PIMA

HANDBOOK
Public Investment Management Assessment

2022 EDITION
000_PIMA_Handbook_FM.indd 6 16/06/22 5:20 PM
PIMA
HANDBOOK
Public Investment Management Assessment

1ST EDITION
 © 2022 International Monetary Fund
Cover design: IMF CSF Creative Solutions Division

Cataloging-in-Publication Data
IMF Library

Names: International Monetary Fund. | International Monetary Fund, publisher.

Title: PIMA handbook : public investment management assessment, 1st edition.
Other titles: Public investment management assessment.
Description: Washington, DC : International Monetary Fund, 2022. | 1st edition. |
Includes bibliographical references.
Identifiers: ISBN 9798400202131
Subjects: LCSH: Public investments. | Economic development projects --
Evaluation.
Classification: LCC HC79.P83 I44 2022

DISCLAIMER: The views expressed in this book are those of the

authors and do not necessarily represent the views of the IMF’s
Executive Directors, its management, or any of its members. The
boundaries, colors, denominations, and any other information
shown on the maps do not imply, on the part of the International
Monetary Fund, any judgment on the legal status of any territory
or any endorsement or acceptance of such boundaries.

Recommended citation: International Monetary Fund. 2022. PIMA Handbook:

Public Investment Management Assessment, 1st edition. Washington, DC:
International Monetary Fund.

ISBNs: 978-1-51357-182-9 (paper)

979-8-40020-415-9 (web PDF)
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CONTENTS

Acknowledgmentsv

Acronymsvii

Executive Summary ix

PART 1. PIMA Overview

1 Introduction 3

2 Public Investment Trends and Efficiency 7

Public Investment Trends 7
Public Investment Outputs, Outcomes, and Efficiency 10

3 PIMA Findings 13
What Do PIMAs Tell Us About the Strength of Infrastructure Governance Institutions? 13
How Are PIMAs Used? 15

PART 2. PIMA Practitioners’ Guide

4 Assessing PIMA Institutions: General Issues 21

How Are Institutional Design and Effectiveness Assessed in Practice? 21
What Data and Data Sources Are Typically Available? 23
How Are Externally Financed Projects Assessed? 23
How Do We Define Major Projects? 24
How Do We Apply the Indicative Scoring Thresholds? 24
What is the Scope of the PIMA? 26

5 Planning Sustainable Levels of Public Investment 27

Institution 1: Fiscal Targets and Rules 28
Institution 2: National and Sectoral Planning 38
Institution 3: Coordination between Entities 48
Institution 4: Project Appraisal 58
Institution 5: Alternative Infrastructure Financing 70

6 Allocating Investments to the Right Sectors and Projects 81

Institution 6: Multiyear Budgeting 82
Institution 7: Budget Comprehensiveness and Unity 90
Institution 8: Budgeting for Investment 98
Institution 9: Maintenance Funding 105
Institution 10: Project Selection 114

7 Delivering Productive and Durable Public Assets 125

Institution 11: Procurement 126
Institution 12: Availability of Funding 137
Institution 13: Portfolio Management and Oversight 144
Institution 14: Management of Project Implementation 153
Institution 15: Monitoring of Public Assets 162

iii
iv PIMA HANDBOOK

8 Cross-Cutting Issues 171

Legal Framework 171
Capacity 173
Information Systems 175

Appendix I: PIMA Questionnaire 179

Appendix II: Indicative Scoring Thresholds 183

Appendix III: Conducting a PIMA 203

Appendix IV: Outline of a PIMA Report 207

Appendix V: Glossary 219

References 223

Index 227
ACKNOWLEDGMENTS
The Public Investment Management Assessment (PIMA) Handbook was produced by the Fiscal Affairs
Department (FAD) staff under the supervision of Manal Fouad (Assistant Director and Division Chief, Public
Financial Management II division), Carolina Renteria (Division Chief, Public Financial Management I division)
and Torben Hansen (Division Chief, Resource Management Division).
The main drafting team included Nicoletta Feruglio, Isabel Rial, Eivind Tandberg, Ha Vu (all FAD staff)
and David Gentry (FAD expert). Inputs were received from FAD public financial management staff and field
advisors. The overall production process was coordinated by Nathalie Carcenac. Khaled Eltokhy provided
excellent research assistance. The editorial team consisted of Rumit Pancholi from the Communications
Department. The handbook has also benefited from comments from World Bank staff.
This handbook was developed with financial support from the IMF-Japan Infrastructure Governance
Facility and the EU-IMF Public Financial Management Partnership Program.

v
ACRONYMS
ADB Asian Development Bank IPSASB International Public Sector
AE advanced economy Accounting Standards Board

CIPFA Chartered Institute of Public Finance IT information technology

and Accountancy LIDC low-income developing country
CL contingent liability MAPS Methodology for Assessing
COFOG Classification of the Functions Procurement Systems
of Government MoF ministry of finance
DP development partner MTBF medium-term budgetary framework
EBE extra-budgetary entity MTEF medium-term
EBRD European Bank for Reconstruction ­expenditure framework
and Development MTFF medium-term fiscal framework
EME emerging market economy OECD Organisation for Economic
EP expenditure pollicy Co-Operation and Development

EU European Union PC public corporation

FAD Fiscal Affairs Department PFM public financial management

GDP gross domestic product PIM public investment management

GFSM Government Finance PIMA Public Investment

Statistics Manual Management Assessment

ICT information and PIP public investment program

­communications technology PPP public-private partnership
IFAC International Federation SAI supreme audit institution
of Accountants SNG subnational government
IFI international financial institution SOE state-owned enterprise
IPF investment project financing TSA Treasury Single Account
IPSAS International Public Sector UK United Kingdom
Accounting Standards
UN United Nations

vii
EXECUTIVE SUMMARY
This handbook is aimed at anyone who is involved in a Public Investment Management Assessment (PIMA)
or who has a practical interest in public investment management. It is intended to be useful for country
authorities, IMF staff, staff of other financial institutions and development organizations, and anyone who
is interested in exploring different aspects of public investment management to understand how country
systems are designed and how they work in practice.
Part I (sections 1 through 3) of the handbook gives a concise overview of the PIMA framework. Section I
explains the importance of public investment and describes the PIMA framework. Public infrastructure is a
key driver of inclusive economic growth and development, and the reduction of inequalities. The need for
stronger infrastructure governance for quality investment is widely recognized. Yet, creating quality infra-
structure has often been challenging. Losses and waste in public investment are often systemic.
PIMA is a comprehensive and standardized framework to assess public investment management for
countries at all levels of economic development. PIMAs evaluate 15 institutions, or practices, involved in the
three key stages of the public investment cycle: planning, allocation, and implementation. Each institution is
analyzed along three dimensions that reflect the key features of the given institution, resulting in a total of 45
dimensions. A key feature of the PIMA is that it makes a clear distinction between institutional design (what
is on paper) and effectiveness (what is in practice).
Section 2 discusses how to describe and analyze public investment trends and efficiency. It describes the
datasets that are used and gives examples of how these are presented. It also outlines the methodology for
analyzing the public investment efficiency and presenting efficiency gaps.
Section 3 of the handbook gives an overview of usefulness of the framework to identify key bottlenecks
in public investment management and develop an action plan for reform. It describes the key issues and
challenges identified in PIMAs and the main recommendations that have been made to improve public
investment management, then gives examples of action plans proposed in previous PIMAs.
Part II provides a detailed practitioners’ guide to apply the PIMA framework. A detailed description,
explanation, and discussion of each of the 15 PIMA institutions and 45 dimensions are included in sections
4 through 8. Section 4 discusses key general issues that are common for many of the institutions and dimen-
sions. Sections 5 through 7 provide detailed discussions of the institutions and dimensions under each of
the three main pillars: planning, allocation, and implementation. Section 8 discusses how to analyze and
assess the cross-cutting enabling factors.
The appendixes provide additional guidance on the PIMA framework. Appendix I contains the ques-
tionnaire that guides the PIMA assessments. Appendix II summarizes indicative scoring thresholds for
institutional design and effectiveness for each of the 45 PIMA dimensions. Appendix III provides an overview
of the PIMA assessment process. Appendix IV outlines a PIMA report, and Appendix V comprises a glossary
of commonly used terms.

ix
 PART 1
PIMA Overview
 1
Introduction
Public infrastructure is a key driver of inclusive infrastructure governance—defined as the institu-
green economic growth and development and tions and frameworks for planning, allocating, and
the reduction of social inequalities (Schwartz and implementing infrastructure investment spending.
others 2020). Roads, bridges, electricity, railways, Estimates suggest that, on average, better infra-
and airports connect markets, facilitate production structure governance could make up more than
and trade, and create economic opportunities for half of the observed efficiency (Schwartz and others
work and education. Water and sanitation, irriga- 2020).
tion, schools, and hospitals improve people’s lives, The need for stronger infrastructure governance
skills, and health; and with broad-based access, for quality investment is widely recognized, and
public infrastructure supports income and gender initiatives have been launched to provide guidance
equality. Digital infrastructure supports economic on good practice. Yet, most countries still lack the
development and inclusion. Done right, public institutions needed to produce good infrastructure
infrastructure helps reduce pollution and build outcomes. Countries frequently stumble over key
resilience against climate change and natural disas- institutional issues. For example, they may struggle
ters.1 Infrastructure investment also plays a key role to finance projects in a fiscally sustainable way given
in securing a green recovery after the COVID-19 limited resources. Selecting projects with the highest
pandemic (IMF 2020). social and economic returns can prove difficult, as can
Yet, creating quality infrastructure has often been ensuring that funding will be available throughout
challenging. Almost all countries have their iconic project implementation. Budgeting for operations
white elephants—major investment projects with no and maintenance costs, ensuring that procure-
or negative social returns—that never delivered on ment is transparent and rigorous, or harnessing
their initial promise. Infrastructure projects that were private sector skills, innovation, and funding without
poorly designed, had large cost overruns, experi- creating undue risks to public finances can also be
enced long delays in construction, and yielded poor challenging. Table I.1 gives an overview of some key
social dividends are common. Examples of poor publications on infrastructure governance.
project appraisal, faulty project selection, rampant The Public Investment Management Assessment
rent seeking and corruption, or lack of funding to (PIMA) is a comprehensive and standardized
complete ongoing projects abound and not only in framework to assess public investment manage-
low-capacity countries. And even perfectly good ment (PIM) and infrastructure governance for
public infrastructure may deteriorate quickly when countries at all levels of economic development.2
maintenance is inadequate, which often reflects a PIMAs evaluate the procedures, tools, and deci-
lack of funding or political attention. sion-making and monitoring processes used by
Losses and waste in public investment are often governments to provide infrastructure assets
systemic. On average, over one-third of the funds
2  Stringent use of the terms “governance” and “manage-
spent on creating and maintaining public infra- ment” implies that infrastructure governance focuses on
structure are lost because of inefficiencies (IMF high-level, strategic, and institutional decisions whereas
2015). These inefficiencies are closely linked to poor public investment management focuses on operational
procedures and practices. See, for instance, Governance
Guiding Principles, “Governance versus Management,”
1  The IMF is currently piloting a PIMA Climate Change Government of Scotland, https://www.governanceprin-
module, which will assess countries’ ability to systemati- ciples.scot/governance-vs-management. In practice,
cally reflect climate change considerations in their public there is considerable overlap between the two terms;
investment (IMF 2021). the PIMA framework covers both concepts.
3
4 PIMA HANDBOOK

Table I.1. Key Publications on Infrastructure Governance

Title of Publication Source

Public Investment and Public-Private Partnerships: Addressing Infrastructure Corbacho, Funke, and
Challenges and Managing Fiscal Risks Schwartz 2008
A Diagnostic Framework for Assessing Public Investment Management Rajaram and others 2010
What You Should Know About Megaprojects and Why: An Overview Flyvbjerg 2014
Making Public Investment More Efficient IMF 2015
Getting Infrastructure Right: A Framework for Better Governance OECD 2017b
Public Investment Management Handbook for Capacity Development Japan International
Cooperation Agency 2018
Public Investment Management Assessment: Review and Update IMF 2018c
G20 Principles for Quality Infrastructure Investment Ministry of Foreign Affairs
of Japan 2019
Well Spent: How Strong Infrastructure Governance Can Reduce Waste in Public Schwartz and others 2020
Investment
Public Investment Management Reference Guide World Bank 2020
Strengthening Infrastructure Governance for Climate-Responsive Public Investment IMF 2021

and services to the public. They take a systematic unified, medium-term planning, and objective
approach to analyzing infrastructure governance criteria for selecting projects.
issues that allows countries to quantify and üü Implementation: Timely and cost-effective
benchmark their practices against peers. The implementation of public investment projects
in-depth analysis, complemented with cross- requires institutions that ensure projects are fully
country comparisons, raises awareness and builds funded, transparently monitored, and effectively
a shared understanding among key stakeholders of managed throughout their implementation.
required reform actions. This can help countries to Each institution is analyzed along 3 dimensions
develop an overarching strategy that is accessible that reflect the key features of the given institution,
to policy makers and development partners alike. resulting in a total of 45 dimensions. Three possible
PIMAs evaluate 15 institutions, or practices, scores are assigned to each dimension, and the
involved in the three key stages of the public invest- average of the 3 dimensions within an institution
ment cycle (Figure I.1): (1) planning sustainable produces a score for that institution.
investment across the public sector; (2) allocating To complete the analysis, PIMAs also include
investment to the right sectors and projects; and a qualitative assessment of three cross-cutting
(3) implementing projects on time and budget. All enabling factors that often impact the overall effec-
three stages are critical from a macro perspective: tiveness of infrastructure governance institutions:
üü Planning: Efficient investment planning requires the legal and regulatory framework, IT systems,
institutions that ensure public investment is and general staff capacity. For instance, poor
fiscally sustainable and effectively coordinated integration of IT systems may limit data sharing
across sectors and levels of government and that on projects. Weak IT systems can have a negative
projects are subject to rigorous appraisal. impact across the project cycle, but particularly
üü Allocation: Allocating public investment to the during implementation when knowing the correct
most productive projects requires comprehensive, status of projects, the amount of funds spent, and
1 Introduction 5

Figure I.1. Overview of the PIMA Framework

15. 1.
Monitoring Fiscal
14. of Targets 2.
Manage- Public and National
ment Assets Rules and
of Project Sectoral
Implemen- Planning
13. tation
Portfolio 3.
Management Coordination
and Oversight between
ion Entities
at

t
en

Pla
4.

Implem
12.
Project

nnin
Availability of CROSS-CUTTING
Funding Appraisal
IT System

g
Legal Framework
Staff Capacity
5.
11. Alternative
Procurement Infrastructure
Financing
A ll o
c a ti o n
10. 6.
Project Multiyear
Selection 7. Budgeting
Budget
9. Compre-
Maintenance 8.
Budgeting hensiveness
Funding and Unity
for
Investment

Source: IMF 2018c.

the condition of individual assets is important for areas may be jeopardized by weaknesses in other
efficient resource use. areas. For example, a country may have high-quality
A key feature of the PIMA is that it makes a clear practices for planning public investments, but
distinction between the institutional design (what these will not be effective if insufficient funding is
is on paper) and effectiveness (what is in practice). allocated to project preparation, or if funding gaps
This is important because what exists on paper exist during project implementation.
may differ from the actual practice. For example, The PIMA framework was established in 2015
a country can establish fiscal rules to set limits on and reviewed and updated in 2018. The 2018
fiscal aggregates, but it might fail to consistently update found that the framework had been well
comply with these rules. Alternatively, a country may received by member countries, with several PIMAs
have developed guidelines for project appraisal, completed and a strong pipeline of new requests
but these are only applied to few projects. In some in place. The PIMAs showed that there is much
cases, actual practices might also be stronger than room for strengthening PIM in most countries, with
the institutional design. Low scores in either one or weaknesses spread across the investment cycle.
both of these dimensions help inform the reform While leaving the structure of the 2015 framework
priorities for the country. unchanged, the revised 2018 PIMA framework high-
By covering the full public investment cycle in a lights key aspects of maintenance, procurement,
comprehensive manner, the PIMA also addresses independent review of projects, and the enabling
the networked nature of infrastructure governance. environment (for example, adequacy of the legal
The benefits of having strong institutions in some framework, information systems, staff capacity).
6 PIMA HANDBOOK

At present, PIMA is the most comprehensive and is consistent with this literature.3 However, the
internationally recognized framework for detailed specific assessment methodology and its strong
assessment and comparison of PIM practices. There macro-fiscal perspective are unique to PIMA. The
is an extensive literature on PIM issues, and several only other widely used tool that includes explicit
other methodologies have been applied to analyze scoring of PIM practices is the Public Expenditure
different PIM practices and results. Also, there are and Financial Accountability framework, which
comprehensive conceptual models for the analysis includes a single composite indicator for invest-
of PIM, as well as recommendations on good ment management.4
practices (Table I.1). The PIMA framework draws on

3  PIMAs are under taken during IMF missions in close

collaboration with country authorities and often include
contributors from other institutions, in particular the
World Bank and regional development banks.
4  See PEFA.org for more information about the PEFA
framework.
 2
Public Investment Trends and Efficiency
Public Investment Management Assessments (PIMAs) countries use the term development spending rather
start with an overview of public investment trends in than capital spending in their budgets, to include
a country and discuss the outputs, outcomes, and other forms of spending with long-term impacts.
efficiency of this investment. The investment trends Other countries may use the term capital spending,
include time-series data as well as cross-country but with a definition that goes beyond the GFSM 2014
comparisons with similar countries. This provides an and PIMA definition. In such cases, the PIMA analysis
important background for the subsequent discus- will focus on those components that fall within the
sion of public investment institutions. The data will PIMA definition of capital spending.
also identify key differences between the countries The public investment database includes several
being assessed and comparable countries, indi- parameters that can provide useful background to
cating the scope for changes in practices and results. the PIMA assessment and illustrate the impact of
the existing institutions. The available data include
Public Investment Trends the following:
PIMAs describe the history of public investment üü Comparison between investment/capital stock
spending and the resulting capital stock. This and other macroeconomic and fiscal variables
is based on a standard database maintained by (GDP, deficit, debt)
the IMF. The data give an overview of investment üü PPP investment and capital stock
spending for the past 20–30 years, illustrating the üü Investment and capital stock by government
public investment policies that have been in place function
during this period. The capital stock is computed as üü Investment and capital stock by level of government
the aggregate capital spending over time reduced üü Comparison of capital and current spending
by a depreciation rate that varies by the country üü Capital budget execution rates
group. Box 2.1 gives an example of how these data üü Capital budget volatility
are presented in the Georgia PIMA.1 üü Capital budget churn (variability in composition
The PIMA framework focuses on the management of capital budget)
of physical infrastructure and on capital spending üü Country corruption index (according to
to acquire a physical asset or to extend the usable Transparency International)
life of a physical asset. The PIMA definition of capital The choice of data to present and analyze depends
spending is broadly equivalent to acquisition of on the specific circumstances of the country and the
nonfinancial assets as defined in the 2014 Government challenges it is facing in public investment. Box 2.2
Finance Statistics Manual (the GFSM 2014).2 Some provides examples of the additional data that were
presented for Georgia. Figure 2.2.1 illustrates that
1  Summary public investment data and methodological the composition of public investment in Georgia is
descriptions, including for the computation of capital
stock, are available at, what’s New in the IMF Investment more skewed toward economic affairs than in other
and Capital Stock Dataset, IMF, updated May 2021, emerging market economies.3
ht tps://infras truc turegovern.imf.org/content /dam/ The choice of comparator countries will also
PIMA/Knowledge-Hub/dataset/WhatsNewinIMFInvest-
mentandCapitalStockDatabase_May2021.pdf. depend on country specificities and context. The
2  Nonfinancial assets as defined by GFSM 2014 include
intangible assets (patents, software, etc.) that are not 3  The figures in Box 2.2 include investment in defense
explicitly covered by the PIMA assessment, but spending as set s, but countries var y in what they include in
on such assets will generally be included in data for this category. See GFSM 2014, paragraph 7.36, for a
capital spending in PIMA reports. discussion of defense assets.
7
8 PIMA HANDBOOK

BOX 2.1. Georgia Public Investment and Capital Stock

Figure 2.1.1. Investment Figure 2.1.2. Investment and capital stock
( Percent of GDP ) ( Percent of GDP )

Public Private Total Public capital stock Public investment

investment investment investment
35 10

Public Capital Stock, Percent of GDP

Public Investment, Percent of GDP

140
9
30
120 8
25 7
100
Percent of GDP

20 6
80
5
15 60 4
10 3
40
2
5 20 1
0 0 0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015

2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Figure 2.1.3. Capital stock Figure 2.1.4. Capital stock per capita
( Percent of GDP ) ( Thousands of 2011 purchasing power party dollar-
adjusted per capita )
Georgia Emerging market economies
140
Poland 9.7
130
Bulgaria 7.2
120 Bosnia and
7.2
Herzegovina
Percent of GDP

110 Albania 5.7

100 Ukraine 4.9
90 Georgia 3.7
80 Belarus 3.1
Serbia 3.0
70
Armenia 2.5
60
Moldova 1.8
50
0 2 4 6 8 10 12
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015

Source: Georgia PIMA 2018.

authorities often have clear views on the choice may be because data are missing for specific time
of comparators. They will often want to focus on periods or certain parameters. It may also be that
countries that are similar in terms of economic discussions during the PIMA process indicate that
development or natural resource endowment. previously reported data are inaccurate. Additional
Many countries want to be compared with countries data will usually be provided by the authorities or
that have advanced practices they want to emulate. compiled from other relevant sources. In many PIMA
In some cases, the figures from the IMF database missions, public corporations play an important
are complemented or updated during a PIMA. This role in the provision of public infrastructure
2. Public Investment Trends and Efficiency 9

BOX 2.2. Georgia Composition of Public Investment

Figure 2.2.1. Georgia Public Investment, Figure 2.2.2. EME Public Investment, by Function,
by Function, Last 5 Years Last 5 Years
( Percent of GDP ) ( Percent of GDP )

Public order Environmental Public order Environmental

3% protection 2% protection
2% 6%
General services
11%
General services
Defense
12%
2%

Social
protection Defense
4% 6%

Education Social
8% protection
3%
Recreation
and culture
Education
3%
8%

Health Recreation
1% and culture
4% Health Housing
Housing Economic Economic
6% affairs 5% 8% affairs
60% 46%

Figure 2.2.3. Composition of Public Investment Figure 2.2.4. Public Investment, by Sector,
( Percent of GDP ) 2005–17
( Percent of GDP )

BCG LEPLs SNG PCs PPPs+PPAs General government Public Corporations

PPPs PPAs (onlending)
100 12
90 12.7 18.2
24.3
80 13.8 10 0.5 0.6 0.4 1.5
70 18.0 0.6 0.6
14.0 8 1.1 1.1
1.0 1.6
60 30.7 0.4 2.4
19.7 0.1 0.4 0.6
50 24.4 6 1.4
0.2 0.8 1.4
3.2 0.6
40 5.1
4.3 4 8.2 7.7
30 7.5
5.7 5.6 6.1
20 5.1 5.0 5.0
37.6 33.1 40.9 2
10
0 0
2015 2016 2017 2005 2010 2011 2012 2013 2014 2015 2016 2017

Source: Georgia PIMA 2018.

