Better public investment management can offer improved public services
CHISINAU, October 24, 2013 – A study launched today by the World Bank - “Moldova: Public Expenditure Review” – underlines inefficiencies in the allocation and implementation of capital budgets and provides recommendations in improving the effectiveness and impact of capital expenditures to boost Moldova’s competitiveness and achieve a more robust economic growth.
”This study was produced in response to the Government of Moldova’s request for assistance in better targeting public investments”, said Abdoulaye Seck, World Bank Country Manager for Moldova. „Moldova’s limited budget resources and need to maximize the impact of public expenditures across a range of sectors, from education to health, and from water and sanitation to transport and agriculture, call for greater allocative efficiency and higher cost-effectiveness to achieve better economic outcomes, strengthen Moldova’s competitiveness and improve public services delivery.
The report underlines that improving public investment management in Moldova is critical to making space for greater and more efficient capital expenditures. It notes the existing inefficiencies in the allocation and implementation of capital budgets, due to inadequate appraisal, spreading of resources over small, fragmented and insufficiently prioritized projects, and long implementation periods. To address these challenges, the report recommends: i) raising the quality of project preparation by improving preliminary screening and project appraisal mechanisms, ii) improving budgeting to prioritize resource allocation and ensure continuity of funding and iii) strengthen project implementation and monitoring for greater cost efficiency and timely delivery of public services.
“Addressing infrastructure inefficiencies and improving public services through better public investment decisions is critical to achieving inclusive growth for Moldova”, said Carolina Sanchez-Paramo, World Bank Sector Manager for Poverty Reduction and Economic Management, Europe and Central Asia region. “The country has witnessed a sharp reduction in poverty rates over the past decade, but strengthening allocative efficiency, particularly in areas such as education and health, can help further reduce poverty and boost prosperity for the bottom 40 percent of Moldovans.”
The report makes a series of sector-specific recommendations for improving capital expenditure outcomes. In the transport sector, it highlights the need for clear prioritization of investment projects to ensure that resources are directed to priority projects with the highest expected economic and social impact. It also notes the need to improve local roads network by strengthening local government capacity and resources for road maintenance and rehabilitation allocations.
In the utilities and housing sector the study notes the centrality of strengthening implementation capacity by raising the efficiency of investments in the water and sanitation sector. Strengthening the procurement and administrative skills of local governments to increase absorption of donor funds and apply improved technical standards and guidelines for water and sanitation infrastructure design, and addressing governance and public service delivery issues associated with unclear roles and responsibilities and lack of access to funding for local service providers.
The education sector suffers from weak preliminary screening, project selection and monitoring in the allocation of public resources. It is thus critical that the optimization of the secondary school network continues in order to redirect funds toward quality enhancements in consolidated schools and raise access to quality pre-school education. In addition, to address issues of resource concentration in small projects, with a low rate of completion, it is important to prioritize and improve screening of projects to ensure capital spending helps provide equal opportunities. Improving monitoring of project execution is also paramount.
The health sector needs to address the challenge of weak strategic guidance and boost equity and efficiency in resource spending. Rationalizing the hospital network and re-profiling existing facilities in order to improve efficiency and equity in healthcare access is needed. Another priority is establishing integrated information systems to overcome fragmentation and lack of coordination as part of sector modernization.
In the agricultural sector a multi-year program – rather than a one-year program is needed to set clear rules of the game for the private sector, and improve program planning, implementation and evaluation. Greater inclusion of smaller-scale farms into the subsidy program is important for growth, as they specialize in high value crops, and face high financial constraints to investment. Finally, a greater focus of the subsidy program on fostering market competitiveness and integration is crucial.
The report concludes that addressing the range of challenges across these sectors would result in more effective capital expenditures and would translate into better prioritization and delivery of critical public services, improving development outcomes for the people of Moldova.
Since Moldova joined the World Bank in 1992, over US$1 billion has been allocated to 49 operations in the country. Currently, the World Bank portfolio includes 11 active projects with total commitments of US$205.7 million. Areas of support include regulatory reform and business development, education, social assistance, e-governance, healthcare, water and sanitation, agriculture, and others. The International Finance Corporation has provided total investments in the amount of US$191 million and the Multilateral Investment Guarantee Agency has provided guarantees totaling US$95 million. Both institutions are members of the World Bank Group.