemic constraints in Ghana's public sector. It will develop and implement some key elements for effective public sector operations including a human resource management system, a performance management system, an incentive system, and a management information system. This component will also develop and introduce a public-private partnership program. This program aims at increasing private sector input and applying private sector standards on government operations; - 2 -  The program complements ongoing reform activities by the Bank or other donors. It will build on these activities and integrate them into a comprehensive reform agenda. 6. Program financing The entire program costs are estimated at US$ 173.0 million to be spent over a period of eleven years. The program will be implemented in three phases with a first phase of three years. The costs for this phase are estimated at US$ 19.2 million with the Bank contributing US$ 14.3 million of the total costs of phase I. Bank assistance for the entire program (in total US$ 83.5 million) will mainly focus on two areas: - Support of consultancy services for the different program components (30w of total program costs), - Costs for retraining of public servants to enable them to effectively fulfill their new roles and responsibilities (9t of total program costs). As a consequence of the reform process a significant number of public servants must leave the public sector. Therefore, termination and redundancy benefits have been built into the program. Based on a comprehensive social assessment, an alternative employment concept will be developed to carefully establish eligibility criteria for severance payments and identify the public servants who qualify under these criteria. It is estimated that approximately 10t of the employees of the targeted institutions will be eligible for termination and redundancy benefits. These payments represent 57T of total program costs. Under its current operational policies IDA is able to support severance pay as part of a technical assistance operation only for a limited number of subvented agencies. It is estimated that only 2000 public servants are eligible for IDA funded severance pay. With budgetary support from IDA the GoG will provide adequate assistance to civil servants and public servants of subvented organization which do not meet the requirements of IDA policy. 7. Program implementation The Public Sector Management Reform Program has been designed as an eleven- year Adaptable Program Lending (APL) operation with a first phase of three years, and two subsequent phases of four years each. The first phase (1999 - 2001) would concentrate on first implementation steps in priority areas (closing down or restructuring some pilot Subvented Agencies, realigning some pilot government agencies, introducing key systems, etc.), and thus set the stage for full scale implementation. Assuming that performance expectations have been met during the first phase the second phase (2002 - 2005) would broaden the reform and expand the focus to all levels of central government (e.g. a first group of Subvented Agencies closed down or restructured, and realignment of a number of sector ministries and departments). The third phase (2006 - 2009) would further advance the reform, particularly focusing on the Subvented Agency sector and on reforming processes and structures in the remaining ministries and departments at the central government level. 8. Program sustainability Ongoing support for the different components of the reform agenda will be -3 -  necessary during and beyond implementation. This refers to staff, infrastructure and maintenance which is needed to administer new systems and processes as well as other components. The necessary costs for these elements must be taken into consideration and integrated into the government's budget. In addition, it is of crucial importance to maintain a participatory approach involving all relevant stakeholders during and beyond implementation of the reform program. The government will therefore continue to effectively build ownership and internal/external support for the reforms. 9. Lessons learnt from part operations It has been difficult to achieve concrete and measurable results with regard to more efficient and effective public services in Ghana. A first civil service reform project which was launched in 1987 had few positive results because it lacked ownership by major stakeholders and did not sufficiently focus on systemic constraints. Other public sector reform activities were equally ineffective because they too narrowly focused on sector issues. The proposed program is different: It will specifically target underlying systemic constraints by developing and reforming key systems and processes which are triggers for effective public sector operations. The institutional changes proposed in this program cover the entire central government level. The program design also reflects the need to involve all major stakeholders in the reform process. Important additional lessons from other projects, particularly from previous public sector reform projects include: - A long-term, strategic approach to technical assistance which is not "donor-driven" is needed to achieve sustainable results. Previous projects were predominantly focused on achieving macroeconomic targets. Neither did they provide enough room nor sufficient time for a complex reform agenda which is based on institutional development and capacity building. This program proposes a long-term adjustment process. It particularly addresses underlying systemic constraints and necessary institutional changes which can only be achieved over a longer period of time. - A strong discipline for the implementation process needs to be established to ensure progress towards long-term objectives and a constant reassessment of all significant program elements. Previous public sector reform projects failed because of insufficient control mechanisms and a weak project implementation discipline. A main emphasis of program preparation and the first phase of the program was/is therefore to establish a comprehensive project management system that is able to effectively monitor the implementation process. This also includes more and closer monitoring by the Ghana Office of the Bank. - More attention needs to be paid to monitoring the quality of technical assistance outputs to measure the overall performance of the program. Performance indicators which focus more on quality, process and behavior will be developed to sufficiently assess progress. - Local "champions" who know what they want and who know how to operate are important success factors. The first phase of the program will particularly focus on identifying managers who are able to push the reform process forward. - Explicit attention needs to be given to the institutional environment which plays a crucial role during the implementation of the reform agenda. A significant amount of training and institutional development has therefore been built into the program. - The various donor activities need to be better coordinated to avoid friction and to rationalize activities. The key elements of the program have - 4 -  been discussed with other major donors. Effective coordination during program implementation will be ensured. 10. Poverty category The program will indirectly contribute to poverty alleviation in Ghana. The comprehensive reform of structures, organizations, systems and processes in Ghana's public sector is expected to improve overall fiscal performance. The medium term impact on the government budget will free funds for direct poverty alleviation activities. 11. Environmental aspects The program will have no negative environmental impact. It is a category C project requiring no further environmental analysis. 12. Program objective categories The program is consistent with the Bank's CAS for Ghana (Report No. 17002-GH, date August 13, 1997, and discussed by the Board on September 2, 1997) in that it aims to improve overall fiscal performance through comprehensive reform of structures, organizations, systems and processes in Ghana's public sector. 13. Contact Point: The InfoShop The World Bank 1818 H Street, N.W. Washington, D.C. 20433 Telephone No. (202)458 5454 Fax No. (202) 522 1500 Note: This is information on an evolving project. Certain activities and/or components may not be included in the final project. Processed by the InfoShop week ending March 26, 1999. - 5-