Note: BCG = budgetary central government; EME = emerging market economy; LEPL = legal entity of public law;
PC = public corporation; PPA = power purchase agreement; PPP = public-private partnership; SNG = subnational
government.
10 PIMA HANDBOOK

BOX 2.3. Jordan Infrastructure Access and Quality

Figure 2.3.1. Perception of Infrastructure Quality, Figure 2.3.2. Perception of Infrastructure Quality
Jordan versus Comparators (Jordan Sectoral Breakdown)

Jordan Emerging market Comparator Jordan global indicator Roads Ports

economies average Air traffic infrastructure Electricity supply
6.0 6.0
Infrastructure Quality (Scale: 1—7)

Infrastructure Quality (Scale: 1—7)

5.5 5.5

5.0 5.0

4.5 4.5

4.0 4.0

3.5 3.5

3.0 3.0
2010 2011 2012 2013 2014 2015 2010 2011 2012 2013 2014 2015

Figure 2.3.3. Infrastructure Access in Jordan versus Figure 2.3.4. Increase in Road Network versus
Comparators Population Growth

Jordan Comparator Emerging market Road network (km)

average economies Road network (per capita)
9.0 120 7,350 1.10
8.0 1.09
Length of Road Network (km)

100 7,300

Road Network per Capita

7.0 1.08
7,250 1.07
6.0 80
7,200 1.06
5.0
60 1.05
4.0 7,150 1.04
3.0 40
7,100 1.03
2.0 1.02
20 7,050
1.0 1.01
0.0 0 7,000 1.00
Public Electricity Roads Public Access to 2010 2011 2012 2013
education production per health treated
infrastructure per capita infrastructure water
capita (right scale)

Source: Jordan PIMA 2017.

Note: For Figure 2.3.3, units vary to fit scale. Left scale: Public education infrastructure is measured as secondary
teachers per 1,000 persons; electricity production per capita as thousands of kWh per person; roads per capita as
kilometers per 1,000 persons; and public health infrastructure as hospital beds per 1,000 persons. Right scale:
Access to treated water is measured as a percentage of population.

assets, and data for public corporations have Public Investment Outputs,
been added to the basic data sets to complete Outcomes, and Efficiency
the analysis. Figures 2.2.3 and 2.2.4 illustrate the PIMAs present assessments of public investment
important role of public corporations and PPPs in outputs, outcomes, and efficiency for each country.
public investment. This is also based on the standard database
2. Public Investment Trends and Efficiency 11

BOX 2.4. Jordan Efficiency Frontier and Gap

Figure 2.4.1. Jordan Efficiency Frontier
Emerging market economies All other countries Frontier Jordan
140
Index—Hybrid indicator (Output)

120

100
Infrastructure

80
Jordan
60

40

20

0
0 10,000 20,000 30,000 40,000
Public Capital Stock per Capita (Input)

Figure 2.4.2. Jordan Efficiency Gap

Mean Jordan
1.0
Average
efficiency
0.8 gap of
27%
Efficiency Score

0.6
Jordan 21%

0.4

0.2

0.0
Comparator Emerging market Middle East, All
average economies North Africa, countries
(n=4) (n=61) Afghanistan, (n=128)
and Pakistan
(n=16)
Source: Jordan PIMA 2017.

maintained by the IMF. The database includes data The PIMA efficiency assessment is based on a
for physical outputs of public investment, focusing comparison of capital stock per capita to the outputs
on public education, electricity, roads, public and outcomes of this capital stock.4 The results for
health, and water, as well as for the perception of different countries are plotted, and the countries
infrastructure quality in different countries. Box 2.3 that achieve the highest scores on infrastructure
gives an example of the perception (Figures 2.3.1
and 2.3.2) and the output (Figures 2.3.3 and 2.3.4) 4  The methodology for assessing investment efficiency is
of public investment in Jordan. described in Annex II of IMF (2015).
12 PIMA HANDBOOK

access and quality perception define the efficiency results if public investment management were as
frontier. Other countries are compared with this effi- efficient as in the most efficient country with the
ciency frontier to determine the efficiency gap for same level of capital stock per capita.
each country. This gap reflects how much higher The aggregate PIMA efficiency assessment
the results of capital investment could be for a given complements the sectoral and project-based
level of capital stock. Box 2.4 describes the estima- analysis. It gives a broad overview of how efficient
tion of the efficiency gap for Jordan. It is based on a public investment has been in a country, as well
hybrid indicator for public investment outputs and as the key drivers of existing inefficiencies. To
outcomes, combining the scores for infrastructure understand the causes of this, and to design
access and quality perception. The analysis indicates appropriate mechanisms to improve efficiency, the
that the efficiency gap for Jordan is 21 percent, indi- analysis of the detailed PIMA institutions, both “on
cating that Jordan could achieve significantly better paper” and “in practice,” is essential.
 3
PIMA Findings
What Do PIMAs Tell Us About Figure 3.1. Effectiveness of Public Investment
Management, by Income Group, 2015–20
the Strength of Infrastructure
Governance Institutions? 3.0
PIMAs provide valuable insights into the strength
of institutions within and across countries (Taz,
2.5
Matsumuto, and Murara 2020). As subsequently Highest score

discussed in more detail, the PIMAs show the following: 2.2

üü Countries generally score higher on institutional 2.0

design than effectiveness, indicating that many

1.6 1.6
countries are not fully translating reforms into 1.5
practical actions. Lowest score
üü The gap between institutional design and effec-
1.0
tiveness is most pronounced for low-income Low-income Emerging Advanced
developing countries (LIDCs), reflecting weak developing market economies
countries economies
implementation capacity even where sound
Source: IMF staff calculations based on PIMA reports.
design features are in place.
üü Across the three key stages of the public
investment cycle—planning, allocation, and
implementation—the lowest effectiveness Countries score higher on institutional design
scores are generally recorded in the allocation than effectiveness. All countries assessed achieved
and implementation stages, when assets are an average score of 1.9 on institutional design
selected, monitored, and maintained. compared to 1.8 on effectiveness. This is mostly
üü Countries often score more poorly in the insti- explained by the lower performance of LIDCs and
tutions specific to public investment, such as EMEs on effectiveness compared with AEs, perhaps
project appraisal, project selection, and mainte- reflecting that the latter have longer experiences in
nance funding, compared with the more general implementing robust governance systems as well
public financial management (PFM) institutions as better access to strong technical and manage-
reflected in the PIMA framework, such as fiscal rial skills. Figure 3.2 shows aggregate results for
targets and rules and budget comprehensive- countries where the variation in performance seems
ness and unity. evident from the size of the gap between design and
Overall, the PIMA results show that advanced effectiveness. Turning to Figure 3.3, EMEs appear to
economies (AEs) have far stronger infrastructure score lower on effectiveness compared with institu-
governance institutions than emerging market tional design, while LIDCs show a similar difference
economies (EMEs) and LIDCs. Figure 3.1 shows that, between the two. Both groups show similar insti-
on a scale of 1 to 3, the average performance of tutional strength in the planning and allocation
EMEs and LIDCs is far below best practice (a score stages. However, LIDCs fall behind in key aspects of
of 3). However, even AEs have a gap in performance implementation, for example, by failing to provide
relative to best practice, showing that they too have funding for investment projects in a timely manner,
scope for improvement in the selected areas. likely because of cash constraints.
13
14 PIMA HANDBOOK

Figure 3.2. Institutional Design versus Effectiveness, All Countries, 2015–20

IMPLEMENTATION PLANNING
1. Fiscal Targets and Rules

15. Monitoring of Public Assets 2. National and Sectoral Planning

3. Coordination
14. Management of Project between Entities
Implementation

13. Portfolio 4. Project

Management Appraisal
and Oversight
DESIGN

EFFECTIVENESS
12. Availability 5. Alternative
of Funding Infrastructure
Financing

6. Multiyear
11. Procurement Budgeting

10. Project Selection 7. Budget Comprehensiveness

and Unity

9. Maintenance Funding 8. Budgeting for Investment

ALLOCATION

Source: IMF staff calculation based on PIMA reports.

The challenges faced by LIDCs are frequently

related to capacity constraints, particularly in imple- Figure 3.3. Institutional Design versus
menting policy reforms. LIDCs have often focused Effectiveness, by Income Group, 2015–20

on setting up the legal and regulatory aspects of Institutional Design Effectiveness

infrastructure governance, with less attention paid to 3

implementation. They have relatively strong design

features in national and sectoral planning, enacting Max
strong public procurement laws and adopting fiscal 2.00
2 1.87
rules, but weak capacity to undertake rigorous Mean
1.68
project appraisal and selection. For example, while 1.56
Mali has relatively solid systems for project selection, Min
it has yet to implement them fully.
Gaps between institutional design and effec- 1
Emerging market Low-income
tiveness are evident in all three stages of public economies developing countries
investment (Figure 3.4). At the planning stage, most (n=30) (n=28)

countries struggle to design and implement robust Source: IMF staff calculations based on PIMA
reports.
3. PIMA Findings  15

Figure 3.4. Institutional and Effectiveness Scores, backlog. The same applies to other types of infra-
by Stage of Investment, 2015–20 structure. Inadequate information on asset status

Institutional Design Effectiveness

also undermines maintenance planning.

1.91 1.88 1.94

2
1.66 1.63 1.66 How Are PIMAs Used?
PIMAs produce a set of prioritized recommenda-
tions tailored for each country and informed by
multiple information sources. While recommen-
1
Planning Allocation Implementation
dations cover all stages, reflecting the variety of
challenges encountered in different countries,
Source: IMF staff calculations based on PIMA reports.
the most common PIMA recommendation seems
to concern the area of alternative infrastructure
systems for project appraisal. At the allocation financing, as seen in Figure 3.5. Public-private part-
stage, the lowest effectiveness scores are recorded nerships and public corporation investment are
for project selection and maintenance funding. often introduced as alternative ways to scale up
Most countries, including AEs, also fail to apply a infrastructure investment by directing resources
standard methodology for estimating routine and through channels that are not restricted by tradi-
capital maintenance costs. At the implementation tional procurement and budget procedures. Yet,
stage, the lowest scores are recorded in the moni- these alternative channels tend to fall outside the
toring of public assets. budget process and have become major sources of
Better scores are often achieved in the early fiscal risk for national budgets possibly because of
stages of the investment cycle, when countries are poor governance, inadequate central oversight, or
setting fiscal targets and rules, and formulating weak procurement controls.
national and sectoral plans. Once in place, these In addition, project appraisal, and project
broad frameworks and supporting rules are difficult selection are featured regularly in the individual
to translate into effective allocation and implemen- reform agenda reflecting widespread weaknesses
tation because of weaknesses in project selection, in these areas. Improved project preparation will
maintenance funding, and the monitoring of often be a basic building block for many of the
public assets. other reforms. If projects do not have realistic cost
Project appraisal and selection stand out as estimates and timetables, then efforts to improve
two of the weakest areas. Project selection is weak project delivery mechanisms are unlikely to succeed.
across all countries, regardless of income level, For country authorities, the PIMA report provides
while appraisal is a challenge particularly for EMEs a basis for developing reform plans tailored to their
and LIDCs. Project appraisal is technically difficult; needs and prioritized in line with their resources
however, the process is often rushed because of the and institutional capabilities. The report brings
pressure to deliver quickly, resulting in shortcuts together in-depth data analyses based on standard
being taken to get to procurement. When coupled charts, and useful qualitative discussions of key
with political interference during the process of issues. Also, because of the consultative approach
project selection, the outcome can be poor in terms that is followed, which encompasses government
of quality of the works. ministries and agencies, development partners,
Monitoring of public assets also stands out as a and other actors, the reform plan arising from PIMA
weakness. Once the asset has been delivered, less assessments typically has broad support. Many
attention is paid to maintain its quality. For example, countries have taken actions to implement PIMA
few countries have a detailed understanding of the recommendations. Among them, some specific
number of buildings they have in the public sector, examples of follow-up actions are presented in
the status of those assets, and the maintenance Box 3.1.
16 PIMA HANDBOOK

Figure 3.5. Number of PIMA Recommendations, by Institution, 2015–20

Planning Allocation Implementation

5. Alternative Infrastructure
Financing 58

4. Project Appraisal 54

10. Project Selection 49

13. Portfolio Management and

Oversight 46

7. Budget Comprehensiveness
and Unity 40

14. Management of Project

Implementation 39

6. Multiyear Budgeting 37

2. National and Sectoral

Planning 30

12. Availability of Funding 18

15. Monitoring of Public

Assets 17

11. Procurement 13

9. Maintenance Funding 13

8. Budgeting for Investment 13

1. Fiscal Targets and Rules 13

3. Coordination between
Entities 12

0 10 20 30 40 50 60 70
Source: IMF staff calculations based on the recommendations in PIMA reports.

PIMA recommendations and action plans need how to assess the different PIMA institutions,
to be carefully tailored to the specific context, including their effectiveness, but does not provide
capacities, and priorities of each country. Some general recommendations for how to define
recommendations, particularly related to insti- reform programs. These must be developed
tutional design, may follow directly from the through the in-country assessments and other
assessment. For example, if there is no mechanism analytical work.1
for project appraisal at all, the establishment of
such a mechanism will in many cases be an obvious
solution. However, the specific approach, timeline, 1  A forthcoming IMF working paper will discuss public
investment management in LIDCs, including how to
and detailed design will depend on the circum-
design reform programs and prioritize measures in low-
stances of the country. This handbook discusses capacity countries.
3. PIMA Findings  17

Box 3.1. Examples of Infrastructure Governance Reforms Based on PIMA

Recommendations
The PIMA conducted in Ireland (July 2017) found infrastructure governance practices to be of a
generally high standard for both institutional design and effectiveness. Nonetheless, a number of
recommendations were made to further enhance infrastructure governance practices at all stages of
the public investment cycle. The National Development Plan 2018–2027, published in February 2018,
presented several new measures based on the PIMA recommendations. These include (1) the estab-
lishment of an infrastructure projects steering group; (2) publication of a capital tracker, which will
become Ireland’s primary tool for public transparency on infrastructure projects, priorities, timelines,
and performance targets; and (3) improvements in the methods of project appraisal and selection.
The government has also reinforced technical processes and staff resources in the Department of
Public Expenditure and Reform and other government departments dedicated to the appraisal and
ex post evaluation of investment projects.
In Kenya, the PIMA conducted in January 2017 recommended the establishment of a central
public investment management unit to improve the coordination among ministries and agencies. It
also identified the need for a set of standard project appraisal guidelines to bring consistency across
different entities. In the months that followed, both of these reforms were implemented by the govern-
ment with the support of development partners. The reforms came at a time when President Uhuru
Kenyatta announced a step-up in the fight against corruption, resulting in the greater transparency
around large-scale procurement decisions. Such transparency was another area highlighted for action
by the PIMA.
From 2012 to 2013, Mongolia experienced a rapid expansion of off-budget spending on public
investment, financed by borrowing through the Development Bank of Mongolia (DBM). The level of
spending, which was volatile, reached nearly 10 percent of GDP and led to a large accumulation of
liabilities. In the context of declining revenues, Mongolia was unable to sustain this level of spending
as it reached the limits of its borrowing capacity. Following the PIMA, the authorities transferred the
off-budget projects to the state budget and introduced tighter control over borrowing by DBM for
new projects. In addition, they improved project appraisal and selection through a new standard
methodology and evaluation criteria, as recommended by the PIMA. This will help to improve the
quality of project preparation and contribute to stronger project implementation.
Source: IMF staff compilation of information from country authorities.
 PART 2
PIMA Practitioners’ Guide
 4
Assessing PIMA Institutions:
General Issues
Some common issues and challenges apply to The PIMA framework can be described in a
many PIMAs. Chapter 4 discusses the main common generic theory of change or intervention logic
issues, whereas chapters 5 through 8 discuss the (Figure 4.1). This theory of change spells out the
detailed assessment of the different institutions. main elements in the logic underlying the different
PIMA dimensions. The assumption is that clearly
defined objectives, well-defined procedures, and
How Are Institutional Design and effective communication mechanisms (key elements
Effectiveness Assessed in Practice? of institutional design) contribute to the successful
PIMAs assess institutional design as well as effec- completion of planned activities. These activities
tiveness. The analysis of institutional design looks should result in the production of planned outputs
at the formal public investment management and the realization of expected outcomes and
system, including legislation and regulations, to effects (effectiveness). The quality of the process
see whether its design is in line with international and the results will depend on the important cross-
good practices. The institutional design assess- cutting features, including the legal framework,
ment describes the potential effect of the current policies, information systems, and staff capacities,
framework, provided that it is fully applied. When as well as on external factors.
assessing effectiveness, the focus is on how well Political considerations and decisions may have
the system works in practice. Are the implementing important effects at different stages of the result
agencies fully compliant with the different rules and chain. Even the best legal and regulatory frame-
procedures, and does the formal framework have works will rarely produce the expected results if they
the intended effects on project planning, resource are routinely circumvented in the political process.
allocation, and project implementation? Many PIMA institutions, including Institution 4

Figure 4.1. Generic Theory of Change for PIMA Dimensions

Design Effectiveness

Planned
Effective Planned Expected Intended
Clearly Well- activities
communi- outputs outcomes impacts
defined defined are
cation are are are
objectives procedures carried
mechanism produced achieved realized
out

Legal Policies, Information Staff External

framework directives systems capacity factors

Cross-cutting issues

Source: IMF staff.

21
22 PIMA HANDBOOK

Figure 4.2. Illustrative Theory of Change for PIMA Dimension 4.a

Design Effectiveness

Stringent Adequate Projects are Approved

Projects with Intended
Clear procedures projects prepared, project
highest value impacts
public for project submission, analyzed, pipeline
selected for benefits
investment appraisal review, and and updated includes
implement- are
objectives and consultation to maximize high-value
tation realized
review systems value projects

Legal Policies, Information Staff External

framework directives systems capacity factors

Cross-cutting issues

Source: IMF staff.

(Appraisal), emphasize the importance of inde- The assessment of effectiveness must be based on
pendent review and transparency. This measure the analysis of the results that are achieved and will
will reduce the risks of undue political influence. often go beyond the specific questions in the PIMA
PIMA scores for effectiveness should reflect the questionnaire. Effectiveness is related to, but not
actual outcomes of relevant processes, including synonymous with, compliance. Compliance with formal
the results of political interventions. Broader gover- rules should contribute to ensuring that the planned
nance challenges can be addressed under the outputs and outcomes are realized. Weak compliance
IMF’s new framework for enhanced engagement on may be an important factor when explaining weak
governance (IMF 2019). effectiveness, but compliance will often be insufficient
Similar theories of change can be specified for each to ensure effectiveness. The analysis of effectiveness
dimension in the PIMA framework. Figure 4.2 provides should therefore not be limited to the verification of
an example of a theory of change for Dimension compliance. This handbook discusses relevant indica-
4.a: Are major capital projects subject to rigorous tors for the assessment of effectiveness under each of
technical, economic, and financial analysis? the PIMA dimensions.
The PIMA questionnaire largely focuses on Assessments are based on current legal frame-
the institutional design and highlights selected works and current practice. Design scores should
elements in the underlying theory of change. For be made on the basis of literal interpretation of the
Dimension 4.a, the questionnaire’s definition of a dimension criteria. For example, if existence of a
high score is as follows: Major projects are system- law, regulation, or policy is a scoring criterion, full
atically subject to rigorous technical, economic, credit should be given if it has been approved by
and financial analysis, and selected results of this the parliament even if it has not yet been imple-
analysis are published or undergo independent mented. The absence of results from the new
external review. This definition mainly relates to legislation so far should be covered under the effec-
procedures and systems for project submission and tiveness assessment. If a law is under consideration,
appraisal, and to some extent to the publication of this can be mentioned in the narrative but should
appraisal results (bolded text in Figure 4.2). Some not impact the score on institutional design.
parts of the theory of change for one dimension may This handbook mentions several govern-
be dependent on other dimensions. For Dimension ment documents and datasets that will be
4.a, the outcome of the appraisal process (selection useful for a PIMA assessment. The documents
of high-value projects) is covered by Institution 10, will often be most useful for assessing institu-
and the realization of project benefits (the intended tional design and are listed under this heading,
effect) is influenced by several PIMA institutions. while the suggested datasets are listed under
4. Assessing PIMA Institutions: General Issues 23

the effectiveness assessment. However, both capital spending unless there is no reasonable
documents and datasets will generally contribute alternative. Capital spending or expenditure is
to an understanding of both institutional design commonly defined as spending to acquire a physical
and effectiveness. asset or to extend the usable life of a physical asset.1
Under accrual accounting, capital spending is capi-
talized in the balance sheet. Many countries have a
What Data and Data Sources Are
development budget rather than capital budget. A
Typically Available? development budget commonly includes current as
Effectiveness assessments should be evidence well as capital spending. Most countries with devel-
based. For each PIMA dimension, this handbook opment budgets also identify capital spending as
suggests what might be useful datasets for the projects either within the development budget or in
assessment of the dimension, in particular for the the economic classification, and this should be the
effectiveness assessment, and gives suggestions for basis of the assessment whenever possible. Each
how these datasets may be used. The suggested PIMA report should clarify which components of the
quantitative thresholds are indicative, and assessment budget have been covered by the assessment.
teams must cross-check these against other indica-
tions of effectiveness. There are several different
categories of data that may be useful in this regard:
How Are Externally Financed
üü Time series of budget data, for instance, aggregate Projects Assessed?
capital spending by sectors. A high level of external financing may contribute to
üü Data related to specific projects, for instance, the fragmentation of practices under some institu-
how estimates have developed over time. tions. This applies to institutions 2 (Planning), 10
üü Comparative data, for instance, maintenance (Selection), and 12 (Funding). For these dimensions,
allocations compared with capital stock. the PIMA questionnaire includes specific questions
üü Case studies, for instance, summaries of external on the treatment of externally financed projects,
audit reports of project delays and cost overruns. and these may affect the scores for both institu-
Lack of specific data can be an indication of low tional design and effectiveness.
effectiveness. If data are not available at the time of Practices for project development, appraisal,
the PIMA, this is important information in itself. To selection, and monitoring may also differ based
ensure the effectiveness of a process or a system, it on whether a project is externally financed or
will generally be necessary for relevant government domestically financed. This applies to three
bodies to generate and analyze the performance dimensions under institutions 4 (Appraisal), 11
data. If such data are not available, it is an indication (Procurement), and 14 (Project Implementation).
that the performance is not being monitored and that International financial institutions (IFIs) and devel-
effectiveness is limited. Similarly, if there is inadequate opment partners (DPs) often have their own rules
information about or documentation of institutional for project preparation and approval, which must
features, including legislation and regulations, this be applied to projects when they contribute to
would lead to a low score on institutional design. the financing. This is not explicitly reflected in the
Time series should cover at least three years. PIMA questionnaire. External financing should not
Effectiveness assessments should be based on affect the institutional design scores for these three
practices over three years, so they are not unduly institutions, which should reflect the institutional
influenced by spurious developments in one specific framework established by national laws and regu-
year. If data are available, a five-year perspective lations. However, practices related to externally
may add additional depth to the assessment, but
this is not a requirement. 1  Current spending that contributes to the creation of a
government asset, for instance, project monitoring by
PIMA focuses on capital spending; the devel- own staff, may be included in the capitalized value of the
opment budget should not be used as a proxy for asset. This will depend on national accounting standards.
24 PIMA HANDBOOK

financed projects may in a few cases have impacts are discussed in more detail under the relevant insti-
on effectiveness assessments. tutions and dimensions. Table 4.1 gives an overview
Some IFIs, in particular the major development of potential impacts.
banks, have rigorous project methodologies.
However, many other financial institutions and How Do We Define Major Projects?
bilateral DPs have less rigorous approaches. Many dimensions of the PIMA institutions focus
External financing schemes are often more focused on major capital projects. The definition of major
on establishing a financial mechanism than on projects varies across countries and the assessment
the specific projects to be financed under this should generally be based on the national defini-
scheme. In these cases, the DPs’ appraisal of the tion. However, the assessment team should verify
financial mechanism will not constitute appraisal that this definition is reasonable and consistent with
of the specific investment projects. In some cases, national practices.
IFIs and DPs carry out appraisal of specific invest- üü The most common definition of a major project is
ment projects only after a financial mechanism has in terms of total project costs. All projects above
been approved. Project development and manage- a certain threshold (for example, 100 million
ment by IFIs and DPs will focus on the priorities currency units) are defined as major. National
and preferences of the institution, which are not rules determine the thresholds and the definition
always fully aligned with the government’s priorities of total project costs (for example, investment
and preferences. costs or lifecycle costs).
In some cases, the PIMA effectiveness assess- üü It is common that projects that are particularly
ment may be influenced by the financing source. This complex and entail high risks are also defined as
would require that the share of major projects imple- major projects, even if total costs are lower than
mented by IFIs or DPs that apply stringent project the general threshold. In some countries, there
development and management criteria, consistent are lower thresholds for certain project types (for
with government priorities, is large enough to reach example, IT investments).
the relevant thresholds for better practices.2 If this üü Some projects are defined as major projects for
is the case, the PIMA should provide documenta- political reasons. They may be part of govern-
tion of which share of major projects are subject to ment main priorities, have important regional
systematic, rigorous, and consistent development, impacts, or be particularly visible to the public.
appraisal, selection, and management, and how üü In some countries, all projects with external
this reflects the government’s priorities and prefer- financing or projects procured as public-private
ences. The share of different IFIs’ and DPs’ financing partnerships are defined as major projects, even
of the capital budget should be presented, together if total costs are below the general threshold.
with a summary description of the project manage- These projects will often entail high risks and be
ment practices that are applied by each major politically important.
financing source. The specific thresholds that need The number of major projects and their share of the
to be met for a higher effectiveness assessment are total public investment will vary between countries.
discussed under the relevant institutions. In many countries the number of major projects
PIMA reports should specify the role of external under preparation and implementation range from
financing of public investment and how this has 30 to 100. Their share of the total investment budget
been treated. If external financing arrangements will often be in the range of 50–75 percent.
have impacted any scores, this should be clearly
specified and explained in the report. Issues related
How Do We Apply the Indicative
to assessments of projects with external financing
Scoring Thresholds?
2  T h r e s h o l d s a r e d i s c u s s e d i n t h e n ex t s e c t i o n o f
The PIMA questionnaire uses general terms to refer
the handbook. to the share of projects being subject to specific
4. Assessing PIMA Institutions: General Issues 25

