WASHINGTON, March 28, 2016 - The Board of Executive Directors of the World Bank today approved a US$10 million loan to the Republic of Belarus for a new Public Financial Management Modernization Project aimed to improve policy alignment of the budget, consolidate cash balances, improve budget transparency and lay foundations for implementation of an Integrated Financial Management Information System (FMIS).
The Project design is based on profound analytical work. The Public Expenditure and Financial Accountability (PEFA) Assessment carried out by the World Bank in 2014 argued that Belarus’ Public Financial Management (PFM) system managed to deliver fiscal discipline in recent years but still had notable weaknesses such as lack of multi-year perspective in budgeting, focus on compliance controls rather than performance, and limited ability to proactively manage cash flows that undermined the efficient allocation and use of public funds.
The Government’s Public Financial Management Reform Strategy, prepared by the Ministry of Finance in 2015, responds to the PEFA assessment with an ambitious reform program in the areas of medium term budgeting, program budgeting, treasury, debt management, and public sector accounting. The program calls for the need to supplement strict fiscal discipline with stronger emphasis on allocative and operational efficiency of public spending during the coming years and the Public Financial Management Modernization Project will support its implementation.
“The World Bank helped the Government to outline key structural reforms to improve competitiveness, long-term economic growth, and shared prosperity in Belarus. Budget planning and execution is a key foundation for public sector reforms to improve service delivery and efficient use of public resources.” said Mr. Young Chul Kim, World Bank Country Manager for Belarus. “Belarusian Government recognizes that changes are needed in the way it manages public finances and we are ready to assist the authorities in this endeavor,” added Mr. Kim.
The Project relies on a phased approach to public financial management modernization with major investment – FMIS – expected to be financed by the next project upon implementation of essential PFM reforms, stabilization of the regulatory framework and approval of Financial Management Information System design.
“The project supports institutional reforms, improving the legislative and organizational framework for the public financial management system, redesigning core business processes and investing in capacity development. As a result of implementation of the Project, the private sector and households will benefit from improvements in transparency and more efficient management of public resources, which will ultimately lead to improvements in the level and the quality of public services,” – noted Mr. Oleksii Balabushko, Senior Public Finance Specialist, World Bank Project Team Leader.
Since the Republic of Belarus joined the World Bank in 1992, lending commitments to the country have totaled US$1.58 billion. In addition, grant financing totaling US$28 million has been provided to various programs, including those with civil society organizations. With the approval of this project, the active investment lending portfolio financed by the World Bank includes nine operations totaling US$998 million.