WASHINGTON, MAY 01, 2017 – With higher devolution of central funds to the states, the $21.7 million loan for the Strengthening Public Financial Management in Rajasthan Project, approved today, will help the state government put in place systems for better planning and budget management, enhance transparency, accountability, and efficiency in public spending, and strengthen the capacity of the revenue systems across key departments of Finance, Excise and Commercial Taxes Planning, and the Department of Information Technology, among others.
The key beneficiaries of the project would include the Finance Department, the Commercial Taxes Department, the Transport Department, the Excise Department, the Planning Department, Department of IT, Department of Panchayati Raj, internal and external oversight bodies, and procuring agencies and officials.
The project will help the departments put in place an architecture to strengthen Public Financial Management (PFM) rules, regulations & practices through modernized procurement arrangements; robust audit functions; better commitment management processes; leverage IT infrastructure to enhance use of latest technologies such as big data; and a more efficient tax assessment and audit procedure.
Rajasthan has recently been facing fiscal stress and recognizes the need to strengthen both its expenditure and revenue sides. Growing fiscal pressures and the rising needs for higher development and social expenditure threatens fiscal sustainability.
“Creating fiscal space for ensuring access to services is an important policy and management challenge for all states. Rajasthan has taken on this challenge with a commitment to finance high-quality health, education and social protection services for its citizens,” said Junaid Ahmad, World Bank Country Director in India. “This project will support the state improve the efficiency of expenditure and deliver on its agenda for sustained and inclusive growth.”
The state government is acutely aware of the need for higher efficiency in public expenditure and has already made progress in fiscal consolidation since the adoption of the Fiscal Responsibility and Budget Management Act (FRBM Act). The Integrated Financial Management System (IFMS) – a complete web-based solution for capturing government’s financial transactions including budget planning, preparation, allocation and distribution, fund management, treasury operations, and accounting is already functional. The state enacted the Rajasthan Transparency in Public Procurement (RTPP) Act in May 2012, to regulate procurement and provided the framework for strengthening procurement regulations.
Another major initiative of the government was the introduction of the ‘Bhamashah’ scheme for efficient service delivery by enrolling women as the head of family.
The Government of Rajasthan will now undertake the next generation of reforms in PFM through this project. Audit institutions in the state will be re-organized and re-oriented toward in-time and action-oriented reporting for ensuring better accountability of public spending. For example, business processes of the audit functions will be reviewed at the state level. Recommendations on how to improve risk assessment in various areas will be identified to improve accountability.
At present planning systems at district level in Rajasthan are not adequately linked to the annual budget process. This project will help develop a framework for district-level planning and pilot the framework in two districts.
The project will support a modern IT system. For example, e-governance in the Excise and Transport Departments is expected to increase the state’s own tax revenue through better compliance and debt collection. The project will also build the capacity of state government officials working for better cash and debt management including in cash flow forecasting.
“To realize the full potential of these reforms and achieving the states’ own priorities will require competent and efficient PFM systems in the state, coupled with greater transparency and accountability, said Manoj Jain, Lead Financial Management Specialist and World Bank’s Task Team Leader for the project. “The PFM interventions under the project will help build capacity to undertake activities that will improve the efficiency of expenditures and revenues and would likely alleviate the fiscal stress to a certain extent.”
The $21.70 million loan from the International Bank for Reconstruction and Development (IBRD), has a 6-year grace period, and a maturity of 14 years.