Table 4.1. Possible Effects of External Financing on PIMA Scores

PIMA Dimension Possible Effect of External Financing

2.a Does the government prepare national A high score (institutional design or effectiveness)
and sectoral strategies for public requires that externally financed projects are fully
investment? reflected in national and sectoral strategies.
4.a Are major capital projects subject to If there are many externally funded projects and
rigorous technical, economic, and these are subject to rigorous analysis, this may
financial analysis? affect the overall share of major projects that meet
the requirements of this dimension (effectiveness).
10.a Does the government undertake A high score (institutional design or effectiveness)
a central review of major project requires that the central review process include
appraisals before deciding to include externally financed projects.
projects in the budget?
11.a Is the procurement process for major If there are many externally funded projects and
capital projects open and transparent? these are procured through open and transparent
processes, this may affect the overall share of
major projects that meet the requirements of this
dimension (effectiveness).
12.c Is external (donor) funding of capital The score (institutional design or effectiveness)
projects fully integrated into the main depends on the degree of integration of external
government bank account structure? financing in the government bank accounts.
14.a Do ministries/agencies have effective If there are many externally funded projects and
project management arrangements in these are based on effective project manage-
place? ment practices, this may affect the overall share of
major projects that meet the requirements of this
dimension (effectiveness).
Source: IMF staff.

practices for many institutions and dimensions. This recommendations related to institutional design
handbook recommends interpreting these terms in are largely based on qualitative thresholds.
the following manner:3 Recommendations related to effectiveness are also
üü All refers to 90 percent or more (by value). qualitative, but there are also suggestions for quan-
üü Most refers to 75 percent or more (by value). titative thresholds in Appendix II.
üü Majority or many refers to 50 percent or more The thresholds for institutional design focus
(by value). on the legal basis for relevant provisions. Legal
üü Some refers to 25 percent or more (by value). requirements are embedded in law. Regulatory
üü A few refers to less than 25 percent (by value). requirements are included in regulations, typically
üü Little or no refers to less than 10 percent (by value). issued by the the cabinet, the council of ministers,
This handbook suggests thresholds that or the president. Other formal requirements
may be used in the PIMA assessments. The include ministerial regulations and guidelines,
including from the Ministry of Finance or Ministry of
3  If the use of value to classify project shares gives skewed Planning. Government documents with lower legal
results—for instance, if there is one mega-project that
dominates the results—the assessment team can choose
status than regulations will generally be covered in
to base the analysis on the 10 largest projects. the assessment of effectiveness. However, in some
26 PIMA HANDBOOK

cases, these documents may also affect institutional Assessments should be based on the data for
design. This is specified under the relevant institu- at least three years and shares should be based on
tions—for example, Dimension 4.b assesses the use the total value or cost of investments. The relevant
of central appraisal methodology, which would not threshold should be met in the majority of the years:
necessarily be defined in the regulatory framework. at least two of three years when data cover a three-
The suggested thresholds for effectiveness are year period. Many indicators refer to shares of total
indicative and should not be used mechanistically. investments and this should generally be inter-
The PIMA assessment team must verify that the preted as shares of the value of investments.
proposed thresholds are appropriate for the country Institution scores are the simple average of
being analyzed and adjust the assessment when dimension scores. A low dimension score has a
this is justified. These thresholds are for guidance numerical value of 1, medium has 2, and high has 3. The
and should not be applied indiscriminately. In color coding used in the PIMA report follows normal
many cases, mission teams will need to compile mathematical rounding rules. Scores of 1.00–1.49 are
data from different sources or estimate some of shown as red (low score), 1.50–2.49 as yellow (medium
the parameters that are included in the thresholds score), and 2.50–3.00 as green (high score).
(or both). The key underlying assumptions for such
compilation and estimation should be specified in
the report. Relevant considerations for effective- What is the Scope of the PIMA?
ness assessments are discussed under the different The PIMA focuses on investments by the central
institutions. Examples of quantitative thresholds for government sector. Institutions 3 and 5 cover the
effectiveness are summarized in Appendix II. coordination with other levels of government and
Some thresholds include two conditions, both of public corporations, as well as interfaces with the
which should be met to achieve the relevant score. If private sector. Dimensions 2a and 7b ask about the
one of the threshold conditions is not met, the score coverage of PCs in planning and budget disclo-
will be one step lower, even if the other threshold sure. The assessments under the other institutions,
condition meets the benchmark for the higher score. including the cross-cutting issues, will generally be
For example, high effectiveness on Dimension 5.c based on central government practices.
requires that “the review process covers at least In some countries, SNGs or PCs are major
the largest public corporations (PCs) measured contributors to public investment, and the PIMA
by assets or the PCs covering most of the total PC mission team may choose to expand the assess-
assets and a consolidated report is published.” If ment to cover practices in these sectors, either
it is not published, then the consolidated report generally or for selected institutions. If this is done,
and effectiveness score will be medium, even if the the report should clearly specify where the scope
coverage of the review process is consistent with of the assessment has been expanded and how this
the first condition for a high score. has impacted the findings.
 5
Planning Sustainable Levels
of Public Investment
Efficient public investment requires robust planning sectors, and across levels of government; that project
processes. Investment planning institutions must proposals are based on stringent analysis; and that all
ensure that public investment is fiscally sustain- possible financing and delivery modes are covered
able and effectively coordinated over time, across by the planning process.

27
28 PIMA HANDBOOK

Institution 1: Fiscal Targets DEFINITION OF KEY TERMS

and Rules Term Definition

Target A long-term variable stated as a
Does the government have fiscal institutions to
number to be reached.
support fiscal sustainability and to facilitate medium-
term planning for public investment? Limit A long-term variable stated as a
number that should not be exceeded.
The purpose of Institution 1 is to gauge the presence Debt The ability of a country to service
of mechanisms that smooth total public investment sustainability its debt without a major change in
spending across the economic cycle and promote existing revenue or expenditure
long-term fiscal sustainability. Excessive volatility in policies.
investment spending undermines the efficiency of
public investment. The assessment focuses on the INSTITUTIONAL DESIGN
existence of fiscal policies; it does not require stating The purpose of this dimension is to ascertain the
a preference for any specific fiscal policy or the share existence of fiscal targets or limits to ensure debt
of spending that public investment should occupy. sustainability. Several different targets or limits
The three dimensions under this institution start might contribute to ensuring debt sustainability.
with high-level objectives and become progres- Possible targets include public debt/GDP, change
sively more operational: in public debt/GDP, Net debt-creating flows/GDP,
• The first dimension asks whether there are and overall deficit, excluding net interest payments/
long-term fiscal targets or limits to promote GDP (that is, primary deficit).
long-term debt sustainability. These targets or • A low score on this dimension indicates that
limits generally focus on an end point, without there are no specific targets or limits to ensure
laying out the annual fiscal steps to get there. debt sustainability. This may be because fiscal
• The second dimension asks about fiscal rules that policy documents contain no targets or limits at
set limits to fiscal aggregates to achieve sustain- all. Alternatively, there could be some targets or
ability objectives. Fiscal rules help determine limits in fiscal policy documents, but these have
short-term annual fiscal aggregates, which no formal status or are changed frequently and
should be consistent with the projections of the do not contribute to long-term sustainability.
medium-term fiscal framework (MTFF). For instance, if a limit only appears in a technical
• The third dimension assesses whether there is an appendix to the budget and changes each year,
MTFF to align fiscal policy and budget preparation. it is not an actual constraint on medium- to
long-term policies.
Dimension 1.a: Is there a target • A medium score implies that there is at least one
or limit for government to ensure target or limit in place for central government.
debt sustainability? These would have a clear formal status to reflect
the government’s commitment to debt sustain-
QUESTIONNAIRE ability and will typically be stable over time.
However, the targets or limits do not need to
Low There is no target or limit to ensure
constitute a legally binding fiscal rule (this will be
debt sustainability.
discussed under Dimension 1.b).
Medium There is at least one target or limit
• For a high score, at least one target or limit should
to ensure central government debt
cover all or most of the general government. GFSM
sustainability.
2014 defines general government as comprising
High There is at least one target or limit central government plus subnational governments
to ensure general government debt
(SNGs), and social security funds and not-for-
sustainability.
profit institutions controlled by them. There are
5. Planning Sustainable Levels of Public Investment  29

examples of countries that have encountered major nature of the target or limit. A debt sustainability
fiscal crises caused by unsustainable borrowing analysis will provide support for this assessment. It
practices by SNGs. Ideally, targets or limits to is also commonly discussed in IMF Article IV reports.
ensure debt sustainability should apply to all SNGs. • Low effectiveness implies that the target or
This will usually be the case for targets and limits limit has not contributed to an improved debt
imposed by the central government on SNGs. position. The mechanism is ineffective if, after
In some countries, targets and limits may also be three years, there is no significant change in the
established separately by SNG legislative organs. trend line that existed before imposition of the
To qualify for a high score on Dimension 1.a, most target or limit and the debt level remains outside
of the general government expenditure should be the range considered sustainable. If the debt
covered by at least one target or limit adopted by level has moved further from the target since it
the central government and by SNGs at the level was established, the target is also ineffective.
below central government. • Medium effectiveness implies that the debt
target has contributed to moving debt closer
IMPORTANT DOCUMENTS to the target, but it is still not within the target
range. For this score, the debt target should
Documents Uses
have contributed to closing at least half the gap
Budget system law Assess specificity between the initial debt level and the target.
Public debt and status of debt
Alternatively, if the debt level fluctuates around
management law targets
the target, the target should have been met at
Fiscal responsibility law
least once the past three years.
or similar
legislation on SNG debt
• High effectiveness means that the debt level
SNG financial laws is within the target or limit. The assessment is
further strengthened if data for the past three
Fiscal policy statements Assess how debt
years show that the debt levels have been within
Fiscal strategy reports targets are reflected
the target or limit the whole period, or if there
and MTFF reports in fiscal policies
has been a clear movement toward meeting the
target. If the debt is outside the target or limit
EFFECTIVENESS most years, but meets it in the most recent year,
The effectiveness of a target or limit to achieve debt the reasons for this should be identified. Box 5.1
sustainability must be judged by the actual develop- gives an example of how Ireland’s debt rule and
ments in the debt position and debt-related risks. The other fiscal rules have been effective in reducing
detailed requirements will depend on the specific the debt over the past few years.

USEFUL DATA SERIES

Data Questions to Address
Public debt/GDP How has debt developed over time?
Is the debt path consistent with targets and fiscal policies?
Fiscal aggregate outturns (revenues, What are the underlying drivers of debt developments?
expenditures, balances) compared with
projections and approved budgets
For central government or general government
as required by rules and targets
Debt sustainability analyses What is the expected impact of debt targets on long-term
sustainability?
IMF Article IV reports Has the country shown progress compared with previous
assessments of debt sustainability?
30 PIMA HANDBOOK

Box 5.1. Ireland Debt Rule and Other Fiscal Rules

Ireland’s fiscal policy is guided by the European Union framework, which includes a range of fiscal rules
regarding the fiscal deficit, the structural deficit, spending growth, and debt levels. The rules are codified in
the 2012 Fiscal Responsibility Act and include
• A debt rule limiting debt to 60 percent of GDP, or if debt exceeds 60 percent of GDP, an annual pace of
reduction of no less than 1/20th of the difference between the actual debt ratio and the 60 percent of
GDP limit.
• A budget balance rule, requiring a general government budget balance or surplus, which is tighter than
the Maastricht limit of a deficit of 3 percent of GDP.
• A medium-term objective of achieving a structural budget deficit of no greater than 0.5 percent of GDP
or, if the structural deficit exceeds 0.5 percent of GDP, an annual reduction is required, the size of which
depends on the cyclical position of the economy (0.6 percent of GDP for 2016 in Ireland).
• An expenditure benchmark that limits the annual growth in general government primary expenditure to
potential GDP growth, as assessed over a 10-year period (defined as the past 5 years, the current year,
and a projection for the next 4 years).
The fiscal rules have contributed to a significant reduction in the level of public debt in Ireland in recent years.
Debt-to-GDP was reduced from close to 120 percent in 2012 to slightly below the 60 percent threshold in 2019
(Figure 5.1.1).

Figure 5.1.1. General Government Debt and Compliance With Debt Rule in Ireland
(Percent)
Debt-to-GDP Stability and growth pact threshold Compliance with debt rule
140

120

100

80

60

40

20

0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Sources: Government of Ireland 2019; Ireland PIMA 2017.
5. Planning Sustainable Levels of Public Investment  31

Dimension 1.b: Is fiscal policy guided by A fiscal rule is numerical and can be applied to
one or more permanent fiscal rules? different fiscal aggregates. Common examples of
fiscal rules are the debt rule, budget balance rule
QUESTIONNAIRE (including overall balance, cyclically adjusted and
structural, and over the business cycle), expendi-
Low There are no permanent fiscal rules.
ture rule, and revenue rule. The choice of rules is
Medium There is at least one permanent generally based on the specific country circum-
fiscal rule applicable to central stances rather than theoretical considerations.
government.
There is overlap between this dimension and
High There is at least one permanent Dimension 1.a, in cases when the fiscal rule is a
fiscal rule applicable to central debt rule.
government, and at least one Debt rules and budget balance rules are most
comparable rule applicable to a
common internationally. Table 5.1 gives an overview
major additional component of
of different types of fiscal rules currently opera-
general government, such as an
tional in different countries and the legal basis for
SNG.
these rules.
• A low score on Dimension 1.b implies that there
DEFINITIONS OF KEY TERMS
are no permanent fiscal rules. This could be
Term Definition because rules are completely lacking. It could
Permanent fiscal A lasting numerical constraint also be that rules are formally in place, but that
rule on a fiscal aggregate aimed these have changed frequently and cannot be
at providing a credible seen as permanent. Numerical rules differ from
commitment to fiscal “procedural rules” that set standards on public
discipline, usually set in law financial management related to budget moni-
or constitution, and in place toring, reporting, and correction mechanisms.
for at least three years. Procedural rules include budget timetables and
Comparable Occurs when a permanent deadlines as well as setting rules and enforcing
rule fiscal rule is in place, which expenditure ceilings at the ministry level. Only
has the potential to be as numerical rules qualify as fiscal rules for the
effective as a fiscal rule purpose of this institution.
adopted by the central
• A medium score indicates that there is at least one
government. It does not
fiscal rule for the central government. This rule
mean that the rule must be
is numerical, and it has a clear formal and legal
the same as that adopted by
basis in law, regulation, or international treaty.
the central government.
A policy statement in the budget documents,
Major additional GFSM 2014, paragraph 2.58,
without a clear legal basis, does not constitute a
component defines general government
fully fledged fiscal rule.1 However, if it has been
of general as comprising central
consistently applied over several years, a policy-
government government plus SNGs, and
the social security funds and based rule may still be very effective.
not-for-profit institutions
1  Only rules with targets fixed in legislation and fiscal
controlled by them.
arrangements for which the targets can be revised on a
low-frequency basis (for example, as part of the electoral
cycle) and binding for at least three years are considered
INSTITUTIONAL DESIGN as fiscal rules. Medium-term budgetary frameworks or
This dimension assesses whether there are specific expenditure ceilings that provide multiyear projections
but can be changed annually are not considered to be
and permanent fiscal rules to guide fiscal policies. fiscal rules (Lledó and others 2017).
32 PIMA HANDBOOK

Table 5.1. Fiscal Rules, by Legal Basis: International Practices

(Number of countries)

Budget
Expenditure Revenue balance Debt Total
Political commitment 1 2 2 4 9
Coalition agreement 4 8 4 4 20
Law 21 4 41 28 94
International treaty 28 – 47 53 128
Constitution 3 1 8 2 14
Total 45 14 78 75 212
Source: IMF Fiscal Rules Dataset 2017.

• A high score requires that there also is a compa- and budgeting stage and whether budget
rable fiscal rule for a major part of general outturns are in line with the rules. The rules should
government, for instance, SNG. To be effective be reflected in medium-term budget estimates
tools at the general government level, fiscal and in annual approved budgets and the outturns
rules should cover all or most of the general will be documented in the annual fiscal execution
government. Ideally, fiscal rules should apply reports. If fiscal rules are not observed during the
to the whole general government sector, as is budget process, they are not effective. In addition,
the case in the European Union (EU). To qualify if the rules are applied at the budgeting stage
for a high score on Dimension 1.b, most of the but fiscal forecasts are consistently optimistic,
general government expenditure (75 percent or the fiscal rule is not effective. A fiscal rule without
more) should be covered by fiscal rules adopted any correction mechanism will not be effective
by the central government and SNGs at the level when projections fail to materialize. Because
below central government. This is equivalent to budget outturns are subject to significant uncer-
the requirement for a high score on design under tainty, the effectiveness thresholds for budget
Dimension 1.a. outturns should be somewhat higher than for
budget allocations.
IMPORTANT DOCUMENTS In most countries, the main fiscal rule can be a
debt rule, a budget balance rule, or an expenditure
Documents Uses
rule. As operational rules, the assessment under
Fiscal responsibility Assess specificity and
this dimension should focus on the balance or the
law or similar status of fiscal rules
expenditure rule. The discussion of thresholds for
Fiscal policy Assess how fiscal rules effectiveness of fiscal rules will therefore focus on
statements and fiscal are reflected in policies budget balance and expenditure rules.
strategy reports
• Low effectiveness implies that the fiscal aggregates
in the budget and budget outturns deviate from the
EFFECTIVENESS limits established by the fiscal rule, without explicit
The effectiveness of fiscal rules depends on how justification by escape clauses. If the approved
consistently they are applied at the fiscal planning budget balance deviates from the fiscal rule or the
5. Planning Sustainable Levels of Public Investment  33

final budget outturn deviates significantly, then circumstances, such as the 2020/21 COVID-19
effectiveness is low. pandemic, have undermined the effectiveness of
• For medium effectiveness, the budget outturn the rules.
deviates to some extent. Medium effective- • High effectiveness indicates that fiscal rules are
ness may be attributable to escape clauses that stringently followed when budgets are prepared
are broad and undermine the credibility of the and that budget outturns are in line with the rules.
fiscal rule. Some fiscal rules give governments This will generally require that the rule includes a
extensive powers to deviate from the fiscal rule correction mechanism to capture deviations from
when they deem this to be necessary, even in the the projections and adjust policies accordingly.
absence of external shocks or emergency situ- Escape clauses may be used in special cases but
ations. Frequent application of escape clauses should not undermine the credibility of the fiscal
over several years may be a sign that the fiscal rule. In case of past deviations being corrected
rule is not effectively disciplining fiscal policies. the effectiveness may be high. Box 5.2 illustrates
Mission teams must assess whether adjustments how Bulgaria’s fiscal rule framework has helped
to or suspensions of fiscal rules in exceptional ensure fiscal sustainability during 2002–17.

USEFUL DATA SERIES

Data Questions to Address
Fiscal aggregate outturns (revenues, expenditures, and Is there evidence of optimism bias?
balances) compared with projections and approved
budgets (for central government or general government
as required by fiscal rules)
Length of time that fiscal rules have been in place, and Has the frequent use of escape clauses
periods in which rules were suspended or ignored undermined the credibility of the rule?
Share of general government expenditure covered by How comprehensive is coverage of fiscal rules?
fiscal rules
Review independent opinions on fiscal rules Is there a report from an independent institution
on the effectiveness of the fiscal rule?
Change in central and/or major SNG fiscal variables What is the impact of the rules on fiscal
since introduction of fiscal rules aggregates?
IMF Article IV reports Has the country shown progress compared with
previous assessments of assessments of fiscal
rule formulation and compliance?
34 PIMA HANDBOOK

Box 5.2. Public Finance Act in Bulgaria

In Bulgaria, the Public Finance Act and the annual state budget define a clear set of fiscal rules and provide
a good foundation for fiscal planning and sustainability (Table 5.2.1). The Public Finance Act complies with
relevant European Union regulations and presents tighter constraints on some indicators.
Table 5.2.1. Fiscal Rules in Bulgaria

Reference in the Public

Type of Rule Coverage Value Finance Act
Annual budget deficit Consolidated fiscal ≤2 percent of GDP • Article 27 (4)
program on a cash basis • Stability and Growth Pact
(set at 3 percent)
Medium-term objective General government ≤0.5 percent of GDP • Article 23
for the structural budget
deficit
Nominal level of the General government ≤60 percent of GDP • Article 29
consolidated debt as of • Stability and Growth Pact
the end of the fiscal year
Expenditures Consolidated fiscal ≤40 percent of GDP • Article 28
program on a cash basis
Annual growth of public General government ≤potential GDP growth • Article 26 (1)
expenditures
Medium-term objective Local government 0 • Article 30
for the budget balance
Expenditure growth for Local government ≤Average expenditure • Article 31
local activities growth for local activities
in the past 4 years
Annual payments under Local government ≤15 percent of the • Article 32
the municipal debt average annual amount
of own revenues plus total
equalizing subsidy in the
past 3 years
Commitments for Local government 50 percent of the • Article 94 (3), 2
expenditures average expenditures in
the past 4 years
Sources: Authors’ analysis of the Bulgarian Public Finance Act.

