Tonga: Economic and Public Sector Reform Program (Loan 1904[SF])

Evaluation Document | 19 November 2011
This report evaluates the Economic and Public Sector Reform Program in Tonga to assess its performance and highlight lessons. It provides inputs to two broader evaluations on promoting good governance in Pacific developing member countries and the preparatory work for the regional evaluation of the Pacific strategy.

Background

This report evaluates the Economic and Public Sector Reform Program in Tonga to assess its performance and highlight lessons. It provides inputs to two broader evaluations on promoting good governance in Pacific developing member countries and the preparatory work for the regional evaluation of the Pacific strategy.

The program's main objective was to support the government's reform agenda for improved overall macroeconomic stability and private sector-led economic growth. The program's expected goal or impact was a sustained and equitable rise in living standards of all Tongans. The expected outcomes were for the government to achieve a sustainable fiscal balance and provide improved public services to the private sector and the general public. The program included five outputs:

  • strengthening public expenditure management,
  • enhancing revenue generation,
  • improving the efficiency and effectiveness of the use of public resources by public sector enterprises (PSEs),
  • putting in place the institutional framework for a performance-based public service, and
  • ensuring efficient and effective public service operations through a performance-based management system.

Overall assessment

Overall, the program is rated partly successful. The program is assessed relevant. Policy measures in the program design reflected conditions related to fiscal, public sector enterprise, and public sector, and were generally underpinned by economic logic. Various program components were interrelated. The program was consistent with government and ADB development strategies. Detracting from an assessment of highly relevant was the fact that some of the performance indicators and targets were not more conservatively formulated, taking into careful consideration the cause and effect mechanism of policy reforms and a more realistic program time frame. Limited progress was made with long-standing structural weaknesses of having a large public sector and extensive government involvement with PSEs.

The program is assessed less effective. The program achieved some of its intended outputs. However, sustained fiscal balance and improvements in public services were not achieved. In retrospect, a sustainable fiscal balance could have been formulated in a different way. The fiscal surplus or deficit should have been allowed to fluctuate within certain limits or a band. This could have been used as an outcome indicator instead of the stringent fiscal rule that was used. On the other hand, reform measures undertaken to provide an enabling environment proved not sufficient to modernize the public sector and provide impetus for improving public service delivery. Performance measures for public servants have not yielded improvements in public service delivery. In the case of PSEs, profitability target set by the government was not achieved.

The program is assessed efficient in the use of resources to achieve its intended program outcome and outputs. Tranche conditions were met as scheduled and no implementation delays were experienced. The program is assessed less likely to be sustainable. A sustainable fiscal balance was not achieved. Fiscal consolidation has remained an issue. Efforts to reduce recurrent expenditure have been ongoing since program implementation. The program's goal was ambitious given the focus and extent of the reform measures adopted. The envisaged growth and inflation targets were not achieved. More realistic impact indicators should have been formulated. The government's commitment and ownership of the reform program strengthened the credibility of the policy measures put in place. Also, the program contributed to the provision of an enabling environment for reforms, built capacity for policy making and implementation, and fostered learning.

Key Issue

  • Performance targets, especially if they pertain to macroeconomic performance, have to be realistic and not bounded by a stringent program time frame.

Lessons

  • Political economy dimension of reforms should be considered to better assess feasibility of policy measures.
  • Careful prioritization of reform issues facilitate better sequencing and pacing of reform measures.
  • Implementation is equally important.

Follow-up actions

ADB should provide support to the government to strengthen economic and social impact monitoring, especially for improving data gathering, monitoring, and evaluation of the economic and social impacts of the reform measures. This may be undertaken through followup capacity building technical assistance for the Policy and Planning Division of the Ministry of Finance and National Planning (the former Ministry of Finance after it was merged with the Central Planning Department). Technical assistance resources may be devoted to improving analytical and technical capacities of the Policy and Planning Division staff. This may involve hiring an impact monitoring adviser and improving source data and compilation techniques for the preparation and analysis of benchmark information on individuals or groups affected by policy measures under the program and the ongoing reforms. Review of institutional arrangements, policy issues, and gaps may also be undertaken.

Contents 

  • Contents
  • Basic Data
  • Executive Summary
  • Introduction
  • Design and Implementation
  • Performance Assessment
  • Other Assessments
  • Issues, Lessons, and Follow-up Actions
  • Appendixes