The objectives of the TA will be to strengthen PFM in Lao PDR to enable the country to reduce poverty and help it to achieve the Millennium Development Goals. Its outcome will be efficient resource allocation within and between sectors, with more predictable budgets and greater accountability for expenditure in selected ministries, based on the Government?s socioeconomic programs and benchmarked against international good practice standards in PFM.
The scope of TA will involve reviewing and assessing progress made toward overall PFM reforms, and identifying institutional constraints on the implementation of PEMSP reform measures by the Executing Agency (EA) and the Implementing Agencies (IAs), taking into account the intergovernmental fiscal policy measures carried out in recent years. The gap analysis will cover selected provinces. Secondly, the TA will assist pilot implementation of MTFF and MTEF in Selected Ministries, consistent with Existing Methodological Framework. The present fiscal planning process, including progress in the budget management process, will be assessed. Challenges and opportunities will be identified and addressed in the implementation of the Budget Law and in the drafting of the implementing decrees and related ministerial instructions, and improvements will be made in the methodological framework of the MTFF and MTEF models already developed. Specific technical and policy issues in the implementation of the MTFF and MTEF framework for all ministries and provinces (including agreeing on data, assumptions, parameters, and the structure of the model; updating and reprioritizing procedures and baseline projections over the medium term) will be identified and addressed. The MTEF will be implemented on a pilot basis in the Ministry of Finance and selected line ministries. Staff capacity, data availability, and other practical implementation matters will be considered in the selection of the ministries. Further, the fiscal policy and personnel departments of the MOF will be assisted in formulating and implementing a long term capacity development plan for the central ministries (MOF and selected line ministries) and selected provincial finance departments, to improve PFM capacities as needed for budget planning, which will include working with MTFF and MTEF methodology. Besides training in the effective implementation of the MTFF and MTEF models, the capacity development plan will include training in generic PFM techniques (budgetary systems, international PFM/PEM standards, budget planning, budget execution, budget monitoring, and reporting). Training in macroeconomics, public finance, fiscal planning, and change management will also be given. In addition, training in information technology (IT), to enable government staff to use computer spreadsheets and database management models, will be covered by the TA. The TA will make use of the training infrastructure of MOF and the resources of academic institutions to ensure the sustainability of the capacity development efforts. The TA will seek to support open forums, seminars, and conferences, with representatives from the National Assembly, the Ministry of Planning and Investment (MPI), MOF, sector ministries, and provinces participating, to strengthen the policy dialogue and facilitate in-depth discussions on PFM and governance issues.
|Project Rationale and Linkage to Country/Regional Strategy
||The Government of the Lao People?s Democratic Republic (Lao PDR) seeks to achieve economic growth, reduce poverty, and graduate from its least-developed-country status by 2020. The National Growth and Poverty Eradication Strategy (NGPES), approved by the National Assembly in October 2003, provides a broad strategic framework that emphasizes the need to build capacity at all levels of public administration, and particularly to improve public financial management (PFM), to achieve the socially inclusive development goals laid out in the sixth National Socio-Economic Development Plan (NSEDP) and the NGPES. The 2007 Public Expenditure Review and Integrated Fiduciary Assessment (PER), jointly undertaken by the World Bank, the International Monetary Fund, ADB, and the European Commission, noted that improving PFM and public expenditure policy will be critical to the key challenge of achieving the country?s socially inclusive development goals laid out in the sixth National Socio-economic Development Plan and the NGPES. The Government has made progress in advancing the PFM development agenda since 2002. To strengthen its PFM capacity in line with the country?s policy and development priorities, the Government has lodged its reform strategy in the 5-year Public Expenditure Management Strengthening Program (PEMSP), which it adopted in November 2005. The strategic objective of the PEMSP is to improve the efficient use of public resources and to strengthen the overall transparency of and accountability for public spending. For the Government to succeed in implementing the NGPES and the NSEDP, it will have to mobilize resources effectively and allocate them efficiently.