The fiscal rules have been effective in guiding fiscal policies, and the rules are largely adhered to. As Figure
5.2.1 shows, from 2002 to 2017, deviations were limited to the 2009 financial crisis and a 2014 banking crisis.
Figure 5.2.1. Adherence to Fiscal Rules in Bulgaria
(Percent of GDP)
Public debt Public expenditures Budget balance
70

60

50

40

30

20

10

0
Initial impact of the Liquidity support for
–10
economic crisis a systemic bank
–20
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Sources: state
Sources: Bulgaria Bulgaria state and
budget budget andFinance
Public Public Finance Act; Eurostat;
Act; Eurostat; and IMFand IMFassessment.
staff staff assessment.
5. Planning Sustainable Levels of Public Investment  35

Dimension 1.c: Is there a medium- Ongoing and An ongoing project is

term fiscal framework to align budget new project one that was the object of
preparation with fiscal policy? appropriations for construction
(not for appraisal or feasibility)
approved in a prior budget (a
QUESTIONNAIRE
budget for a prior fiscal year or
Low There is no MTFF prepared before
a budget for the current fiscal
budget preparation.
year approved before passage
Medium There is an MTFF prepared before of a supplementary budget), but
budget preparation but it is limited the project construction is not
to fiscal aggregates, such as completed. New projects are
expenditure, revenue, the deficit, or those relating to construction
total borrowing. that may be proposed for the
first time in the budget currently
High There is an MTFF prepared before
under preparation.
budget preparation, which includes
fiscal aggregates and allows
distinctions between current and INSTITUTIONAL DESIGN
capital spending and ongoing and This dimension assesses whether there is an MTFF
new projects. to guide the preparation of the central govern-
ment budget. The strength of the MTFF depends
DEFINITIONS OF KEY TERMS on its specificity and whether it represents a limit to
the annual budget. This is confirmed most clearly
Term Definition
in the legal framework addressing the MTFF and
Medium-term To qualify as an MTFF, it must in the annual budget instructions. It may also be
fiscal framework (1) cover a minimum period confirmed that a constraint was intended by the
(MTFF) of the budget year plus two
cabinet when approving the MTFF.
forward years; (2) be approved
• A low score indicates that there is no MTFF
at the level of cabinet or above;
prepared and approved prior to budget prepa-
and (3) over its duration, the
expenditure fiscal aggregates
ration. In some countries there is no MTFF at
or the deficits must be viewed all. In other countries an MTFF is presented in
as a ceilings. budget documents, but it is not approved before
budget preparation. This MTFF is a result of the
Budget Refers to preparation by line
budget process rather than a framework to guide
preparation ministries of their detailed
annual budget proposals. The budget preparation.
start of budget preparation • A medium score indicates that an aggregate
is the date of issuance of the MTFF is prepared but does not differentiate
annual budget instructions, or current and capital spending or identify the fiscal
its equivalent. space for new investment projects. An MTFF
Distinction The definition of current (or of this type does discipline the overall budget
between recurrent) and capital spending process but has limited direct impact on the level
current refers to the current and and composition of capital spending.
and capital capital budgets, as defined in • For a high score, the MTFF also indicates the
spending each country. Any guidance allocation to capital versus current spending and
provided in an MTFF must be how the capital spending envelope should be
aligned with the presentation distributed between ongoing and new projects.
of the detailed budget and
This MTFF will provide clear guidance on the
budget law.
development of the capital budget.
36 PIMA HANDBOOK

IMPORTANT DOCUMENTS countries, the budget process largely ignores

Documents Uses
the framework established by the MTFF. In other
cases, the MTFF is the formal starting point for
Budget system Clarify the legal basis for the
the budget deliberations, but the final budget is
law or similar MTFF
quite different. If the final capital budget is signif-
Fiscal policy Assess the linkages between icantly higher or lower than the capital allocation
statements fiscal policies and MTFFs in
in the MTFF, then effectiveness could be rated
subsequent years
as low.
MTFF document Analyze scope, level of detail, • Medium effectiveness implies that the MTFF to
and consistency of MTFFs some extent constrains the approved budget. If
over subsequent years the final capital budget is somewhat higher or
Budget Assess consistency between lower than the capital allocation in the MTFF,
documents MTFFs and budgets effectiveness could be rated as medium.
• High effectiveness indicates that the budget
EFFECTIVENESS document is consistent with the allocations
If the MTFF is effective, the deficit and the capital that were indicated in the MTFF, in particular
budget allocation in the approved annual budget for capital spending. If the final capital budget
should be close to the approved MTFF. In many is largely in line with the capital allocation in
countries, macroeconomic conditions change the MTFF, effectiveness could be rated as high.
quickly, and updated forecasts are often made There may be adjustments related to new devel-
late in the budget preparation process. Therefore, opments in the time period between the MTFF
revenue and expenditure estimates may change and the budget. If these are clearly explained
compared with the MTFF estimates. However, fiscal and documented in the budget documents, a
policy relating to deficits as a percentage of GDP somewhat higher deviation might be consistent
should not change significantly based on updated with high effectiveness. Box 5.3 shows how MTFF
forecasts, unless there is a fiscal shock. capital spending estimates in Estonia discipline
• Low effectiveness indicates that the MTFF has subsequent investment spending.
little impact on the approved budget. In some

USEFUL DATA SERIES

Data Questions to Address
Compare MTFF fiscal aggregates announced Does the MTFF effectively constrain the budget
for the budget year and fiscal aggregates in the process?
approved central government budget
Compare MTFF capital allocation, approved Do the MTFF and the budget provide realistic capital
capital budget expenditures, and actual capital budget projections?
expenditures
5. Planning Sustainable Levels of Public Investment  37

Box 5.3. Medium-Term Fiscal Framework in Estonia

In Estonia, the annually prepared medium-term State Budget Strategy provides a medium-term fiscal
framework (MTFF) that specifies planned current and capital spending. Capital spending is allocated by minis-
tries, by main funding source, and by major programs and projects. The Budget Strategy describes decisions
regarding ongoing and new investment projects, but there is no clear specification of budget allocations to
existing and new capital projects in the published State Budget Strategy. This is specified in the underlying,
detailed medium-term estimates provided by the ministries to the Ministry of Finance (Table 5.3.1).

Table 5.3.1. Medium-Term Fiscal Framework Capital Spending Ceilings in Estonia, 2015−21
(Millions of euros)

Investment spending 2015 2016 2017 2018 2019 2020 2021

2015 State Budget
1,054 972 1,042 1,011      
Strategy
2016 State Budget
  1,033 1,286 1,237 1,165    
Strategy
2017 State Budget
    1,067 1,196 1,159 1,116  
Strategy
2018 State Budget
      1,365 1,375 1,408 1,224
Strategy
Final outturn 1,081.1 989.6 1,290.8    
Sources: Estonia Ministry of Finance State Budget Strategies, 2015–18.
38 PIMA HANDBOOK

Institution 2: National and goals, can best be assessed through its contribu-
tion to outputs and outcomes.
Sectoral Planning
Are investment allocation decisions based on
Dimension 2.a: Does the government
sectoral and intersectoral strategies?
prepare national and sectoral strategies
Public investment should be guided by strategies
for public investment?
that set out the goals and objectives to be achieved
through public investment spending and plans QUESTIONNAIRE
for how to realize these. The strategies should set Low National or sectoral public
out the direction and high-level ambition or aspi- investment strategies or plans are
rations for future public investment, informed by prepared, covering only some
current gaps and trends (for example, popula- projects found in the budget.
tion, technology, environmental) that would shape Medium National or sectoral public
future infrastructure needs and demands. The investment strategies or plans are
plans should explain how public investment goals published covering projects funded
and objectives will be achieved through a broad through the budget.
portfolio of projects that complement each and High Both national and sectoral public
prioritize individual major projects. These goals investment strategies or plans are
and objectives are nonfinancial in nature, but plans published and cover all projects
should be subject to broad constraints in terms of funded through the budget
the economic viability of addressing the underlying regardless of financing source (for
infrastructure needs. Plans should not be expected example, donor, public corporation,
to go into much detail about major projects and will or public–private partnership).

often not include any information on specific smaller

projects. Public investment spending contributes to DEFINITIONS OF KEY TERMS
the capital stock and is often driven by gaps in this Term Definition
stock, and thus plans should make some reference
National In this context, a national
to the existing nonfinancial fixed assets.
plan is one that is produced
Each dimension of this institution addresses a by central government and
key aspect of the planning phase: includes all types of projects
• The first dimension captures whether national and for which central government
sectoral public investment strategies and plans are is responsible regardless of
prepared and how comprehensive they are. National location within the national
and sectoral goals are achieved through the contri- boundaries. It may also include
bution of all projects once they are completed. projects under the responsibility
• The second dimension highlights the impor- of SNGs or other parts of the
tance of costing of public investment plans. The public sector if these are of
national importance.
total cost of a plan should reflect the financing
constraints—if there are no constraints, there are Sectoral A sectoral plan is a subset of
no priorities. Costing major projects conveys a national plan. There is no
greater confidence that fiscal constraints applied standard definition of sector.
The closest to a standard
to the plan, and the number of major projects
definition would be the UN
identified in the plan, are realistic.
Classification of the Functions
• The third dimension reinforces the concept of
of Government, the COFOG
nonfinancial project benefits—the value of an functional classification.
individual project, and its contribution to overall
5. Planning Sustainable Levels of Public Investment  39

The strategies and plans can cover both current

Term Definition
and capital spending. A strategy or plan that
Strategy The direction and high-level
includes public investment but is not limited to
ambition or aspirations for
public investment meets the definition of a public
future public investment,
investment strategy or plan. Institution 7, Budget
informed by current gaps and
trends (for example, population, Comprehensiveness and Unity, gives higher scores
technology, environmental) that when recurrent and capital budget preparation are
would shape future infrastructure closely coordinated. Plans are not different.
needs and demands. • A low score indicates that plans are not prepared
Plan A document that describes
or that they provide limited coverage of future
how strategic goals and investment projects. Plans and strategies may
objectives are to be achieved. be high level and focus more on broad policy
This may be a part of the directions than on specific projects. These plans
strategy document (strategic do not provide concrete guidance on specific
plan) or a separate document. future investment projects, although they may
A plan includes statements of be used to justify such projects. Some plans and
goals and objectives, covers strategies may mention a few projects that are
a period of at least 3–5 years, under preparation but do not provide a concrete
identifies the budget entity
description of these projects or an overview of
or entities accountable for it,
planned investments in the sector.
and is separate from, and is
• A medium score indicates that either national
prepared before, the budget
documentation. or sectoral plans are published and identify
the planned major budget-funded projects in a
Found in the A project that is included in
sector. The plan and strategy need not address
budget budget documentation.
all possible future projects or be as detailed as
Fund through A project that receives funding the budget. To qualify for a medium score on
the budget from the budget but may also
Dimension 2.a, the plan and strategy should
receive financing from other
identify some of the 3–5 most important projects
sources.
in most main infrastructure sectors. The defini-
Publish See the Glossary. tion of main sectors, and the government’s role
in each sector, may vary between countries, and
INSTITUTIONAL DESIGN needs to be determined in each country. In many
The purpose of this dimension is to clarify the countries, main public infrastructure sectors will
existence and the contents of national strategies include transport (roads, railways, airports, and
and plans, in particular, how they cover public seaports), electricity, telecommunications, and
investment. National strategies and plans provide water supply.
the long-term foundation for public investments. • A high score indicates that most major projects
The terms strategies and plans have different are identified in published national and
meanings, as defined previously. However, in sectoral plans, and these plans should cover all
practice these terms are often used interchange- financing sources, including external sources,
ably. When assessing national and sectoral planning public-private partnerships (PPPs), and public
documents, it is important to verify whether they corporations (PCs). For a high score, the plan
include both strategies and plans or are limited to should identify most of the 3–5 most important
one of these aspects. projects in each main sector.
40 PIMA HANDBOOK

IMPORTANT DOCUMENTS have been identified in national or sectoral plans,

Documents Uses
then effectiveness is also low. In addition, if it is
not possible to assess the consistency between
National strategies Assess how public investment
the plans and the subsequent budgets, then
and plans projects are reflected in
effectiveness will be low.
strategies and plans
• Medium effectiveness indicates that many
Sectoral strategies Assess how public investment
projects are identified in plans, but there may
and plans projects are reflected in
be significant changes in the projects that are
strategies and plans
selected for implementation. For medium effec-
Official gazette Assess if the strategies tiveness, some projects that are described in
Web site and plans are published national or sectoral plans are subsequently
of ministries and accessible
approved for budget funding. If some projects
approved in the budget have been identified in
EFFECTIVENESS national or sectoral plans, then effectiveness is
The effectiveness of the capital project planning also medium.
process depends on the realism of the plans and • High effectiveness indicates that there is close
the correspondence between the major project correspondence between the national and
priorities found in the plans and the projects that sectoral plans and subsequent budgets. Most
are included in subsequent budgets. If projects major projects that are approved for implemen-
turn out to be very different from those envisaged tation have been identified in relevant plans, and
in the plan, or if the annual budget includes the project scope and design is consistent with
major projects that have not been covered by the the initial plans. For high effectiveness, most
planning process, planning is not very effective. A projects that are described in national or sectoral
fragmented planning framework, with many partly plans are approved for budget funding. If most
overlapping but inconsistent planning documents, projects approved in the budget have been
may also undermine effectiveness. The effective- identified in national or sectoral plans, effective-
ness assessment should be based on comparing ness is also high. Box 5.4 describes the national
the projects that have been included in the budgets planning process in Botswana, which facilitates
for the years covered by a strategy.2 high correspondence between planned and
• Low effectiveness implies that the plans have realized investment projects.
little impact on which projects are approved Plans are less effective if they have a narrower
in the budget and implemented. This might be coverage than the capital budget. For example, if
because the initial plans fail to identify projects, the budget includes externally funded projects but
as discussed under institutional design. It might plans do not, then the plans are not effective. They
also be the case that plans do identify major are more effective if they have a wider coverage
projects, but these are largely ignored when than the budget.
budgets are prepared. If budgets for relevant National and sectoral plans should be consis-
years include few of the investment projects in tent with each other. Sectoral plans may be more
national or sectoral plans, then effectiveness is detailed than the national plan. If there are signifi-
low. If few of the projects approved in the budget cant differences between the sector portion of the
national plan and separate sectoral plans in terms
2  For instance, the projec ts identified in the national
s trategy for 2014 –19 should be compared with the
of coverage, priorities, or major projects, then,
projects included in the budgets for 2014 through 2019. planning is not effective.
Box 5.4. Botswana National Development Plan

5. Planning Sustainable Levels of Public Investment 

Botswana has several strong planning institutions—as reflected in the National Development Plan (NDP). The plan is in its 11th iteration and is valid for
six years. NDP 11 is based on the government’s 2036 strategic vision, includes six-year estimates per ministry and per project, and provides the basis
for the total medium-term and annual budgets. Sector and subsector strategies are integrated within the NDP and are linked to broader policy goals
(thematic policy areas). The NDP indicates the status of funding for each sector, program, and project, categorized as Committed Projects, Programmed
Investment, Appraised Projects, and In Preparation. Table 5.4.1 summarizes the NDP allocations for one ministry.

Table 5.4.1. NDP Allocations for the Ministry of Defence, Justice, and Security
Cluster Project/Project Funding Status 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 Total NDP 11 Cost
Total NDP Allocation 2,813.2 2,928.1 2,933.6 3,086.1 3,143.6 3,002.1 17,906.7
o/w: Committed 2,678.8 2,718.8 2,659.8 2,588.8 2,506.8 2,481.8 15,634.5
Programmed 87.2 112.2 92.2 91.1 91.3 56.2 530.1
Appraised 22.0 57.0 40.0 4.0 5.0 0.5 128.5
In Preparation 25.2 40.0 141.7 402.3 540.6 463.6 1,613.6
Programme: Rule of Law
Key Result Area: National Security
Goal: Strengthening of National Security
NDP 11

Key Performance Indicator: Voice and Accountability

2.0 Strengthening of Botswana
Police Services TEC (P million) 2,420.1
TOTAL 310.1 382.0 365.0 471.0 470.0 422.0 2,420.1
o/w: Committed 205.0 245.0 185.0 116.0 35.0 10.0 796.0
Programmed 70.1 90.0 70.0 69.9 70.1 37.0 407.1
Appraised 15.0 17.0 0.0 0.0 0.0 0.0 32.0
In Preparation 20.0 30.0 110.0 285.1 364.9 375.0 1,185.0
2.1 Block 10: 130 Staff Houses TOTAL 25.0 25.0 25.0 25.0 00.0 00.0 100.0
o/w: Committed 25.0 25.0 25.0 25.0 100.0
Programmed 0.0
Appraised 0.0
In Preparation 0.0
2.2 Police Posts and Base Camps TOTAL 0.0 0.0 15.0 15.0 15.0 15.0 60.0
o/w: Committed 0.0
Programmed 0.0
Appraised 0.0
In Preparation 15.0 15.0 15.0 15.0 60.0
2.3 Letlhakane: 28 Staff Houses and New TOTAL 25.0 20.0 15.0 11.0 10.0 10.0 91.0
Police Station o/w: Committed 25.0 20.0 15.0 11.0 10.0 10.0 91.0
Programmed 0.0
Appraised 0.0
In Preparation 0.0
Source: Botswana National Development Plan 2017.
Note: ICT = information and communications technology; MDJS = Ministry of Defence, Justice, and Security; NDP 11 = 11th National Development Plan; o/w = of which.

41
The inclusion of multiyear projections in the NDP provides an effective platform for investment funding and implementation. The NDP framework includes project
codes, names, and their total estimated costs, which provides a tangible bridge to the annual and multiyear budget and execution processes.
42 PIMA HANDBOOK

USEFUL DATA SERIES

Data Questions to Address
Number and cost of major projects that appear in What is the realism of the planning process?
plans but not in the budget
Number and cost of major projects in the approved What is the effect of the plans on subsequent
budget that do, and do not, appear in national or budget decisions?
sector plans, by financing source

Dimension 2.b: Are the government’s INSTITUTIONAL DESIGN

national and sectoral strategies or plans This dimension assesses whether public invest-
for public investment costed? ment plans are costed and subject to financial
constraints. If the plans are to guide capital project
QUESTIONNAIRE priorities, they must be concrete and contain initial
cost estimates for the major projects or groups of
Low The government’s investment strategies
projects identified in the plans.
or plans include no cost information on
• A low score indicates that there is no concrete
planned public investment.
cost information in strategies and plans. The
Medium The government’s investment strategies
documents may mention specific projects, but
include broad estimates of aggregate
in the absence of any costing it is not possible
and sectoral investment plans.
to make any judgment about the likelihood that
High The government’s investment the projects will be implemented. The failure to
strategies include costing of provide cost estimates and indicate resource
individual, major investment projects
availability is a common weakness in many strat-
within an overall financial constraint.
egies and plans.
• A medium score requires that the plans provide
DEFINITIONS OF KEY TERMS aggregate estimates for groups of projects.
Term Definition However, the plan does not indicate resource
Investment Defined in the discussion in availability for these project groups.
strategy or plan Dimension 2.a. • For a high score, the plans should provide
Broad estimate A top-down estimate of cost estimates for individual major invest-
financing, without reference to ment projects and indicate the overall financial
individual projects. constraints of the investment, and the cost
Aggregate Estimated spending on all estimates should be consistent with these
and sectoral projects, or projects grouped financial constraints. The financial constraint
investment by sector or major ministry, should be based on top-down considerations of
plan for which central government
future fiscal space. It is different from a bottom-up
budget entities are responsible.
assessment of sectoral spending needs. The
Major project See discussion on page 24.
plans should provide a comparison between the
Overall The maximum amount of
overall spending needs and financial constraints
financial money that would be spent
constraint for all projects in the strategy
and discuss strategies for closing any financing
or plan. This must be stated gaps.
with specific reference to fiscal
policy, and thus is not the
same as broad estimates of
aggregate or sector investment
plans.
5. Planning Sustainable Levels of Public Investment  43

IMPORTANT DOCUMENTS and budgeted amounts. If cost estimates in the

plan are systematically lower or higher than in
Documents Uses
the budget, the planning process is not effective.
National Assess the costing of major
If broad cost estimates in plans are significantly
plans and investment projects and the
higher than budgeted capital expenditure for
strategies financial constraints applied to
public investments
the same period as the plan, effectiveness would
Sectoral Assess the costing of major be assessed as low. This assessment should be
plans and investment projects and the based on a sample of major projects, covering
strategies financial constraints applied to the most important public investment sectors. If
public investments in each sector it is not possible to compare cost estimates, the
Public Compare project costs and fiscal effectiveness of this dimension will be low.
investment space to estimates in plans and • Medium effectiveness implies that the differ-
plans and strategies ences between initial estimates in the plan and
budget the budgets are more moderate. If broad cost
documents estimates in plans are somewhat higher than
budgeted capital expenditure for the same
EFFECTIVENESS period as the plan, effectiveness should be
The effectiveness of this dimension should be considered to be medium.
assessed by comparing the broad cost estimates • High effectiveness implies that initial estimates
in the plans to the final cost estimates in the subse- are generally accurate. If broad cost estimates
quent budgets. Underestimation of project costs in plans are broadly in line with budgeted
at the planning stage is a common weakness in capital expenditure for the same period as the
many public investment management systems. This strategy, effectiveness should be considered
may be because of weak capacity and inadequate as high. Box  5.5 describes the Irish National
methodologies. Strategic misrepresentation is also Development Plan 2018–2027, in which there is
common—low initial cost estimates are provided close correspondence between cost estimates
to reduce the risk that a project is rejected as too in the plan and the outturns, and between the
costly compared with the expected benefits. fiscal framework for the plan and subsequent
• Low effectiveness implies that there are signifi- budgets.
cant differences between initial plan estimates

USEFUL DATA SERIES

Data Questions to Address
Compare the cost of individual major projects in the Are project cost estimates in the plan realistic?
plan with the cost of the same project in the budget
Compare total sector costs in the plan with the total Are sector cost estimates in the plan realistic?
sector costs in the budget
Compare aggregate financial constraints used in Are financial constraints in the plan consistent with
planning with aggregate financial constraints used in actual fiscal space?
budgeting (in the MTFF or the total in the approved
budget)
44 PIMA HANDBOOK

Box 5.5. Strategic Investment Planning in Ireland

Ireland prepared a National Development Plan (NDP) for 1989–1994 as the basis for a request for European
Union financial support. The second National Development Plan, for 1994–2000, was largely a strategic invest-
ment plan. New plans have been prepared at regular intervals and the focus has shifted from European Union
financing to national investment priorities. The current plan covers the period 2018–2027 (Table 5.5.1).
The NDP 2018–2027 is managed by the Department of Finance. The plan is fully costed, and fully coordi-
nated with the budget process. The NDP provides financing indications that are consistent with long-term
fiscal projections, and these will be updated and revised during medium-term and annual budget consider-
ations. Capital investment allocations are provided for a five-year period and will be rolled over annually. The
NDP 2018–2027 combines direct investment by the Exchequer of €91 billion and state-owned sector invest-
ment of around €25 billion. This will increase public investment from about 3 percent to about 4 percent of
gross national income during the period.
The NDP includes 10 strategic investment priorities that are aligned with the 10 strategic outcomes in the
National Planning Framework and identifies 43 major investment projects or programs. There is a substan-
tial contingency allocation. Annual progress reports show that the NDP has been effective in guiding public
investment in Ireland.

