WASHINGTON, April 4, 2022- The World Bank approved a US$8 million grant to advance public financial management (PFM) reforms. The second phase of the Public Financial Management Improvement Project aims to strengthen institutions to improve their accountability and transparency and to support fiscal stability.
“Improving public financial management forms an integral part of the World Bank’s assistance strategy for the Palestinian people and is crucial to achieving development in a sustainable way. Greater accountability and transparency in the use of public resources help strengthen citizens’ confidence in the ability of governmental institutions to deliver essential services,” said Kanthan Shankar, World Bank Country Director for West Bank and Gaza.
The new project is an extension of the first Public Financial Management Project, which helped identify gaps and critical reform areas. These include a lack of commitment controls and in-year cash management procedures, which leads to delayed payments to contractors and the accumulation of arrears. Other challenges include weak forecasting due to the use of outdated models and as a result of uncertainty over clearance revenues, which are taxes collected by Israel on behalf of the Palestinian Authority (PA).
“Despite the Palestinian Authority’s progress in improving the PFM system, much still remains to be done to ensure effective public financial management, critical for decision making and the prioritization of expenditure,” said Riham Hussein, World Bank Senior Governance Specialist.
The new project will build on the reforms carried through the first phase and include new areas of interventions such as budget preparation and revenue administration. It will support the management and control of budget expenditure by helping develop procedures, build capacity, and provide technical assistance for cash planning and annual procurement plans as well as minimize reallocations between budget categories during execution.
The project will address financial accountability and upgrade the Financial Management Information System, including budget execution and capacity building for the staff of the PA to operate the system. It will help improve the Ministry of Finance’s (MoF) debt management and borrowing plan and align accounting and reporting with international standards.
It will also enhance revenue mobilization and the operational development of the recently created Revenue Commission under the MoF. Activities to develop taxpayer services will focus on expanding the scope and the quality of e-services (i.e., e-filing, e-payment). To maximize the benefits of the reforms, the project will help improve procurement monitoring and reporting within the PA to ensure value for money and fiduciary integrity and provide support to professionalize the procurement work force.
“Public procurement accounts for a substantial share of total government expenditure, around 10% of GDP and 30% of the PA's budget. Hence, public procurement reform is critical for the Palestinian territories in view of the cross-cutting role that it plays in achieving good governance and sustainable development,” added Hussein.