Minsk, November 4, 2014 – Representatives of the World Bank and the Government of the Republic of Belarus presented the Public Expenditures and Financial Accountability (PEFA) Assessment for Belarus 2013. The report prepared by a team of World Bank experts assesses the strengths and weaknesses of the public financial management system using internationally accepted PEFA framework. The report aims to build a shared understanding of public financial management (PFM) performance and priority areas for improvement.
The assessment was carried out in response to a request from the Government, and in close collaboration with the Ministry of Finance and other Government agencies. It aims to contribute to the Government’s objective of optimizing public expenditures with a focus on achieving better results and raising efficiency in the use of public funds.
“The report provides a general understanding of the public financial management performance and aspects of the system in need of improvement and will contribute to the design of the Government Public Finance Management Reform Strategy,” noted Mr. Maksim L. Ermolovich, Deputy Minister of Finance of the Republic of Belarus.
Public Expenditure and Financial Accountability Assessment (PEFA) is an indicator-based instrument used for evaluating public financial management performance and for tracking reform progress over time. It is based on 28 indicators clustered in 6 modules covering the last 2-3 fiscal years.
Belarus scored well under 14 out of 28 PEFA indicators. Main performance improvements compared to 2009 assessment include increased public access to key fiscal information; improved transparency of taxpayer obligations and liabilities; extended coverage of the treasury single account and stronger controls over loans and guarantees; modernized legal basis for intergovernmental fiscal relations.
Despite a very volatile macro-economic environment during the period covered by the assessment (2010-2012), the strong treasury function and control structure effectively helped the Government to maintain aggregate fiscal discipline. However, macroeconomic instability undermined reliability of revenue and expenditure forecasts resulting in significant revenue and expenditure deviations compared to approved budgets. It also affected negatively the time provided to the ministries, departments and agencies to prepare their detailed budget requests as well as the timeline of legislative review of the annual budget.
“The assessment highlights the strengths of the current Belarusian public finance system and indicates areas where improvements would be useful, including policy based budgeting, budget transparency, oversight of aggregate fiscal risks, inter-governmental fiscal relations, public sector accounting standards, procurement, internal financial controls and audit, external oversight. This is potentially a huge and long-term reform agenda. We hope our analysis helps the Government in further work on identification of priority actions for PFM reform strategy,” noted Ms. Elena Nikulina, Senior Public Sector Specialist and PEFA Task Team Leader.
The analysis demonstrated that there is high level of use of information systems in the PFM processes, relatively strong control over the payroll, debt and guarantees which together with strong culture of compliance and ex-post controls results in high accuracy and completeness of treasury transactions. The annual budget process is orderly and clear procedures exist for the legislature’s budget review.
At the same time, the report highlights the need for stronger oversight of aggregate fiscal risks resulting from operations of public enterprises, taking into account their significance for Belarus economy. Another important area for improvement is strengthening the policy and strategic focus of the budget process through development of medium term budgeting. Legislative changes to the national planning framework that are being considered may facilitate a move in that direction.
The public financial management system at present is focused more on compliance control than on efficiency and effectiveness of service delivery. The ongoing modernization of the procurement system promises improvements in the quality and cost effectiveness of procurement for goods and services. Recent introduction of the elements of performance auditing is also encouraging and has a potential to draw more attention to the issues of efficiency and effectiveness of service delivery.
“The assessment has contributed to a substantive dialogue on the public financial management performance, particularly on areas that require improvements to ensure efficient and transparent use of public funds. Based on the key findings of the PEFA report, the World Bank has been working closely with the Authorities in designing a comprehensive PFM modernization project in Belarus,” noted Mr. Young Chul Kim, World Bank Country Manager for Belarus.
Since the Republic of Belarus joined the World Bank in 1992, lending commitments to the country have totaled US$1.14 billion. In addition, grant financing totaling US$25 million has been provided to programs, including those with civil society organizations. The current investment lending portfolio includes five operations for a total amount of US$648 million.