Table 5.5.1. Strategic Investment Priorities in Ireland’s 2018–2027 National Development Plan

Priorities Euros (in millions)

Compact growth 14,500
Enhanced regional accessibility 7,300
Strengthened rural economies 8,800
Sustainable mobility 8,600
Strong economy 9,400
High-quality international connectivity 4,800
Enhanced amenity and heritage 1,400

Transition to a low-carbon, climate-resilient society 21,800

Sustainable water and environment 8,800

Access to childcare, education, and health services 20,100
Other sectors 3,000
Contingency 7,400
Total 115,900
Source: Government of Ireland 2018, 2020.
5. Planning Sustainable Levels of Public Investment  45

Dimension 2.c: Do sector strategies for outputs and outcomes of public investment.
include measurable targets for The sector strategy could be defined as part of a
the outputs and outcomes of national strategy or in a separate sectoral strategy
investment projects? document. A strategy should identify multiple
outputs and describe how they work in concert
QUESTIONNAIRE to achieve specific outcomes. Outcome targets
should be aligned with the goals or objectives of
Low Sector strategies do not include
measurable targets for outputs or
the strategy. At least one measurable target must
outcomes. be provided for each major output and for each
outcome in the strategy. The assessment must
Medium Sector strategies include measurable
also cover the validity and reliability of the perfor-
targets for outputs (for example,
mance indicators.
miles of roads constructed).
• A low score indicates that there are no specific
High Sector strategies include measurable
output or outcome targets for investment in the
targets for both outputs and
sector strategy. There may be targets related to
outcomes (for example, reduction in
broad policy initiatives, but if these are not linked
traffic congestion).
to public investment, then it is not possible to
ascertain the results of the investments.
DEFINITION OF KEY TERMS • A medium score indicates that the sector strate-
Term Definition gies include targets for outputs of the investment
projects. Outputs are generally easier to measure
Measurable A numerical goal or objective
target to be achieved within the plan than outcomes and therefore easier to include in
period. planning documents. It is reasonable to measure
Output Products or services delivered by outputs annually.
a budget entity. Capital budget • A high score indicates that strategies provide
outputs include the number and targets for both outputs and outcomes. Outputs
types of health care facilities built, are the means for achieving an outcome.
the number of primary education Knowledge of outputs is necessary to under-
classrooms built, or miles of stand the realism of outcomes and to monitor
public roads constructed. the progress in achieving them. Inclusion of only
Outcome The effect of outputs on a
outcome measures satisfies neither a medium
problem, condition, or need, such
nor a high score. Outcomes are more difficult to
as reducing traffic congestion
measure than outputs because there are other
or increasing the literacy of the
influences than government outputs on the
general population.
problem or condition targeted by the govern-
ment output. Because of this complication,
INSTITUTIONAL DESIGN outcomes are sometimes measured through
The purpose of this dimension is to assess whether surveys and infrequently, for instance, once
sector strategies identify measurable targets every few years.
46 PIMA HANDBOOK

IMPORTANT DOCUMENTS • Second, measurable outputs and targets can be

Documents Uses
used by a line ministry to manage a program. This
must be demonstrated by monitoring reports
National plans Identify output and outcome
prepared by line ministries or through a central
and strategies targets for major investment
monitoring system.
projects
• Third, outcomes can be measured through
Sectoral plans Identify output and outcome
spending reviews, performance audits,
and strategies targets for major investment
evaluation reports, or other specialized studies.
projects
Program outcomes can be measured on a
Budget Assess whether output and periodic (that is, not annual) or on a sample basis.
submission outcome information is used The share of major projects in which measurable
documents to justify budget proposals
targets are used for decision making, project
Ex post project Assess how output and management, and evaluation purposes is a key
reviews and outcome information is indicator for effectiveness:
evaluations used to analyze project • Low effectiveness means that there is little
performance (effectiveness)
evidence that output and outcome data are
Annual reports Assess whether output and actively used. This is done in few major projects.
for ministries or outcome targets are used to • Medium effectiveness means that there is
government assess annual performance frequent but. There is documentation that perfor-
(effectiveness)
mance data are used in some major projects.
• High effectiveness indicates that there is
EFFECTIVENESS systematic and extensive use of output and
The effectiveness of measurable targets depends outcome information. This is actively used and
on whether and how they are used: documented in most major projects. Box 5.6
• First, measurable outputs and targets can be illustrates how outcome and output targets
used explicitly to analyze or justify proposed from Malaysia’s national planning framework are
current or capital budget allocations, either by actively used in line ministries’ investment project
line ministries or by the Ministry of Finance (MoF). proposals, and in prioritizing among these.

USEFUL DATA SERIES

Data Question to Address
Project implementation and monitoring data from Are output and outcome data used in project
internal tracking and management systems or management and monitoring?
published in, for example, annual reports
5. Planning Sustainable Levels of Public Investment  47

Box 5.6. National Planning in Malaysia

The Malaysian government publishes national strategies for public investment under its five-year develop-
ment plan series, with the current plan, the 11th Malaysia plan, covering 2015–20 (Figure 5.6.1). Each sector
produces its own strategies for public investment under various sectoral master plans and blueprints, albeit
with a different time coverage. The 11th Malaysia plan includes high-level outcome targets and identifies some
major investments. The sectoral strategies include measurable targets for outputs and outcomes, and when
ministries submit their budget requests, details on the targets and outcomes for each project are required.

Figure 5.6.1. Outcome and Output Targets for Infrastructure in the 11th Malaysia Plan

40% 95% 99%

Public transport modal Populated areas Population
share in GKL/KV covered by broadband served by clean and
infrastructure treated water

Paved rural roads Of GNI per capita Sewerage-connected

3,000
km
constructed
1% for fixed broadband
cost 40% services coverage,
especially in main
cities

Malaysian Aviation
Commission as newly
established regulator
46
areas
Populated areas
covered by broadband
infrastructure 25%
Population served
by clean and
treated water

Building an integrated need- Improving coverage, quality, Continuing the transition to a new
based transport system and affordability of digital water services industry framework
infrastructure

Unleashing growth of logistics Encouraging sustainable energy

and enhancing trade facilitation use to support growth

Annual growth of EURO 4M, EURO 5 New megawatt generation

7,626
8.5%
transport and emission standards for capacity installed in Peninsular
clean fuel and B15 Malaysia by 2020
storage subsector
(15% bio-diesel blending)
roll out by 2020
MW

In the World Bank

3.5
Additional million tons per Additional barrels-per-day
TOP Logistics Performance annum import capacity of
300,000 refining capacity by 2019

10 Index
MTPA
liquefied natural gas
through the RGT-2 terminal
in Pengerang, Johor
BPD

Sources: 11th Malaysia plan, annual budget documents.

Note: GNI = gross national income; LGK/KV = Greater Kuala Lumpur/Klang Valley; RGT-2: re-gasification
terminal.

National and sectoral plans have been effective in guiding the strategic selection of investment projects.
Sectoral strategies are published and their formulation is broadly guided by the national strategy plan. On the
basis of national and sectoral strategies, ministries prepared a master list of top priority projects for 2016–20,
which was approved by the cabinet.
48 PIMA HANDBOOK

Institution 3: Coordination Dimension 3.a: Is capital spending

by SNGs coordinated with the
between Entities central government?
Is there effective coordination of the investment
plans of central and other government entities? QUESTIONNAIRE

Institution 3 addresses coordination between plans Low Capital spending plans of SNGs are
at different government levels, that is, coordination not submitted to or discussed with
central government.
between entities that have the right to indepen-
dently allocate resources to public investment. Medium Major SNG capital spending plans
Coordination in this context also includes how one are published alongside central
entity—central government—provides financing to government investments, but there
are no formal discussions, between
other entities.
the central government and SNGs on
In addition to the public investment plans them-
investment priorities.
selves, the dimensions of this institution focus on
fiscal relations between entities involved in the High Major SNG capital spending plans
are published alongside central
public investment:
government investments, and there
• First, how is capital spending by different govern-
are formal discussions between the
ment levels coordinated? SNGs are often as
central government and SNGs on
important, and sometimes more so, than central investment priorities.
government in public investment planning,
financing, and implementation. Coordination in
DEFINITIONS OF KEY TERMS
this context means to ensure that priorities are
consistent and individual projects complemen- Term Definition
tary between the central government and SNGs. Capital Medium- to long-term investment
• Second, how does the central government spending plans as well as budgets.
provide funds to SNGs that may be used for plan
public investment? The more predictable this Major SNG Plan identifying major SNG projects
flow of funds, the more realistic are funding capital that are planned, proposed, or
spending selected for inclusion in the budget.
constraints used in public investment plans.
plan See also “major projects” in the
The focus here is on funds for which SNGs have
glossary.
discretion—in other words, SNGs independently
Published SNG and central government
decide the projects financed by these funds. alongside projects are listed in the same
• Third, how does the central government monitor document or public website.
contingent liabilities (CLs) related to other parts Formal There is a well-defined process for
of the public sector? Central government is often discussion SNGs and central government to
called upon to bail out other entities, including exchange information on projects.
SNGs and PCs, in the event of serious problems
arising from projects. Central government has INSTITUTIONAL DESIGN
an interest in monitoring and minimizing such The intent of this dimension is to determine if
CLs. there is a system to ensure that major projects are
5. Planning Sustainable Levels of Public Investment  49

Table 5.2. Funding Arrangements for Investment Projects Involving Subnational Governments

Who Funds? Who Implements? Who Selects?

SNG own funds—tax, nontax, and SNG SNG
borrowing
Unconditional transfer from SNG SNG
central government

Conditional transfer from central SNG Proposed by SNG but approved by central
government government
Central government line ministry SNG Proposed and selected by central
budget government; SNG is implementation agent
Central government line ministry Central government/ Proposed by SNG but approved by central
budget SNG government

Source: IMF staff.

planned and selected by each level of government does not know which investments are being
with awareness of planning and selection decisions planned at the SNG level, and there is no dialog
at other government levels. The need for coor- to ensure that SNG investment plans are consis-
dination and the direction of this coordination is tent with central government investment plans.
dependent on assignment of responsibilities and For instance, local roads might be built without
on the funding arrangements for different capital knowledge of future developments in the
projects. We can define five main funding arrange- national road network.
ments for projects involving the central government • A medium score implies that there is an insti-
and SNGs (Table 5.2). In principle, coordination with tutional requirement that central government
central government occurs automatically in the last and SNG projects are presented in a consoli-
three funding arrangements, so the need for formal dated format. Central government receives the
discussions should relate mainly to the first two capital spending plans of SNGs and ensures
funding arrangements. However, this automatic that these are published alongside central
coordination does not always occur in practice, so government investments. Ideally, SNG and
the assessment also needs to cover these forms of central government projects would be commin-
funding arrangements. gled and sorted by common project type and
The focus of this assessment will usually be on location. The legal requirement for sharing and
the level below central government, but in some presentation of SNG investment plans will need
countries, it may also be relevant to capture the next to be anchored in central government legisla-
level of SNGs. If lower levels of SNGs are responsible tion, but there may be additional provisions in
for more than 25 percent of SNG public investment, SNG legislation. If the provision is only in SNG
the PIMA should also comment on practices at this legislation, this is not sufficient for a medium
level. The scoring should still be based on the first score.
level below central government. • A high score indicates that the coordination
• A low score on Dimension 3.a implies that there includes a system of formal discussions between
is no institutional requirement for systematic the central government and SNGs. For the design
sharing and coordination of spending plans. assessment, formality means that the system of
The institutional requirement can be expressed discussions, or system of coordination, is defined
through legislation, regulations, or intergovern- in legislation or in written procedures, such as
mental agreements. The central government budget instructions or ministry regulations.
50 PIMA HANDBOOK

IMPORTANT DOCUMENTS for information rather than coordination. If effec-

Documents Uses
tiveness is low, there are few examples of SNG
capital projects submitted to and effectively
Legal and regulatory Clarify legal requirements
coordinated with the central government.
framework for for coordination of public
• Medium effectiveness indicates that the formal
intergovernmental investments between levels
fiscal relations of government
coordination mechanisms are operational but do
not cover all SNG public investment decisions. If
National plans Assess consistency
there are few concrete examples of the impact of
and strategies between national and
this coordination, it is only moderately effective.
SNG plans and subnational investment
For medium effectiveness, some SNG capital
strategies plans
projects are submitted to and effectively coordi-
National budget Verify whether SNG
nated with the central government.
documents projects are presented
• High effectiveness implies that information about
alongside central
investment plans is shared and forms the basis
government projects
for active coordination, and that the impact of
Budget circular and Verify whether SNG project
this is clearly documented in plans and budgets.
other guidelines should be aligned/coordi-
In this case, most SNG capital investments are
nated to national priorities
coordinated with central government. Some
Verify whether there is
a formal consultation countries have annual formal consultations with
mechanism between SNGs early in the budget process and use these
the central and SNG to decide investment priorities. If discussions do
governments not have a clear formal basis, discussions must
have occurred with regularity for the past three
EFFECTIVENESS years to be equivalent to formal discussions.
The effectiveness assessment should focus on
whether the arrangements that are put in place USEFUL DATA SERIES
actually lead to effective coordination of public Data Questions to Address
investments between the central government and
Total public investment How has coordination
the SNG. Is there a flow of information in this system
spending by level of between central
that can be used for project planning and selection
government compared government and SNGs
by each entity? Effective coordination should have with central govern- impacted the following?
impacts on the design and selection of specific ment broken down by • public invest­ment at
investment projects. Identification of such impacts each level
financing source where
• Investment levels
will support the assessment of effectiveness. SNG has full or partial • Project selection
• Low effectiveness indicates that the level and discretion over use of • Sectoral prioritization
impact of coordination is low. This may be attrib- funds
utable to the absence of formal coordination
mechanisms, which would also result in a low Many countries have comprehensive institutional
score on institutional design. Alternatively, there arrangements for consultation between the central
may be formal arrangements in place, but these government and the SNGs on public investment.
are not working in practice. Central govern- Box 5.7 provides an example of the institutional
ment may receive SNG investment plans, but arrangements for Chile. Chile has not been subject
these are not reviewed and the information in to a PIMA, so there is no assessment of the effec-
them is not used for coordination purposes. In tiveness of these arrangements from a PIMA
some countries, discussions between the central perspective. Box 5.8 describes similar mechanisms
government and SNGs occur after budget in Indonesia, where the PIMA indicated that these
decisions have been made and serve as a vehicle mechanisms were effective.
5. Planning Sustainable Levels of Public Investment  51

Box 5.7. Subnational Government Investments in Chile

Decree N. 3876 of 2000 stipulates that is the responsibility of the Ministry of Interior and Public Security,
through its Sub-secretariat for Regional and Administrative Development (SUBDERE), to coordinate regional
public investment. This duty is the responsibility of the Co-ordination of Public Expenditure Unit (Coordinación
Gasto Público, CORGAPU) with the support of intendentes (central government appointees in the regions),
with the latter responsible for coordination with public services and ministries within their regions.
The intendente, together with the Regional Council, Ministry Regional Secretariats (SEREMIs), and of the
public services in the region, develop the Anteproyecto Regional de Inversión (ARI), including a financial esti-
mation of the projects to be undertaken, to accomplish their institutional objectives. The ARI needs to be sent to
the Unit of Coordination of Public Expenditure via the online ChileIndica platform. Any discrepancies between
the priorities of the intendente and the regional authorities of the sectoral ministries must be resolved in the
evaluation phase of the ARI or in the budgetary discussions carried out in the national budget office (DIPRES).
The preparation of the ARI is strongly guided at the central government level. National ministries and
services give their regional representatives specific guidelines as to which policies, programs, and institu-
tional goals should be considered for the regional ARI. In parallel, to design the ARI, intendentes have to
consider the nonbinding Regional Development Strategy (ERD), the presidential commitments, the Special
Development Plans for Extreme Zones, and Community Development Plans. However, the official memo-
randum that provides instructions for the preparation of the ARI and the Public Programme for Regional
Investment (Programa Público de Inversiones Regionales, PROPIR) specifically mentions that the intendente
may consult the mayor when appropriate.
Once the ARI is approved at the central government level and by the DIPRES, national ministries and
services inform regional representatives of the details of investments and programmes to be considered in
the PROPIR. This information is also available on the ChileIndica online platform. This platform has to be
updated regularly by regional governments, because it is the instrument used by the central government to
monitor execution of investments. However, the information of this platform is not publicly available, which
represents a significant restriction on the possibilities for monitoring by citizens and ensuring accountability.
Source: OECD 2017b.

Box 5.8. Subnational Government Investments in Indonesia

Subnational governments (SNGs) engage in public investment in social and economic infrastructure. Following
adoption in 2001 of the fiscal decentralization policy, SNGs became responsible for developing their own
medium-term plans (RPJMDs) and an annual work plan (RKPD). These plans are not included in national plans
or sectoral plans at the national level. The role of SNGs in providing infrastructure is substantial. In 2018, SNGs’
aggregate budget for public investment was approximately 130 percent of the central government budget
for public investment.
Mechanisms exist to annually coordinate investment spending of SNGs with national priorities. This occurs
through several channels and phases in which each SNG participates:
• The development planning forum (Musrenbang), which consists of a series of meetings in each region
between dinas (local governments’ working units) and Bappenas (the regional development agency)
leading to a regional work plan, and meetings at the national level between regions, line ministries
and Bappenas to coordinate national work priorities and strategies. These meetings are held between
February and April.
• Technical coordination meetings (Rakontek) held with line ministries normally twice yearly. Rakontek
is also a series of meetings between line ministries and regions normally held to discuss the physical
project plan under DAK (specific allocation fund) transfer.
• The Ministry of Home Affairs reviews SNG overall budget plans (APBD) to ensure that the overall spending
is aligned with regional and national priority programs at the end of the national budget process.

Box 5.8 continues on next page

52 PIMA HANDBOOK

Box 5.8 (continued)

SNG annual plans are published on the websites of the Ministry of Home Affairs (under DG Regional
Development), the Ministry of Finance (under DG Fiscal Balance), and the National Public Procurement
Agency (LKPP).
Source: Indonesia PIMA 2017.

Dimension 3.b: Does the central INSTITUTIONAL DESIGN

government have a transparent, This dimension assesses whether there are rules in
rule-based system for making capital place to ensure predictable funding of SNG capital
transfers to subnational governments investments. A rules-based system is a capital
and for providing timely information on transfer plan whereby both the transfer pools (the
such transfers? amount of funds to be distributed) and the distri-
bution formula are set in rules. In the absence of
QUESTIONNAIRE such rules it is very difficult to ensure that funding
decisions are transparent and consistent across
Low The central government does not
have a transparent rule-based SNGs and from year to year, or even within the
system for making capital transfers year. The transfers need not be reserved for capital
to SNGs. spending purposes. There may be a general
transfer plan that can be used for both current and
Medium The central government uses a
transparent rules-based system for capital spending.
making capital transfers to SNGs, but A rules-based system for capital transfers should
SNGs are notified about expected increase the predictability of these transfers. If the
transfers less than 6 months before rule is used only to define the transfer pool, but the
the start of each fiscal year. distribution of this amount among SNGs can be
High The central government uses a changed from year to year without reference to a
transparent rules-based system for rule, it does not give predictability to SNGs. Such a
making capital transfers to SNGs, design does not constitute a rules-based system for
and expected transfers are made the purpose of this dimension.
known to SNGs at least 6 months • A low score indicates that there is no legal or
before the start of each fiscal year. regulatory framework that establishes a trans-
parent and rules-based capital transfer system.
DEFINITIONS OF KEY TERMS This does not mean that there are no transfers to
SNGs. However, such transfers may be ad hoc or
Term Definition
may be a result of annual considerations, without
Rules-based The quantity of funding to be
a specific allocation formula to estimate the
system transferred is calculated using a
formula with variables, or factors,
transfers. Sometimes, formulas or similar meth-
such as population, economic odologies are assumed to be in place, but the
development, or surface area. details of these are not known outside the central
Capital Transfer of funds that can be used government. If the methodology is not available
transfer for capital projects. and not transparent, the score on design is low.
Notify about Communication in writing (hard or soft • A medium score implies that there is a trans-
expected copy) from an authoritative source to a parent and rules-based transfer system, but that
transfers responsible party that communicates a the transfer amounts are not known to SNGs
final decision. A telephone call cannot well ahead of the budget year. If transfers from
be viewed as “notification.” the central government are known less than six
5. Planning Sustainable Levels of Public Investment  53

months before the fiscal year, it is difficult to fully substantially from the amounts determined by
reflect these in the SNGs’ own budget process. the rules-based system. If the assessment of
• A high score implies that the transfers are based institutional design concludes that there is no
on a transparent and rules-based transfer system transparent, rules-based capital transfer system,
and communicated at least six months before the it is difficult to envisage that these transfers can
budget year. This should give SNGs ample time be predictable. Even if a transfer system is in
to plan for the use of these funds in their internal place, it does not necessarily deliver the intended
budget processes. results. If aggregate actual capital transfers
To establish predictability, the rule for calculation deviate significantly from amounts notified to
amounts and notification dates must be based in SNGs, effectiveness is low.
regulation, law, or constitution. If the rule and dates • Effectiveness is medium if aggregate actual
are based on government policy, annual budget capital transfers deviate somewhat from amounts
instructions, or a minister’s order, it can easily be notified to SNGs or actual notification is done less
changed. Notification can be done in published than six months before the fiscal year. Even if there
documents, for instance, a budget document, and are moderate deviations and delays, the transfer
in direct communications to the SNGs. Allocations system still provides some degree of predictability
that are included in internal central government to SNGs.
documents, but not published or conveyed to SNGs, • Effectiveness is high if both the amounts received
cannot be counted as notification in this regard. and the timing is in line with expectations. This
implies that the aggregate transfers are broadly
IMPORTANT DOCUMENTS in line with amounts notified to SNGs and actual
Documents Use notification is done at least six months before
Legislation and Assess transparency and the fiscal year. High effectiveness will generally
regulations regarding robustness of transfer coincide with a high score on institutional design
transfers to SNGs mechanisms for the same dimension. Box 5.9 describes coor-
dination of investments and transfer of funds to
Decisions regarding Analyze how mechanisms
SNG transfers during are is reflected in annual SNGs in Mali. The transfer mechanism in Mali was
annual budget budget process assessed to be highly effective in the 2018 PIMA,
preparation although the role of SNGs in public investment in
Mali generally is limited.
EFFECTIVENESS For the system to be effective, SNGs should have
The effectiveness of this dimension depends on access to promised funds when needed to finance
whether and when SNGs are able to realistically public investment spending. There may be timing
predict the amounts and the timing of the financial issues for actual transfers. SNGs often note that
resources they will have available for public invest- actual transfers do not occur early in the fiscal year.
ment. As noted under Institution 2, accurate However, capital transfers need not be immediate
financial constraints support effective planning. If cash transfers equal to the annual amount
total annual amounts transferred to SNGs during promised to them. Central government may have
the fiscal year differ from the announced amounts, a system of monthly or quarterly allocations that
the rules are not effective, unless this is related to could apply to capital transfers as well as to line
project implementation delays or similar reasons. If ministries. Such mechanisms should be structured
the financing constraint used in planning the SNG so they do not create obstacles for predictable
capital budget is incorrect, project prioritization and rational implementation of capital projects in
may be inappropriate. SNGs. If unpredictable in-year transfers undermine
• Effectiveness is low if there is no mechanism for the system, effectiveness could be assessed as
predictable transfers or if actual transfers deviate medium.
54 PIMA HANDBOOK

Box 5.9. Coordination of Investments and Transfer of Funds to SNGs in Mali

In Mali, SNG investment plans are defined through a coordinated process with the central government. The
economic, social, and cultural development program (PDSEC) provides the reference for investment projects
in territorial communities. This program has been implemented since 2015 through state-region contracts,
concluded for five years. There are information and coordination mechanisms at different levels of govern-
ment: a national steering committee for technical support to local authorities (NOCs); regional orientation,
coordination, and monitoring of development actions (CROCSAD); local orientation, coordination, and
monitoring of development actions (CLOCSAD); municipal orientation committees for coordination of devel-
opment actions (CCOSAD).
The amount of transfers allocated to SNG investment expenditure is generally known at least six months
before the start of the financial year. Since 2007, Mali has had a National Support Fund for Territorial
Communities (FNACT), funded mainly by development partners and in part by budget allocations and state
subsidies. This fund is administered by the National Agency for the Investment of Territorial Communities
(ANICT). For the allocation of investment grants, the ANICT relies on an equalization formula that combines
two series of criteria: (1) situation criteria (the needs of communities with regard to their territorial context),
and (2) performance criteria (good tax administration for local authorities). Scoping letters sent by the ANICT
communicate each year to the communities the transfers provided for in the central budget. In 2016, this letter
was sent on June 9, more than six months before the next fiscal year.
In 2016, SNG capital expenditure reaches 27.4 billion CFAF, or 14 percent of the total expenditure of the
territorial communities. Although this share has more than doubled in three years, it remains limited. The
state budget constitutes the main source of funding for communities, while the communities’ own resources
are weak. Since 2007, the revenue from local authorities’ own resources (in particular non-tax resources) has
remained low. In addition, the state itself executes a significant part of the expenditure made at the local level
through transfers to the deconcentrated services but also through projects executed by central government
agencies, in particular multiregional projects. PDSEC contracts have been signed with five regions and two
are in the process of being signed (Kidal and district of Bamako). All of the funding allocated to contracts was
included in the 2017 finance law.
Source: Mali PIMA 2018.

