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Tracking Poverty-Related Spending in HIPCs: Strengthening Systems of Public Expenditure Management

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The enhanced HIPC Initiative seeks to tilt the composition of public spending toward poverty-related allocations; to improve the efficiency and effectiveness of public spending; and to use debt relief to finance pro-poor activities. Monitoring of the resource use under the Initiative, therefore, requires the tracking of poverty-related public spending.

The World Bank-IMF Joint Implementation Committee (JIC) overseeing HIPC/PRSP The preparation of Poverty Reduction Strategy Papers (PRSPs) has been an important effort for developing national ownership of economic policies. implementation adopted a set of principles to guide Bank and Fund work in expenditure tracking. These are:

1. HIPC funds should not be differentiated from other funds of the country;

2. HIPC funds should be tracked through a country’s own public financial management system;

3. Countries themselves will bear the primary responsibility for monitoring and reporting on pro-poor spending; and

4. The Bank and Fund work will emphasize providing assistance to countries in strengthening their own public financial management system.

Drawing on country briefs prepared by Bank and Fund regional colleagues in August-September on current public expenditure management systems in 25 HIPCs, a core team of World Bank Public Sector Group and Fund Area Department staff have jointly designed a short but systematic assessment tool for evaluating a country’s overall public expenditure management system. The tool focuses on the core elements of the budget formulation, execution and evaluation systems that should be in place for reasonable assurance of sound expenditure management. This exercise goes beyond poverty-related spending issues to assess the capacity of the countries in question to:

(a) plan spending;

(b) execute the plan; and

(c) evaluate the results of spending

Using this tool, Bank and Fund staff are in the process of preparing a first cut assessment for each of the 25 HIPCs that might reach a decision point in 2000. The assessment will be useful for identifying key weaknesses in country PE management systems, and to design work plans and program resources both to meet short-term HIPC expenditure tracking needs as well as longer term strengthening of country capacity for sound expenditure management. Country team activity, which has been the engine for tracking HIPC spending, will continue to be the focal point for these efforts to improve public expenditure management in each country.

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