Different fiscal years at central and local levels but not all. Effectiveness, with regard to date of noti-
may impact effectiveness. The questionnaire fication, should be assessed relative to the start of
assumes that SNG and central government fiscal the SNG fiscal year.
years are the same. This is true in most countries,

USEFUL DATA SERIES

Data Questions to Address
Amount of money (total overall and total for capital What is the overall importance of SNG transfers for
projects) transferred from central government to public investment?
SNGs, and percent of SNG spending
Comparison of amount of money mandated by Is the transfer mechanism effective in terms of
the formula with transfer to SNGs and actual amounts provided?
amounts transferred

Comparison of amounts SNGs were notified they

would receive with amounts provided
Dates when SNGs were formally notified of capital Is the transfer mechanism predictable?
transfer amounts

Dates when funds were made available to SNGs

5. Planning Sustainable Levels of Public Investment  55

Dimension 3.c: Are contingent essential for fiscal risk management. These liabili-
liabilities arising from capital ties are defined during the project planning and
projects of subnational governments, implementation period, when it is decided who will
public corporations, and public- be responsible for implementing a project and how
private partnerships reported to the it will be procured and financed.
central government? • A low score indicates that there is no legal
requirement for systematic reporting of CLs
from capital projects undertaken by SNGs, PCs,
QUESTIONNAIRE
and PPPs. Partial information on such liabilities
Low CLs arising from major projects may be available on an ad hoc basis, but often
of SNGs, PCs, and PPPs are not
this only happens after problems occur and
reported to the central government.
CLs materialize.
Medium CLs arising from major projects of • A medium score indicates that there are legal
SNGs, PCs, and PPPs are reported requirements in place to ensure that these CLs
to the central government but are
are systematically reported. Reporting should
generally not presented in the central
include all four of the following attributes:
government’s budget documents.
• Coverage: CLs must be reported by at
High CLs arising from major projects of least two of the three categories of projects
SNGs, PCs, and PPPs are reported
listed: SNG, PCs, and PPPs.
to the central government and
• Frequency: reporting must occur at least
are presented in full in the central
once annually.
government’s budget documents.
• Mode: reporting can be made through
financial statements, regularly scheduled
DEFINITIONS OF KEY TERMS
and mandatory specialized reports, or
Term Definition regularly scheduled audits (if they are
Contingent An obligation that does not arise conducted annually and published within
liability (CL) unless a particular discrete event four months of the end of the reporting
occurs in the future. See GFSM period).
2014. Only explicit CLs should be • Audience: the report must be readily
taken into consideration under this available to the MoF, and they must be
dimension.
notified of the availability of the report.
Central Limited to budgetary central
• A high score indicates that there are also legal
government government.
requirements that these CLs also are comprehen-
Budget See the Glossary.
sively disclosed in budget documents. The total
document
known size of CLs should be reported for each of
Present in The total known size of CLs, as
the three categories (that is, SNGs, PCs, and PPPs).
full reported for each of the three
categories (that is, SNGs, PCs, and It is not required that presentation in the budget is
PPPs). made at the same level of detail as in the reports
that are received. CL information need not be
INSTITUTIONAL DESIGN presented in a specific type of central government
This dimension is intended to assess the extent budget document. A variety of documents, with
to which the MoF and the legislature are aware of different purposes, makes up the budget document.
CLs arising from major public investment projects, These include the budget law, policy statements,
regardless of who finances or is responsible for the analyses, reports, and other information. This
project. Public investment may entail significant criterion is satisfied if CLs are presented in any of
CLs, and monitoring and reporting of these CLs is these documents, including only for information.
56 PIMA HANDBOOK

IMPORTANT DOCUMENTS and PPPs. This may be by design, which would be

Documents Uses
evident in a low score on institutional design, or
because legal and regulatory provisions are not
Legal and regulatory Assess institutional
complied with. It could also be that there is some
framework for design
information on CLs in budget documents, but
reporting of CLs by
SNGs, PCs, and PPPs
that this is so fragmented that it is not possible
to understand the impacts of these liabilities.
Samples of reports on Analyze compliance with
For this score, few CLs are reported to central
CLs reporting requirements
government. Low effectiveness is also indicated
(effectiveness)
when CLs are reported for none or one of the
Budget documents Analyze compliance with three categories.
including information disclosure requirements
• Medium effectiveness indicates that some CLs
on CLs (effectiveness)
are reported and disclosed, but that there are
important gaps in the reporting. A partial picture
EFFECTIVENESS of fiscal risks related to SNGs, PCs, and PPPs is
The assessment of effectiveness should include to better than nothing, but is clearly not adequate
what extent reporting on and disclosure of CLs take for consistent fiscal risks analysis and manage-
place in practice. This assessment should be based ment. For this score, some CLs are reported to
on review of practices and budget documents for central government, or CLs are reported for two
at least the past three years. Reporting on and of three categories.
disclosure of CLs are mutually reinforcing—the • High effectiveness implies that there is compre-
disclosure assists in the verification of the data and hensive reporting of CLs and that these are fully
systematic consideration of fiscal risks. Because of disclosed in budget documents. Most CLs are
this, the effectiveness assessment should reflect reported to central government and disclosed,
the combination of the two requirements. Ideally, or CLs are reported and disclosed for three of
CLs should be reported together in budget docu- three categories. If reporting and disclosure
mentation, for example, as part of a consolidated are fully in line with legal requirements, there
fiscal risk statement. If reporting on CLs is scattered should be high scores on both design and effec-
throughout the budget documents, then it may be tiveness. In some case, practices may be better
difficult to understand their total magnitude and than legally required and the effectiveness
potential impact. score higher than the design score. Box  5.10
• Low effectiveness indicates that there is little describes disclosure of CLs in the Slovak
reporting on and disclosure of CLs by SNGs, PCs, Republic.

USEFUL DATA SERIES

Data Questions to Address
Reported CLs by group of entities (SNGs, PCs, PPPs) What is the importance of different categories of
CLs?
CLs disclosed in budget documents by group of Are reporting and disclosure of CLs consistent with
entities each other?
5. Planning Sustainable Levels of Public Investment  57

Box 5.10. Disclosure of Contingent Liabilities in Slovak Republic

In Slovak Republic, contingent liabilities arising from major public investment projects are presented in
government budget documents as an annex, regardless of who is responsible for the projects. By law, the
central government does not guarantee liabilities incurred by SNGs.
Every year, the central government approves a general government budget covering a period of three
years. It contains the state budget and a summary of budgets of general government institutions (Table 5.10.1).
Annexes to the budget include general government contingent liabilities (including contingent liabilities of
SNGs and state-owned enterprises) and “implicit liabilities.” The projected “availability-based” payments for
PPPs (discounted expected payments for the remaining duration of the concessions) are reported as “implicit
liabilities” and are expressed as a percentage of GDP. In 2018, the implicit liabilities connected to PPPs were
estimated at 3.3 percent of GDP.

Table 5.10.1. Slovak Republic Contingent Liabilities

(Euros)

December December December

31, 2015 31, 2016 31, 2017
Central administration and state administration 13,228,220 12,925,751 13,778,276
enterprises
Higher territorial units and their budgetary and 2,615 1,247 510
contributory organizations and enterprises of
territorial self-government
Municipalities and their budgetary and contributory 40,508 21,477 48,522
organizations and enterprises of territorial
self-government
Total 13,271,343 12,948,475 13,827,308
Capital on demand and guarantees in international 8,464,557 8,473,154 8,669,919
financial institutions
International investment arbitration 263,500 343,852 471,182
Other litigation 2,336,740 1,590,061 2,028,078
Other 2,081,252 2,355,099 2,426,423
Total 13,146,049 12,762,166 13,595,602
Source: Slovak Republic Budget 2018, Appendix 4.
58 PIMA HANDBOOK

Institution 4: Project Appraisal increase uncertainty regarding final costs and

benefits. Because a wide range of possible
Are project proposals subject to systematic
costs and benefits complicates appraisal, risk
project appraisal?
identification and possible mitigation measures
This institution addresses whether and how to narrow this range are an essential part of
appraisals are used to determine if a project is likely appraisal. Information on risks, and management
to meet its stated objectives and achieve a defined of them, should also feed into project implemen-
threshold of spending efficiency. If an appraised tation plans, addressed in Institution 14.
project meets this threshold, it becomes eligible Appraisal methodologies vary based on the
for budget selection (which is discussed under type of project, its size, and its unique context and
Institution 10). Appraisals analyze project benefits characteristics. There is no universally accepted
and their contributions to achieving objectives set definition of project appraisal, but appraisal is
in national or sectoral plans. As such, appraisals generally considered as one stage in the project
are part of the planning phase of public invest- cycle (Figure 5.1). The appraisal phase is often
ment management. divided in two subphases.
• The first dimension of this institution seeks to Appraisal will usually include analysis of a project’s
account for the coverage of projects that are benefits, costs, and risks, from a social, economic,
subject to appraisal, and the overall rigor and and financial perspective. Table 5.3 provides an
independence of these appraisals. Because overview of elements that are commonly assessed
appraisals require specialized skills and are labor in a comprehensive project appraisal. In advanced
intensive, major projects are typically subject to appraisals, the analysis of project benefits and
more extensive appraisals than others. impacts may be extensive.
• The second dimension addresses the extent to This institution focuses on projects that should
which appraisals are based on standard method- be appraised by central government institutions,
ology and central support, to ensure a consistent including PPPs. In some countries, projects imple-
basis for the analytical process. Different, or mented by PCs are subject to the same appraisal
uncoordinated, methodologies do not guarantee process, but this is not a requirement under this institu-
adequate appraisal of all projects and make tion. Central government oversight of PC investment
cross-project comparisons (within and between projects is discussed under Dimension 5.c.
types of projects) difficult or impossible.
• The third dimension addresses how risks are
considered in project appraisals. Project risks

Figure 5.1.Standard Project Phases

Implementation Ex Post
Identification Preparation Appraisal Detailed Design
and Monitoring Evaluation

Prefeasibility

Feasibility

Source: IMF staff.

5. Planning Sustainable Levels of Public Investment  59

Table 5.3. Key Elements of Comprehensive Project DEFINITIONS OF KEY TERMS

Appraisal
Term Definitions
Project rationale, objectives, and targets
Subject to There is a well-defined mandatory
Project status and timetable analysis process, or processes, for the
analysis of capital projects,
Project description
including a critical review of input
Cost estimates data and reasoning.
Revenue estimates Rigorous Rigor means that analysis
technical, consistently includes a substantial
Project benefits and impacts (quantitative and
economic, portion of commonly accepted
qualitative assessment)
and financial approaches and techniques.
Social
analysis
Climate change and other environmental
Employment
Regional development
INSTITUTIONAL DESIGN
Options analysis
This dimension aims to determine the efficiency
Risk analysis of projects in the pool from which projects are
Implementation plan selected for inclusion in the budget. If all projects,
Procurement strategy and plan
and particularly the major projects, have been
subject to systematic and consistent appraisal,
Financing plan
the selection of projects is likely to maximize the
Source: Allen and Tandberg 2021. economic returns on scarce public investment
resources (see Institution 10). In some low-income
countries, many projects are financed by devel-
opment partners (DPs) and international financial
Dimension 4.a: Are major capital
institutions (IFIs) and may be subject to appraisal
projects subject to rigorous technical,
by them. This should not impact the assessment of
economic, and financial analysis?
the institutional design for this dimension, but may
affect the assessment of effectiveness, as will be
QUESTIONNAIRE discussed further. For the assessment of the insti-
Low Major capital projects are not tutional design, appraisal of externally financed
systematically subject to rigorous projects by DPs and IFIs is not relevant—what is
technical, economic, and financial relevant here is appraisal by government entities
analysis. (possibly on the basis of studies presented by those
Medium Major projects are systematically external entities, plus additional due diligence by
subject to rigorous technical, government).
economic, and financial analysis. • A low score indicates that there is no legally
High Major projects are systematically mandated mechanism for systematic appraisal
subject to rigorous technical, of major projects. Requirements for appraisal
economic, and financial analysis, and may be completely missing, or they may be insuf-
selected results of this analysis are ficient to ensure a rigorous appraisal process for
published or undergo independent all major projects, or several significant sectors
external review. or financial sources are exempted.
60 PIMA HANDBOOK

• A medium score indicates that there will be EFFECTIVENESS

legal requirements for systematic and rigorous The effectiveness assessment for this dimension
appraisal of all major projects. Some sectors or should focus on the share of major projects that
financing sources may be exempted from the are subject to rigorous project appraisal. Do
general appraisal process. If this is the case, there appraisal documents provide systematic and
should be other mechanisms in place to ensure credible assessments, in line with legal or regula-
that these projects are subject to the same level tory requirements? Do the documents describe
of appraisal. For instance, if public-private part- realistic expected benefits and costs of projects?
nerships are exempted from general appraisal Are lower-value projects systematically identified
rules, the partnership’s legal framework should and discarded or returned for further development
have rules prescribing that appraisal is done with and possible resubmission?
the same rigor. The assessment must be based on a sample of
• A high score implies that there is systematic project appraisal documents. There are often major
appraisal of all major projects and that appraisal discrepancies between the formal requirements for
results are either published or subject to inde- project appraisal and the actual practices. Many
pendent external review. Publication should, as countries have comprehensive regulations and
a minimum, include a description of the overall manuals for project appraisal, including require-
project, key issues, conclusions stemming from ments for cost-benefit analysis, risk analysis, and
the analysis, assumptions made in the analysis, implementation plan review, but have limited
and any recommendations for modifying the capacity to comply with these. In the actual project
project proposal. If appraisal results are made documents, these requirements may be ignored
subject to external review, then it is expected or only addressed in a minimalistic fashion.
that the external reviewers are qualified for the Data and assumptions may be far from realistic,
task and will have access to full information suffering from optimism bias. Project “appraisal”
about the project and the appraisal that has been documents are sometimes limited to basic technical
done. External review can be done by national as design documents. Verification of actual project
well as international experts. documents is therefore essential for the analysis of
this dimension.
IMPORTANT DOCUMENTS • Low effectiveness indicates that few major
Documents Uses projects are subject to systematic and rigorous
appraisal, or that there is evidence that low-value
Laws, regulations, and Assess regulatory
projects are included in the pipeline with no
guidelines for project framework for project
requirement for resubmission. This may be
appraisal appraisal
related to the absence of a clear regulatory
Project appraisal Assess quality and framework. In this case, both the effectiveness
documents for major consistency of project
assessment and the design assessment will
projects appraisals
tend to be low. Low effectiveness may also be
Project appraisal Assess quality of related to failure to comply with formal require-
review reports by project reviews ments for project appraisal or lack of capacity
independent external to carry out the required appraisals. In these
reviewers, if any
cases, the effectiveness will be assessed lower
Project decision Assess impact of than the institutional design. In some countries,
documents, for project appraisals the appraisal process never leads to projects
individual projects on specific project being rejected and all projects are included in
and/or for project decisions the project pipeline, regardless of the appraisal
portfolios and
results and regardless of whether they are ready
pipelines
for implementation.
5. Planning Sustainable Levels of Public Investment  61

• Medium effectiveness implies that some or returned for further development. If externally
major projects are systematically and rigor- funded projects are excluded from national proce-
ously appraised, and there is no evidence that dures, there should be rules to ensure that these
low-value projects are included in the pipeline. are subject to at least the same degree of scrutiny
Under a rigorous process, some project as other projects. Box 5.11 describes the project
appraisals are expected to contain recommen- appraisal framework in Colombia. Colombia
dations for change and even requests for project has not had a PIMA but is  generally recognized
resubmissions after revision. for a well-designed and effective public invest-
• High effectiveness indicates that most projects are ment planning framework. Box  5.12 describes
subject to systematic and rigorous appraisal, with the project appraisal framework in Timor-Leste,
clear linkages to the decision to include projects which has been strengthened substantially in
in the pipeline; further, appraisals are realistic. recent years.
Good practice indicates that all projects should be Some projects may be appraised by IFIs and DPs,
appraised, but the depth of the appraisal would but this is unlikely to constitute an effective overall
reflect the value and the risks of the project. Only framework for appraisal of major projects. Some
the projects that are assessed to have high value IFIs, including the major development banks, have
and are ready for implementation are included rigorous appraisal methodologies. However, many
in the pipeline, and other projects are rejected other financial institutions, as well as bilateral DPs,

Box 5.11. Project Appraisal in Colombia

Colombia has an advanced framework for preparation, appraisal, and selection of public investment projects.
The process comprises clearly defined stages: identification, preparation, appraisal, pre-selection and
selection/programming. Appraisal is comprehensive, including financial, economic, and social costs and
benefits, based on detailed project documents. Figure 5.11.1 describes the main elements in the process.

Figure 5.11.1. Colombia Project Development and Appraisal Process

SELECTION
AND
PREPARATION PROGRAMMING

Markets
APPRAISAL Physical and
IDENTIFICATION Legal
financial
Technical Determination of programming
Problem Analysis financial, economic,
Organizational and and social costs and Cost analysis, CBA, Determination of
Beneficiaries Analysis theoretical benefits NPV, IRR financing sources
Objectives Analysis Administrative Financial indicators Selection of goals
Financial forecasts
Socioeconomic and analysis and indicators
Options Analysis political
Economic indicators
Economic forecasts
Natural risks analysis SRR > 12%

Environmental PRESELECTION
Financial
EBI - BPIN

Source: Colombia Ministry of Planning 2016.

Note: EBI File summarizes the information contained in the formulation of the investment projects for the administration,
strengthening, and rates. It helps the administration and the general public so they know the basic information of each of
the investment projects that they execute.
BPIN = Bank for National Investment Programs and Projects; CBA = cost-benefit analysis; IRR = internal rate of return;
NPV = net present value; SRR = statutory reserve requirement.
62 PIMA HANDBOOK

Box 5.12. Standardized Appraisal Methodology in Timor-Leste

Following the 2016 PIMA, Timor-Leste has taken several steps to strengthen public investment management,
including a standardized methodology for project appraisal. This appraisal process assesses the projects
against eight criteria and sorts them in three major groups green (important and ready), yellow (important but
not (ready), and red (ready but less important) (Figure 5.12.1).

Figure 5.12.1. Timor-Leste Project Appraisal Process

1. SDP 3 5. Environmental 3
PROJECT 2011–30 2 impact 2 Important
BRIEF 1 1 and ready
0 0

Priority Projects Map

2. Economic 3 6. Dependence 3
viability, IRR 2 on infrastructure 2 Important
1 and other 1 but not
0 projects 0 ready

3. Economic 3 7. Readiness 3
impact 2 of project for 2
Ready but
1 construction 1
less
0 0 important

4. Social 3 8. Readiness 3
impact, 2 of land 2
direct and 1 1
Project Filters: indirect 0 0
• Less than $5 million
• Not relevant SDP
Less important
• No documents
and not ready
• Not for funding (not for appraisal)

Several guidelines are related to project development and appraisal:

• Project Appraisal Guideline. MPS, August 2017
• Feasibility Study Guideline. MPS, May 2018
• Model Terms of Reference for Infrastructure Fund Projects. MPS, February 2018
• Project Brief Standard Form. MPS, 2017
• Fund Administration Manual. MPS, December 2018
• Ex Post Evaluation Guide. MPS, 2019

Source: Government of Timor-Leste 2020b.

Note: IRR = internal rate of return; SDP = Strategic Development Plan.

have much less rigorous approaches. In addition, mechanism will not constitute appraisal of the specific
external financing plans are often more focused investment projects. In some cases, IFIs and DPs carry
on establishing a financial mechanism than on the out appraisal of specific investment projects only after
specific projects to be financed under this plan. a financial mechanism has been approved. Project
In these cases, the DPs’ appraisal of the financial appraisal by IFIs and DPs will focus on the priorities
5. Planning Sustainable Levels of Public Investment  63

and preferences of the institution conducting the Dimension 4.b: Is there a standard
appraisal, which is not always fully aligned with the methodology and central support for
government’s priorities and preferences. the appraisal of projects?
If the effectiveness assessment is to be influ-
enced by appraisals done by IFIs and DPs, the QUESTIONNAIRE
basis for this should be comprehensively described
Low There is no standard methodology or
and documented. The share of different IFIs’ and
central support for project appraisal.
DPs’ financing of the capital budget should be
presented, together with a summary description Medium There is either a standard
methodology or central support for
of the appraisals that are conducted and of the
project appraisal.
separate due diligence and review done by the
government, if any. This should be based on a repre- High There is both a standard
sentative sample of appraisal documents. To give a methodology and central support for
project appraisal.
higher score on effectiveness than on design, there
should be documentation showing that a significant
share of major projects is subject to systematic, DEFINITIONS OF KEY TERMS
rigorous and consistent appraisal, and that this
Term Definition
appraisal is based on the government’s priorities
Standard One or more methodologies
and preferences. For medium effectiveness, many
methodology that should be used for specified
major projects should be covered. For a high score,
purposes, as officially directed
most of the public investment program should be
in legislation, regulations, and
subject to systematic appraisal.
guidelines from a responsible
government unit. Appraisal
USEFUL DATA SERIES
methodologies may vary based
Data Questions to Address on the sector or size of project.
Number, and proportion, What is the scope Central Designated staff or unit that is
of major projects for of project appraisal support responsible for advising many
which appraisals were requirements? central government budget entities
conducted on appraisal methodologies.
Number of project Are practices for Central support may be located
appraisals published publication and organizationally in the MoF, the
and number subject to external review planning ministry, a line ministry, or
external review consistent with an independent agency.
requirements?
Number and share of What are the impacts
INSTITUTIONAL DESIGN
appraised projects that of appraisals on
The aim of this dimension is to determine whether
were included in the project decisions?
project pipeline appraisals have a known quality, and lead to results
Number, and proportion, Should donor practices that can be used to compare projects. It is closely
of major projects impact effectiveness connected with Dimension 4.a discussed earlier.
subject to appraisal by scoring? The existence of a standard methodology does
different IFIs and DPs and not imply that lesser projects are required to follow
overview of appraisal the same procedures and methodologies as major
methodologies applied projects—the effort and degree of sophistication
Project performance Do projects perform usually depend on the importance of the project.
data, including any ex as assessed during • A low score indicates that there is neither a
post reviews appraisal?
standard methodology nor central support for
64 PIMA HANDBOOK

appraisal of major investment projects. While EFFECTIVENESS

the existence of appraisal methodologies is The effectiveness assessment should cover to
relevant for the assessment of Dimension 4.a, the what extent standard appraisal methodologies are
dimension assesses the standardization or coor- applied to project appraisals and contribute to the
dination of methodologies among the several quality of these. This indicator is a measure of the
appraisal entities. support to achieving the objectives of Dimension
• A medium score indicates that there is either 4.a. The effectiveness assessment will therefore
a standard methodology or central support have a strong focus on compliance with formal
for appraisal of major investment projects. regulations. Externally financed projects may be
Methodologies are standard if they are appraised according to IFI standards, but these
presented in manuals or instructions issued by a should be consistent with national methodologies.
responsible agency and are applicable to most The assessment should therefore cover all major
projects in the capital budget. Central support public investments, regardless of financing source
usually means that one unit advises the entities and financing modalities.
proposing most capital projects in the central • Low effectiveness implies that standard
government budget. A ministry of planning or appraisal methodology has limited impact on
public works might provide central support as project appraisal. This may be because the
effectively as MoF. In some cases, there may methodology is missing, which would imply
be more than one unit involved in providing that the institutional design score also is low.
central support, based on a common method- It could also be because the methodology is
ology. Support exists when advising on appraisal incomplete or inadequate, or because it is not
methodologies is part of a unit’s responsibilities followed in practice. If effectiveness is low, few
designated in budget instructions, a minister’s major projects fully benefit from the standard
order, regulation, or law. Support is most clearly methodology.
indicated by the issuance of manuals and instruc- • Medium effectiveness indicates that a standard
tions and the conduct of training. If the unit only methodology is in place, but not fully applied
provides guidance ad hoc, this does not consti- to all major projects. Some major projects fully
tute central support benefit from the standard methodology.
• A high score indicates that there is both a • High effectiveness indicates that the standard
standard methodology and central support for methodology is used actively to ensure high-
appraisal of major investment projects. quality project appraisals for most major projects.
The methodology is consistently applied for most
IMPORTANT DOCUMENTS major projects.
PIMAs should comment on any external method-
Documents Uses
ologies for appraisal of externally funded projects,
Laws, regulations, and Assess regulatory
and their consistency with the national standard
guidelines for project framework for
appraisal methodologies. Box 5.13 provides an
appraisal project appraisal
example from the Slovak Republic, which has well-
methodologies and
central support
designed national methodologies and central
support for domestically financed major projects,
Mandate for unit Assess role and
while projects financed by EU funds follow EU
providing central support adequacy of central
methodologies. Box 5.14 describes the choice of
to project appraisal support function
discount rates for cost-benefit analysis, a key meth-
Guidance materials Assess how the central odological issue for project appraisal.
produced by central support unit promote
support unit appraisal quality and
standardization
5. Planning Sustainable Levels of Public Investment  65

Box 5.13. Project Appraisal Guidelines and Central Support in Slovak Republic
In Slovak Republic, investment projects financed by budget resources have been subject to cost-benefit
analysis (CBA) since 2017. CBAs are mandated for major projects above €40 million and for IT projects above
€10 million. Central support for state budget-funded major projects is rendered by the MoF’s Value-for-Money
Division, which validates the calculations set out in the CBA before any project is eligible to enter the procure-
ment stage. The Value-for-Money Division was created to assist ministries that do not have the ability to do
CBA and to control the quality of CBA for projects. Even though the MoF’s opinion on the CBA of these major
projects is not binding, it has a strong influence on government decisions.
Projects financed by EU funds are a significant share of public investment (see Figure 5.13.1). These are
subject to comprehensive technical, economic, and financial analysis determined by EU rules and proce-
dures, and there is central support for project appraisal. For the 2007–13 programming period the European
Commission published a guideline for CBA that provided a common framework for project appraisal. This was
subsequently updated for the programming period 2014–20. The European Commission requires the use of
CBA for all major infrastructure projects above €50 million, regardless of the beneficiary. In Slovak Republic,
all EU-funded projects follow the EU rules and conduct the required CBA. The state expertise involvement in
the appraisal of projects is mandatory. Since 2017, the results of the appraisals have been published on the
website of the Ministry of Transport, Construction and Regional Development.

Figure 5.13.1. Public Investment, by Source of Financing

1. Per Year, by Source of Financing 1. Per Year, by Source of Financing
( Percent ) ( Millions of euros )
European Union State Budget Other European Union State Budget Other
100 5,000
90 4,500
80 4,000
70 3,500
60 3,000
50 2,500
40 2,000
30 1,500
20 1,000
10 500
0 0
2011 2012 2013 2014 2015 2016 2017 2018 2011 2012 2013 2014 2015 2016 2017 2018
Source: Slovak Republic PIMA 2019.

USEFUL DATA SERIES

Data Questions to Address
Number and share of projects that are appraised in Are standard methodologies actively used for
accordance with standard methodologies project appraisal?
Number of staff providing central support to project What is the capacity of the central support unit?
appraisal
Training sessions provided by central support unit How does the central support unit promote
capacity building?
Number and share of appraisals reviewed by central What is the impact of the central support unit on
support unit actual project appraisals?
Number of share of appraisals conducted according to How consistent are these methodologies with
methodologies of external financing institutions national standards?
66 PIMA HANDBOOK

Box 5.14. Discount Rates for Cost-Benefit Analysis

The choice of discount rates is a key element of the methodology for project appraisal, and should be clearly
defined in national guidance materials. A higher discount rate will generally make investments less beneficial
and will favor projects for which benefits materialize quickly compared with longer-term projects. There are
two main approaches to selecting appropriate discount rates:
• Consumption behavior (normative) approach (C). The social discount rate is computed from the Ramsey
equation: r=d+n*g, where d is time preference, n is the elasticity of marginal utility of consumption, and
g is the growth rate of the economy.
• Opportunity cost of capital (descriptive) approach (O). The discount rate is estimated by observing
actual interest rates, for instance market rates for low-risk government bonds.
Treatment of risk is also a critical issue. Some countries apply risk-free interest rates and handle risk by scenario
analyses of benefit and cost streams. Others include a risk premium in the discount rate. Discount rates may
differ (be reduced) over time. Table 5.14.1 summarizes the approach to determining the discount rate for
public investment appraisal in different countries.

Table 5.14.1. Discount Rates in Selected Countries

The United
Netherlands Kingdom Norway Sweden Denmark
Approach Opportunity Consumption Opportunity Consumption Opportunity
cost of capital behavior cost of capital behavior cost of capital
(descriptive) (normative) (descriptive) (normative) (descriptive)
Risk-free 0 3.5 2.5 3.5 3.0 (0–35 years)
rate (0–30 years) (0–40 years) 2.5
3.0 2.0 (36–70 years)
(31–75 years) (>40 years) 2.0
2.5 (>70 years)
(>75 years)
Risk 4.5 Not 1.5 Not 1.0 (0–35 years)
premium applicable (0–40 years) applicable 0.5 (36–70 years)
1.0
(41–75 years)
Total 4.5 3.5 4.0 3.5 4.0 (0–35 years)
discount (0–30 years) (0–40 years) 3.0
rate 3.0 3.0 (36–70 years)
(31–75 years) (41–75 years) 2.0
2.5 2.0 (>70 years)
(>75 years) (>75 years)
Source: Mouter 2018.
5. Planning Sustainable Levels of Public Investment  67

Dimension 4.c: Are risks taken required to be identified in project documents,

into account in conducting but there is no analysis and no indication of
project appraisals? probability or possible impacts. There are no
regulatory requirements for consultations with
QUESTIONNAIRE stakeholders to identify possible risks.
Low Risks are not systematically assessed
• A medium score indicates that appraisals of
as part of the project appraisal. major projects are required to include a section
devoted to risk assessment but there are no
Medium A risk assessment covering a range
requirements for risk mitigation plans.
of potential risks is included in the
• A high score indicates that both risk analysis and
project appraisal.
concrete plans for risk mitigation are required
High A risk assessment covering a range
for major projects. Mitigation measures can be
of potential risks is included in the
included in the appraisal document, procure-
project appraisal, and plans are
ment plan, project implementation plan, financial
prepared to mitigate these risks.
plan, or operating plan. If they are in documents
other than the project appraisal, mitigation
DEFINITIONS OF KEY TERMS measures must be clearly identified as such and
linked to risks identified in the appraisal.
Term Definition
Risk An estimation of the uncertainty Table 5.4. Common Risks in Major Public Investment
assessment underlying market, technical, Projects
financial, economic, and
Project Phase Risks
distributional analyses of a
project. Planning • Demand estimates
Potential risk Risk that has a nonnegligible • Choice of concept: best fit
probability of occurring. to meet objectives
Mitigate risk Risk mitigation includes measures • Construction cost estimates
to reduce, transfer, share, or • Operating cost estimates
provision for risk. • Timetables
Allocation • Budget priority
• Availability of funding over
INSTITUTIONAL DESIGN time
The aim of this dimension is to identify uncertainties Construction • Procurement delays
relating to the project and to minimize them. Thus, • Procurement outturns
the quality of project appraisals will be improved. • Implementation delays
Table 5.4 gives an overview of some common risks • Construction cost overruns
related to major public investment projects. • Contractual disputes
• A low score indicates that there is no regulatory Operation • Demand shortfalls
requirement for systematic risk assessment • Operating cost escalation
in appraisals of major projects. Neither is risk • Failure to realize planned
assessment included in standard appraisal objectives
methodologies if they exist. Some risks may be Source: Monteiro and others 2020.
68 PIMA HANDBOOK

IMPORTANT DOCUMENTS • Low effectiveness implies that there is no system-

Documents Uses
atic use of risk assessment in project appraisal
or project implementation. There may be no
Laws, regulations, Assess formal
formal requirements, as indicated by a low score
and guidelines for requirements for risk
on institutional design, and no informal or ad
project appraisal analysis and mitigation
hoc approaches to incorporating risk consider-
Risk assessment Assess quality and ations. Alternatively, risk assessments may be
found in project comprehensiveness of risk
prepared but are too limited for risk manage-
appraisal documents assessment
ment purposes. Few major investment projects
Risk mitigation Assess relevance and include stringent analysis of project risks.
plans in project adequacy of risk mitigation • Medium effectiveness indicates that risk assess-
implementation plans (effectiveness) ment plans are prepared for some project
documents
appraisals. Some major investment projects
Project Assess how risks have include stringent analysis of project risks.
implementation, materialized and been • High effectiveness indicates that risk analysis is
monitoring, and addressed during systematically included in project development
evaluation reports project implementation
and actively used in project implementation.
(effectiveness)
Most major investment projects include stringent
analysis of project risks and risk mitigation plans.
EFFECTIVENESS Estimates of project costs and benefits disclose
The effectiveness of risk assessments and risk miti- the risks related to key assumptions, and there
gation plans depends on how they are used. Risk are contingency reserves to absorb a reason-
mitigation plans are not effective if they are not able share of these risks. Risk mitigation plans
implemented. This may be confirmed by looking at are defined before project implementation
a sample of major projects approved in the budget and are used to manage risks during project
roughly five years before and for which an appraisal implementation. Active risk management
was completed and a risk mitigation plan prepared. helps ensure that projects are implemented on
If risks materialized but the mitigation plan was not budget and on time, and deliver the expected
implemented in material aspects, the mitigation benefits. Box 5.15 describes the approach to
plan is not effective. The focus is on domestically assessing project risks in Norway, where all
financed major projects, because national authori- major projects (above €100 million) undergo
ties will have limited influence over risk management detailed risk analysis.
practices for externally financed projects.

USEFUL DATA SERIES

Data Questions to Address
Adjustments to estimated project benefits and costs Has risk analysis impacted project estimates?
based on risk considerations during project appraisal
Contingency reserves in project cost estimates in project Are contingency reserves based on explicit risk
appraisal documents assessment?
Use of contingency reserves and reallocation caused by Have risk assessments and contingency
unexpected events during project implementation reserves been realistic?
5. Planning Sustainable Levels of Public Investment  69

Box 5.15. Project Risks and Contingency Reserves in Norway

In Norway, cost estimates for major investment projects are subject to mandatory, standardized risk analysis.
The project estimates are decomposed into major cost components, key risks are defined, and a cost prob-
ability distribution is assigned to each risk factor. Because cost of risk is assymetric, expected total cost (the
P50 estimate) is higher than the base cost estimate. Figure 5.15.1 illustrates the cost estimates for different risk
factors, sorted by importance.
Figure 5.15.1. Risk Analysis in Norwegian Investment Projects
(Deviations from base estimates)
Low High
1,000

800

600
Norwegian krone (millions)

400

200

–200

–400

–600
Project Markets Estimates Complexity Organization Interfaces Public
maturity implementation and and processes
resources dependencies

On the basis of this analysis, project allocations include two contingency items. The first is called expected
additions and reflects the difference between the base cost estimate and the expected total cost (P50). This
reserve is managed by the project implementing agency. The second item is called uncertainty reserve. It
reflects the difference between P50 and P85 (85 percent delivery confidence). This reserve is managed by the
supervisory ministry and is only released to the implementing agency after a formal procedure, whereby the
implementing agency must explain and justify why cost estimates have increased.
Source: Drevland, Austeng, and Torp 2005.
70 PIMA HANDBOOK

Institution 5: Alternative Dimension 5.a: Does the regulatory

framework support competition in
Infrastructure Financing contestable markets for economic
Is there a favorable climate for the private sector, infrastructure (for example, power,
PPPs, and PCs to finance infrastructure? water, telecoms, and transport)?
This institution is intended to assess the climate
for the private sector, PPPs, and PCs to finance QUESTIONNAIRE
economic infrastructure. The division of public and Low Provision of economic infrastructure
private responsibilities for economic infrastruc- is restricted to domestic monopolies,
ture is not the same in all countries. For example, or there are few established
internationally, electricity is commonly generated economic regulators.
and distributed by both public and private entities. Medium There is competition in some
If private firms find a stable environment in which economic infrastructure markets,
they can achieve a fair return on long-term invest- and a few economic regulators have
ment, responsibilities for some infrastructure can been established.
shift from the public sector to the private sector, High There is competition in major
thus relieving pressure on public finances. economic infrastructure markets,
Three dimensions seek to measure this climate: and economic regulators are
• The first dimension assesses if private firms independent and well established.
are free to invest and are reasonably assured
that they can earn a fair return. Because most DEFINITIONS OF KEY TERMS
economic infrastructure requires investments Term Definition
that are large and long term (often 30 years or
Economic See major economic
more), private investors look for a consistent
infrastructure infrastructure market.
regulatory history or safeguards that are likely to Domestic A domestic infrastructure market in
continue into the future. monopoly which only a single firm is operating,
• The next two dimensions look at two important and no new firms can enter.
classes of financial institutions that straddle the Economic An entity, often an independent
public and private sectors, and for which poor regulator government agency, that
institutions can shift financing risks back to the oversees one or more economic
public sector. infrastructure markets. Regulators
• PPPs are a potential source of private are typically empowered to
finance and expertise but they must be define services, set prices,
establish geographic service
structured carefully to ensure a fair alloca-
areas, and set competition policy,
tion of risk and reward.
among other issues.
• PCs form a large part of the economy in
Competition For the purpose of this institution, a
some countries. PCs exist, in part, to free
competitive market is one in which
management from political interference. any qualified firm, regardless of
But weak PC governance sometimes results ownership (for example, domestic
in financial losses for the governments that or international), is legally allowed
own them, thus undermining the goal of to enter an economic infrastructure
having PCs relieve financial pressures on market. Market entry can occur
public finances. through the purchase of an existing
market participant or by bidding
on market opportunities, such as
concessions.
5. Planning Sustainable Levels of Public Investment  71

private investments. Private investors will generally

Term Definition
be cautious about entering markets where there is
Major Revenue-generating service
extensive government involvement, particularly if
economic that (1) has the potential to be
infrastructure self-financing and (2) has been
there is uncertainty about the government view on
market provided by governments or the future development of this market and lack of
government-controlled entities transparency about specific government interven-
in some countries. For the tions. If the government wants private investment
purpose of this institution, the in the market, it must demonstrate its intention
major markets are electricity to develop a competitive market. Elimination of
(generation, transmission, and restrictions on market entry and establishment of
distribution), water (source and independent regulators are important signals in
distribution), telecommunications this regard.
(telephone and internet), and
• A low score indicates that the legal and regula-
transport (toll roads, bridges,
tory framework does not support competition
and tunnels; bus; rail; airlines
and there are few incentives for private sector
and airport; and shipping and
seaport). engagement. Domestic monopolies dominate
Independent A regulator is “independent” many markets, and there are no or few economic
regulator if it is legally an independent regulators.
agency (that is, not a unit within • A medium score implies that the picture is
a government ministry), the mixed—some markets are open for competition
agency has legal assurance of and economic regulators have been established.
professional independence, and For this score, there must be an institutional
it can hire and fire its professional framework that supports competition in a least
staff. two important submarkets and at least two regu-
Well For the purpose of this institution,
lators must be established. In many countries the
established a regulator is well established
markets for telecommunications, bus transport,
if it is (1) operating for at least
and electricity generation are among the first to
three years, (2) discharging
be opened up for competition.
duties and resposibilities defined
in law or regulation, and (3) • A high score indicates that the legal and regu-
currently employing permanent latory framework supports competition in major
staff. The three-year operating economic infrastructure markets. For this score,
requirement exists because of there must be clear support for competition in
the need to establish a pattern of at least two of the four major markets (electricity,
policy making that might lead an water, telecommunications, and transport). A
investor to infer its future policies. major market is competitive if the majority of its
subsidiary specialized markets are competitive.
INSTITUTIONAL DESIGN There is also a requirement that regulators are
This dimension aims to determine whether major independent and well established, and that there
infrastructure market environments are competitive, are at least two independent regulators, each
fair, and predictable, and thus encourage long-term covering different major infrastructure markets.
72 PIMA HANDBOOK

IMPORTANT DOCUMENTS enough, or demonstrated consistency in their

Documents Uses
policy making, to give confidence to investors
that they can achieve a return on a long-term
List of major economic Provide overview of
investment. If a market has been legally competi-
infrastructure markets, infrastructure markets
tive for at least three years but there have been
estimated annual with potential for
turnover in each market competition
no new entrants, then the market should not be
considered competitive. If the market shares of
Legislation and Assess whether the
private companies are low, then effectiveness
regulations governing legal framework
would usually be assessed as low.
access to specific markets supports competition
• Medium effectiveness indicates that private
in each market
companies have significant market shares in at
List of major regulators: Provide overview of
least two major markets. Although state-owned
name of the regulator, the key regulators
companies still may have a dominant role,
economic infrastructure
market entry by private companies indicates
market it regulates,
year established, and that they see the market as attractive and
year of major legislation expect their market share to grow in the future.
affecting each regulator This situation is common in many markets for
electricity generation. Box 5.16 describes the
Legislation and Assess the
regulations establishing independence and electricity distribution market in Ireland, where
market regulators role of each regulator there are several private companies but where
the main PC still controls about 50 percent of the
market.
EFFECTIVENESS • High effectiveness indicates that private
Effectiveness should be gauged by the numbers companies have high market shares in at least
and types of market participants and their market two major markets. This will often be a mature
shares. If all qualified firms are legally allowed to competitive market with international compe-
enter a market but have not done so, the market tition, and state-owned companies will be
is not competitive. This may be the result of many expected to play a minor role. In many countries,
possible factors. The effectiveness should be down- telecommunication markets will have reached
graded if there is any evidence of cartelization or this stage.
collusion in those markets. That evidence may be If an infrastructure market is legally competitive
produced by competition authorities or institution- but firms in the market consistently lose money or
alized observatories, or it may be highlighted by receive substantial subsidies, then competition
international reputable assessments. The actual may be distorted. This suggests government inter-
independence of regulators is also an important vention in the market, for instance, pressure on
factor to consider. regulators to keep prices charged to consumers
• Low effectiveness implies that there is little actual low. This is not uncommon in electricity or transport
competition in major infrastructure markets. markets. Such infrastructure markets should not be
There may be clear legal impediments to market viewed as fully competitive. However, this assess-
access, which would show up in the assessment of ment should be cross-checked with the number
institutional design. In addition, many countries of market participants. In principle, a well-defined
place barriers to entry that are not transparent. subsidy program can be combined with a competi-
Regulators may not have been established long tive market. In practice, this is difficult to achieve.
5. Planning Sustainable Levels of Public Investment  73

Box 5.16. Competition in Infrastructure Markets in Ireland

Ireland’s economic infrastructure markets are either open to both domestic and international competition
or regulated monopolies. The former applies to electricity generation and retail distribution, gas supply,
telephone, and internet, while the transmission networks (gas, water, and electricity), which are by their nature
natural monopolies, are closely regulated. The electricity market covers both the Republic of Ireland and
Northern Ireland, and is interconnected with Great Britain, with three private sector players and two additional
public sector generators competing with the incumbent Electricity Supply Board. The provision of broadband
internet is also highly competitive, with three alternative providers to the incumbent, Eircom Limited, ranging
from larger national operators to smaller regional wireless broadband service providers.
The main domestic regulator, the Commission for Regulation of Utilities is responsible for setting the
prices for many of the regulated monopolies. The Commission is organizationally, financially, and manageri-
ally autonomous. It sets prices for the transmission networks according to a set of economic criteria that take
account of both impact on the consumer and maintenance of investment-grade credit ratings for the related
companies. In practice, this means scrutinizing closely the company investment plans and the projections for
domestic demand that underlie them to avoid over- or under investment. Other regulators include the rail
regulator and the Commission for Communications Regulation.

Table 5.16.1. Electricity Distribution in Ireland in the Second Quarter of 2019

Company No. of Customers Consumption (megawatt hours)

Electric Ireland 1,102,991 951,672
Bord Gáis Energy 354,116 381,496
SSE Airtricity 244,262 255,699
Energia 157,898 179,413
PrepayPower 147,391 133,379
Panda 41,839 48,116
Pinergy 26,985 25,857
Others 12,153 19,025
Total 2,087,635 1,994,657
Sources: Ireland PIMA 2017; Commission for Regulation of Utilities 2019.

USEFUL DATA SERIES

Data Questions to Address
Number of market participants and market share of What is the actual level of competition in each
major companies infrastructure market?
Nature of current investors, classified by government To what extent are markets open to private and
or private (domestic and foreign) foreign ownership?
Number of bidders in recent competitive letting of What is the level of competition for infrastructure
concessions concessions?
74 PIMA HANDBOOK

Dimension 5.b: Has the government PPPs. A general policy stating that no PPPs will be
published a strategy/policy for PPPs considered does not constitute a PPP strategy/
and a legal/regulatory framework that policy for the purpose of this institution. However, a
guides the preparation, selection, and formal strategy may be restrictive, so that few PPPs
management of PPP projects? are approved.
The legal/regulatory framework for PPPs does
not necessarily require specialized PPPs laws and
QUESTIONNAIRE
concession laws. The assessment should also look
Low There is no published strategy/policy at the treatment of PPPs in other legislation such as
framework for PPPs, and the legal/
the public finance law or the budgetary framework
regulatory framework is weak.
law and in regulations. A strong legal/regulatory
Medium A PPP strategy/policy has been framework for PPPs does not require any specific
published, but the legal/regulatory legislation on PPPs (for example, a “PPP law”), and
framework is weak.
the existence of a “PPP law” does not imply that
High A PPP strategy/policy has been there is a strong framework. Most relevant is the
published, and there is a strong effective definition of the role and responsibilities
legal/regulatory framework that of PPP concessionaires, the definition of the process
guides the preparation, selection,
for the preparation, approval, procurement,
and management of PPP projects.
contract management, and fiscal risk management
of PPP projects, and the corresponding budgeting,
DEFINITIONS OF KEY TERMS accounting, and reporting procedures.
Term Definitions
• A low score indicates that both the policy/strategy
for PPPs is absent and the legal framework is
Publish See glossary
missing or is weak. PPPs may be developed
PPP Public-private partnership.
A contract between the
and approved, but this is largely based on ad
government and a private hoc approaches. In countries where policies
entity to provide public and legal frameworks are absent or weak, it is
infrastructure services for a common that PPPs are initiated by private sector
predetermined set of prices, interests through unsolicited bids, and there are
with provisions for sharing of often significant weaknesses in PPP procure-
specific risks. ment. A weak legal and regulatory framework is
PPP strategy/ A document that is formally one that addresses PPPs in some form but does
policy adopted by government or not meet the standards for a strong framework.
the legislature.
• A medium score indicates that the government
Legal/regulatory The sum of laws and sublegal
has issued a PPP policy or strategy. This should
framework acts that authorize the
address most of the following issues: eligible
creation and execution of
economic infrastructure markets; principles for
a PPP strategy/policy, or
elements of it.
sharing of risk and risk exposure per PPP; limit or
target total financing of PPPs; nature of the PPP
contract (for example, build, operate, transfer);
INSTITUTIONAL DESIGN preparation of a PPP proposal (that is, methods of
The purpose of this dimension is to assess the analysis); criteria for selection of proposals; review
strategic and regulatory framework for develop- and approval process; management oversight;
ment, appraisal, approval, and oversight of PPPs. A monitoring and reporting requirements; and
PPP strategy/policy is expected to promote some roles and responsibilities to carry out activities of
form of PPP and establish a procedure for approving preparing, selecting, and managing PPPs.
5. Planning Sustainable Levels of Public Investment  75

• A high score indicates that there is also a strong consistent with the PPP policy and legal/regula-
legal and regulatory framework. A strong legal tory framework. In some cases, approved PPPs
and regulatory framework incorporates and may deviate from the approved strategy and
codifies the previously defined components legal/regulatory framework. There may be devia-
of a PPP strategy/policy. At a minimum, it must tions in areas such as sectors in which PPPs are
determine roles, responsibilities, and proce- allowed, limits on the financial size of PPPs, and
dures for preparation, selection, procurement, principles for risk sharing between government
and contract management of PPP projects. A and private investors. If there are such deviations,
legal framework includes law and sublegal acts the PPPs in question should not be included in
approved by cabinet or above. It requires more the PPP share of public investment.
than just regulations issued by a single minister, • Medium effectiveness implies that some public
such as a minister’s instruction. investments the last three years have been
implemented as PPPs and are consistent with the
IMPORTANT DOCUMENTS PPP policy and legal/regulatory framework. The
value should be measured as the total project
Documents Use
cost of PPP projects compared with total project
PPP strategy or policy Assess institutional cost of all public investment projects approved
document design each year. If this information is not available,
Laws and regulations Assess institutional the assessment could be based on total annual
governing PPPs, not design investment outlays for PPP projects compared
limited to specialized PPP with total public investment outlays each year.
or concession laws The assessment can be based on central govern-
Instructions and Assess the technical ment or general government public investment,
guidelines for PPPs support for PPP depending on data availability.
development • High effectiveness implies that approved
projects comply with the approved PPP strategy
EFFECTIVENESS and legal/regulatory framework, and that there is
The effectiveness of a PPP strategy and legal a substantial pipeline of projects approved and
framework is measured by whether it produces implemented. Several public investments the
a pipeline of viable and efficient PPP projects that past three years have been implemented as PPPs.
are consistent with the strategy and the legal A large number of terminated or amended
framework. The purpose of the PPP framework is to PPP contracts imply that PPP policies are not
strengthen public investment by drawing on private fully effective. If some approved PPPs have been
sector skills and resources, in particular to facilitate terminated or renegotiated before the end of the
efficient risk sharing between different stakeholders. contract period, the strategy/policy may still be
Compliance with the legal and regulatory framework effective. One of the objectives of a PPP strategy/
can help achieve this goal but is generally not suffi- policy is to reduce the potential for conflict between
cient to achieve the intended results. The share of government and its private partners. Some conflict
public investment implemented as PPPs is a useful is inevitable. However, a pattern of PPPs not being
indicator but must be interpreted with caution. implemented as originally planned should be inves-
Indicative thresholds are suggested below, but tigated to determine its cause. Such a pattern can
additional indications of effectiveness might lead to be identified based on the proportion of early termi-
other conclusions regarding the scores. nations or amendments of PPP contracts, number of
• Low effectiveness implies that few public PPP contracts challenged in court by either party, or
investments are implemented as PPPs and are audit conclusions.
76 PIMA HANDBOOK

USEFUL DATA SERIES

Data Questions to Address
Number and value of PPPs approved What is the overall importance of the PPP
mechanism?
Number, financing, sector, and type of PPP in the PPP Has the PPP strategy been effective in guiding the
strategy, compared with what has been accomplished PPP portfolio?
to date
Number and financing of PPPs prepared, selected, What is the level of compliance with the PPP
or managed outside the required process or not in strategy and legal/regulatory framework?
compliance with the strategy
Number of terminated or amended PPP contracts Are there systematic weaknesses leading to
contract termination and amendment?

Dimension 5.c: Does the government Public corporation A public entity established to
oversee the investment plans of PCs and (PC) engage in market production
monitor their financial performance? (GFSM 2014). PCs are usually
separate legal entities,
but quasi-corporations
QUESTIONNAIRE
(government agencies
Low The government does not involved in market activities,
systematically review the investment for instance, electricity
plans of PCs. production) also belong
to the PC sector according
Medium The government reviews the
to GFSM 2014. Note that
investment plans of PCs but does
for the purpose of the
not publish a consolidated report
PIMA, PPPs and any special
on these plans or the financial
purpose vehicles created
performance of PCs.
as part of the PPP, are not
High The government reviews and considered PCs.
publishes a consolidated report on Consolidated A report comprising
the investment plans and financial report information on multiple PCs.
performance of PCs.
Financial Profit or loss, as reflected in
performance the statement of operations
or income statement.
DEFINITIONS OF KEY TERMS
Performance may also be
Term Definition assessed in terms of balance
Government Any entity within budgetary sheet developments.
central government. State-owned Entity organized as an
Investment plan For the purpose of this enterprise (SOE) enterprise/corporation
institution, refers to strategic and owned by the state.
plans, a pipeline of appraised SOEs may comprise PCs,
projects, projects selected extrabudgetary entities
for funding, and projects (see Dimension 7.a), and
being implemented. government entities,
depending on their activities
and the specific management
arrangements.
5. Planning Sustainable Levels of Public Investment  77

INSTITUTIONAL DESIGN should be restricted to major projects. The review

The aim of this dimension is to determine if there process does not imply prior approval or control
is coordination between government and PCs by government. Review is intended to ensure there
regarding the provision of economic infrastructure. is flow of information from PCs to the government
This will require a legal framework that establishes regarding its plans for economic infrastructure.
clear responsibilities, including reporting require- Such information may influence projects funded
ments, and an organizational unit with responsibility by government or financed by PPPs.
for PC oversight. PCs play a key role in infrastruc- • A high score implies that there is a legal require-
ture provision in many countries, and it is important ment that the government publish a consolidated
to ensure that these activities are consistent with report on the PCs’ investment plans and their
overall government strategies and plans. It is also financial performance, in addition to the review
important to realize potential synergies between of the investment plans. The consolidated report
PC investment and regular government investment, should cover the same PCs that are covered in
for instance, through coordination of implementa- the review process. If it covers substantially fewer
tion plans for a new road and a major electricity PCs than the review, then it does not qualify as
generation facility in the same area. The PCs of a consolidated report for the purpose of this
concern here are those involved in major economic dimension. Confidential market information need
infrastructure markets, as defined in dimension 5.a. not be included in a published report. However,
Investment plans for economic infrastructure are for the purposes of coordinating major economic
of interest regardless of financing source—in other infrastructure projects, the PC should inform
words, capital spending using PCs’ own funds as the executive of its overall strategy regarding
well as any other financing source, such as govern- economic infrastructure.
ment financing, should be considered.
There may be ambiguities about which govern- IMPORTANT DOCUMENTS
ment-controlled entities are PCs in a specific country. Documents Uses
This PIMA dimension focuses on governance of Legal and regulatory Assess institutional
entities involved in market activities, for instance, framework for design and formal
electricity or telecommunications. However, in PC oversight and requirements for
many countries, governance frameworks are based reporting reporting and review
on the legal nature of the entities (SOEs), not on the Consolidated reports Assess how
economic character of their activities. If it is difficult for PCs (ownership consolidated
to identify the PCs precisely, the assessment may be report) reports capture PCs’
based on governance frameworks for SOEs or other investments and
applicable categories. In these cases, the assess- financial performance
ment should specify which entities are covered. Samples of Assess how
• A low score indicates that the government has little reports from PCs investments are
knowledge of PCs’ investment plans. There may to government reflected in reports
be some limited information sharing, for instance, supervisory ministries from PCs
through government-appointed board members or agencies
on PC boards or through licensing applications, Annual reports of Compile information
but there are no legally mandated arrangements major PCs about the financial
for systematic and consistent information sharing performance and
regarding PC investment activities. investment of major
• A medium score implies that there is a legal require- PCs (when there is
ment that the government receives PC investment no consolidated
plans in a systematic manner. The review process ownership report)
78 PIMA HANDBOOK

EFFECTIVENESS process covers the largest PCs measured by

The effectiveness of this dimension should be assets or many PC infrastructure investments.
assessed by how well information sharing, coor- However, there is no consolidated report and
dination, and reporting works in practice. What is no transparent complementarities between the
the share of PCs covered by the reporting arrange- government and PC investment projects.
ments? Do the PCs comply with the reporting • High effectiveness indicates that there is
requirements? Are there specific examples of extensive information sharing and coordination
coordination of investment activities between on public investments, documented in a consoli-
the government and the PCs? If there is a consoli- dated ownership report. Formal requirements
dated report on PC investment plans and their for reporting, review and disclosure are being
financial performance, does it provide a good followed in practice, and it is easy to assess the
basis for analyzing these activities for each PC and consistency and complementarity between
across the government, or is it mainly a formal- government and PC investment projects. The
istic exercise? review process covers the largest PCs measured
• Low effectiveness implies that there is no active by assets or most of the total PC infrastruc-
information sharing and coordination of invest- ture investments. Box 5.17 describes the very
ments between the government and the major comprehensive oversight of PC infrastructure
PCs. This may be related to lack of formal investments in Brazil.
requirements, as would be evident by a low score A practice of government employees on the
on institutional design. Alternatively, formal boards of PCs will usually not be considered a
requirements may be in place but not followed system of review of investment plans. These board
in practice. Few PC infrastructure investments members will typically focus on sectoral and
over the past three years are covered by the company issues and will not be involved in broader
review arrangements. consideration of public investment. Government-
• Medium effectiveness indicates that PCs do appointed board members representing ministries
report their investment plans, but there are few are also challenging from a conflict of interest
concrete examples of coordination between perspective. OECD guidelines advise against
the PCs and the government. The review this practice.

USEFUL DATA SERIES

Data Questions to Address
The name, size, and economic infrastructure market of PCs What is the scope and coverage of the
that are reviewed and included in a consolidated report consolidated PC report?
Major PCs total capital expenditures (estimates if no How important is PC spending on public
consolidated report is prepared) infrastructure?
5. Planning Sustainable Levels of Public Investment  79

Box 5.17. Public Corporation Oversight in Brazil

In Brazil, there is competition in most markets for economic infrastructure and federal oversight of investment
and financial performance of PCs. Most markets for economic infrastructure are competitive, with domestic
and foreign competition. The share of the private sector can be significant—railways, ports, and most toll roads
are concessions run by the private sector. Telecom operators have been private since the privatization of the
sector in the late 1990s. Foreign companies are present in some sectors, such as electricity generation and
transmission, and dominant in mobile telecommunications and urban mobility.
PCs are important players in the infrastructure sector, especially Petrobras and Eletrobras. After being
agreed upon by the executive boards, the investment budgets of all 133 federal PCs are sent to the govern-
ment for review. These investment budgets are consolidated and approved by Parliament and published as
part of the annual budget law (Table 5.17.1). The Ministry of Planning and Budget publishes a consolidated
financial view of the PC portfolio annually. Since late 2016, quarterly bulletins provide additional information
on PCs’ financial performance and execution of investment.

Table 5.17.1. Brazilian Public Corporations’ Investments in 2015 and 2016

(Brazilian reals)

Name Full Form 2015 2016

AmE Amazonas Distribuidora de Energia S.A. 80,709,710 NA
CDC Companhia Docas do Ceará 30,066,056 7,273,764
CEPISA Companhia Energética do Piauí 60,223,385 NA
CHESF Companhia Hidro Elétrica do São Francisco 12,522,424 NA
CODESA Companhia Docas do Espírito Santo 65,981,582 49,482,859
CODESP Companhia Docas do Estado de São Paulo 208,352,723 110,604,696
ELETROACRE Companhia de Eletricidade do Acre 8,372,163 28,758,754
ELETRONORTE Centrais Elétricas do Norte do Brasil S.A. 8,688,575 NA
ELETRONUCLEAR Eletrobras Termonuclear S.A. 1,727,184,863 782,771,481
FURNAS Furnas—Centrais Elétricas S.A. 60,875,166 14,649,506
INFRAERO Empresa Brasileira de Infraestrutura 985,460,787 609,991,964
Aeroportuária
PETROBRAS Petróleo Brasileiro S.A. 46,429,818,602 28,675,731,872
PNBV Petrobras Netherlands B.V. 5,097,875,238 3,920,533,956
TELEBRÁS Telecomunicações Brasileiras S.A. 590,873,743 313,859,490
TGO Transenergia Goiás S.A. NA 53,698,898
TRANSPETRO Petrobras Transporte S.A. 1,310,588,310 944,658,154
Others 19,680,944 19,262,721
Total 56,677,593,327 35,512,015,394
Source: Country authorities of 2017 Brazil PIMA mission (http://www.pac.gov.br/).
Note: NA = no data available.
 6
Allocating Investments to the Right
Sectors and Projects
Allocating public investment to the most produc- government, within the general government, and
tive projects requires comprehensive and stringent between the government and other parts of the
budgeting practices. There should be consistent public sector is a critical issue. Project selection
medium-term budgets, budget coverage should procedures should ensure that the right projects
be comprehensive, and the full cost of investment are chosen, and maintenance allocations should be
projects should be identified. Efficient coordination based on robust methodologies.
of investments among entities within the central

81
82 PIMA HANDBOOK

Institution 6: Multiyear DEFINITIONS OF KEY TERMS

Budgeting Term Definition

Projection An anticipated amount of money
Does the government prepare medium-term
available for spending in the future. It
projections of capital spending on a full cost basis?
reflects policy. It is not a baseline or a
Major public investment projects take more mechanical calculation of a percentage
than one year to implement, and spending is not of expected future revenue.
evenly spread over years. This complicates capital Capital See the Glossary
budgeting. The sum of required spending for spending
ongoing and new projects should be within the Budget year Fiscal year for which a budget is being
total amount of money estimated to be available. prepared, and thus, typically, it has not
This type of multiyear analysis can appear in yet started.
budget documentation even if the budget system
is annually focused. The three dimensions under
INSTITUTIONAL DESIGN
this institution are designed to identify whether this
The purpose of this dimension is to see whether
information is systematically available:
there is a basis for multiyear prioritization of capital
• The first dimension evaluates whether there are
spending. The existence of financing constraints for
multiyear estimates of the total amount of money
capital spending is expected to encourage priority
available for public investment spending.
setting among projects. A multiyear perspective on
• The second dimension assesses whether the
financing constraints is necessary because major
aggregate multiyear estimates are broken down
projects are usually implemented over more than
by the ministry or sector ceilings. Because most
one year. This is similar to the purpose of estab-
of the major projects are proposed by line minis-
lishing financial constraints when planning, as
tries, projects can be prioritized most effectively
described in Dimension 2.b.
if the multiyear funding constraint is brought
• If the budget document only provides budget
down to their level.
allocations for one year, or if multiyear estimates
• The third dimension identifies whether the
do not distinguish capital spending, the institu-
total estimated costs for each project, and the
tional design should receive a low score. This
required spending for each year within that total,
will often be the case in countries with annual
are known and publicly available. Both types of
budgets and no systematic medium-term fiscal
information are needed to determine the total
or budget frameworks.
demand on the capital budget and, conversely,
• If there are medium-term projections of
to allocate the capital budget each year.
aggregate capital spending, the score should be
medium. These projections will often be part of
Dimension 6.a: Is capital spending by
a comprehensive medium-term fiscal framework
ministry or sector forecasted over a
(MTFF), providing aggregate spending projec-
multiyear horizon?
tions for all major budget components.
QUESTIONNAIRE Medium-term frameworks will usually cover at
least three years, including the budget year, and
Low No projections of capital spending are
may have a longer horizon. For a medium or
published beyond the budget year.
high score, capital spending projections must
Medium Projections of total capital spending are
be published, but not necessarily as part of the
published over a 3- to 5-year horizon.
budget document itself. Production of internal
High Projections of capital spending estimates of future capital spending is not suffi-
disaggregated by ministry or sector are cient. It would be most useful if the projections
published over a 3- to 5-year horizon.
were included in the budget documentation for
6. Allocating Investments to the Right Sectors and Projects 83

information purposes. However, publication of IMPORTANT DOCUMENTS

medium-term estimates as part of a fiscal policy Documents Uses
document or in an annually updated public
Medium-term Assess whether multiyear
sector investment program is also acceptable, as
budget documents estimates for capital
long as these are consistent with the estimates in
spending are presented
the budget documents. and in which form
• If the medium-term projections for capital are
Other documents Assess whether multiyear
published and presented according to ministry
including medium- estimates for capital
or sector, the design score should be high.
term capital spending are presented
This will generally be the case in countries
projections and in which form
with well-defined medium-term budget frame-
works (MTBFs). In addition, some countries may
produce medium-term projections for capital EFFECTIVENESS
spending or for major capital projects, even in If aggregate capital spending forecasts are
the absence of a general MTBF. If these projec- significantly different from actual total budget
tions provide a complete overview of capital spending for capital projects, then the effective-
spending, the score could be high even in the ness is limited. In particular, if the projection is
absence of a full MTBF. Capital spending may higher than the approved capital budget alloca-
be projected by either ministry or sector. The tions, then the benefit of making the projection
projections should be made using the same is weaker proportional to the size of the forecast
high-level categories that appear in the budget error. The forecast error should be measured as
classification. The purpose of disaggregating the a weighted average across ministries or sectors
overall capital funding amount is to guide units over the past three years.
preparing detailed budget proposals on the If projections of capital spending are prepared
total size of projects they can propose. but not published, then effectiveness may be higher
Projections of capital spending in national than the design score indicates. Countries may wish
or sectoral plans do not meet the intent of this to make capital spending projections but use them
dimension. Plans are often prepared without regard internally in the government without publication.
to fiscal constraints. For this dimension, projections Countries may choose not to publish as a political
of capital spending must be made by the Ministry consideration to avoid creating public expectations
of Finance (MoF) and derived from projections of during periods of economic, fiscal, or policy uncer-
overall fiscal variables, for example, total revenue, tainty. This is especially true for countries that do
expenditure, and deficit. Similarly, ministry and not have a formal medium-term budgeting system.
sector projections must be determined in the • Low effectiveness indicates that medium-term
budget process, typically as part of a top-down capital spending projections do not exist or that they
budget process in which ceilings are announced at deviate significantly from the subsequent budget
the beginning of the budget preparation cycle. allocations. This applies if budget allocations are
It is not a requirement for the scoring under this significantly higher or lower than projections.
dimension that capital spending projections are • Medium effectiveness indicates that capital
binding. As is the case of MTFFs, there are signifi- spending projections deviate somewhat from
cant benefits in projecting capital spending based budget allocations. This applies if aggregate
on the available information, even if economic and capital budget allocations are somewhat higher
fiscal circumstances, and policies, may change or lower than projections as an average over the
in the future. Under Dimension 6.b, which covers past three years. Alternatively, the comparison
multiyear budget ceilings, there is also a separate can be based on capital allocations by ministry
assessment of whether the projections are binding. or sector, weighted according to their value. The
This is not the case under Dimension 6.a. result should be the same. A medium score is
84 PIMA HANDBOOK

also warranted if medium-term capital spending to achieve a high score on effectiveness if the
projections are made by the MoF and made projections are not published.
available to line ministries but not published. If • High effectiveness implies that projections
the MoF can document that the information is are consistent with subsequent budget allo-
used when preparing budgets, the effective- cation. Some deviation is always possible, but
ness score may be raised from low to medium. medium-term projections should on average
However, publication of projections adds to the be broadly in line with budget allocations.
transparency and consistency of the budget Box 6.1 describes the capital projections in
process, and it will generally not be possible Jordan, which have been robust.

USEFUL DATA SERIES

Data Questions to Address
Compare projections of capital spending with Did capital spending projections effectively facilitate
approved budget amounts for capital spending for prioritization of capital budget allocations?
the same years
If the country has a development budget and an Is analysis based on capital spending, not on
operating budget, provide breakdown of these development spending?
budgets in capital and current spending

Box 6.1. Medium-Term Capital Spending Projections in Jordan

In Jordan, capital expenditure is forecasted over a three-year period, on a rolling basis. Both the General
Budget Law and the Budget Laws of Government Units provide estimated capital expenditure for the budget
year and indicative capital expenditure for the following two years, by ministry, program, governorate, and
project. While the ceilings set for the out-years are not binding, the outturns have not exceeded the indicative
ceilings set for capital expenditure since 2012. On average, the budget outturn is 11 percent below both the
annual budget and the previous year’s indicative forecast (Figure 6.1). This indicates that budget allocations
on average are broadly consistent with medium-term projections.

Figure 6.1. Medium-Term Budgeting of Capital Expenditure Versus Actual in Jordan, 2010–16
(Jordanian dinars)
Two-year projection Actual
1,600,000

1,400,000

1,200,000

1,000,000

800,000

600,000

400,000

200,000

0
2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: Jordan PIMA 2017.
6. Allocating Investments to the Right Sectors and Projects 85

Dimension 6.b: Are there multiyear horizon. Projections, as used in Dimension 6.a, are
ceilings on capital expenditure by analytical and informational in nature. They are antic-
ministry, sector, or program? ipated amounts. Ceilings, as used in Dimension 6.b,
are operational limits on budget requests, whether
QUESTIONNAIRE indicative or binding.
• A low score on this dimension implies that
Low There are no multiyear ceilings on
no multiyear ceilings on capital spending are
capital expenditure by ministry, sector,
provided to ministries before the submission
or program.
of budget requests. Ceilings are intended to
Medium There are indicative multiyear ceilings
constrain detailed budget requests and must
on capital expenditure by ministry,
be issued before budget preparation is finished.
sector, or program.
Therefore, ceilings may be issued in an MTFF
High There are binding multiyear ceilings at the beginning of the budget preparation
on capital expenditure by ministry,
cycle or in annual budget instructions. If neither
sector, or program.
document exists, a ceiling must be issued before
the deadline for submission to the central budget
DEFINITIONS OF KEY TERMS
office of detailed budget requests.
Term Definition • A medium score indicates that capital ceilings
Multiyear The budget year plus two years or are issued, but that they are indicative. Ministries
more after the budget year. may submit budget requests that go beyond
Ceiling In this context, the maximum funding
the indicative ceilings without these submis-
that can be requested during sions being rejected. There may, however, be
budget preparation. Given that most specific requirements for justification or docu-
budget entities will request funding mentation of submissions beyond the ceilings. It
up to the maximum allowable is common that the ceilings for the budget year
amount, a ceiling often represents a are more binding than the out-year ceilings. For
preliminary budget allocation. the purpose of this dimension, binding ceilings
Ministry, As defined in the budget for the budget year and indicative ceilings for the
sector, or classification. out-years would still qualify as a medium score.
program • A high score indicates that the capital spending
Indicative For information purposes only and ceilings are binding, for the budget year as well as
subject to change. the out-years. This does not mean that the ceilings
might not change in next year’s budget process.
Binding A decision that is final (unless
fundamental factors change and However, any changes in budget ceilings would
there are explicit decisions and need to be explicit, explained, and documented.
documented changes to budget The MoF should provide a step-by-step expla-
ceilings). nation of any changes in budget ceilings from
one budget year to the next. Box 6.2 provides
INSTITUTIONAL DESIGN an overview of the capital budgeting framework
The purpose of multiyear ceilings is to operation- in Mali, which was assessed to be well designed
alize the financing constraints for capital spending and highly effective in the 2018 PIMA.
that follow from the MTFF and the multiyear capital Capital spending ceilings may be issued by
spending projections. This is a continuation of the ministry, sector, or program. The ceilings must
discussion under Dimension 6.a. The difference correspond to groupings also used in the budget
here is that budget ceilings are more operational classification. Otherwise, the ceilings will not have
in nature, more detailed, and have a shorter time direct effects on the budget submissions.
86 PIMA HANDBOOK

Box 6.2. Multiyear Programming in Mali

Budget ceilings with actual and comprehensive costs have been introduced in multiyear frameworks
(Table  6.2.1). Documents issued and published by the units in charge of multiyear programming are both
complementary and consistent.
• The Medium-Term Economic and Fiscal Framework (DPBEP) for 2020–22 has been submitted to
Parliament during the FY 2020 prebudget debate (end June 2019) and includes multiyear projections
by type of expense and by ministry over 2020–22.
• The three-year investment plan (PTI) for 2020–22 prepared by the National Development Planning
Directorate (DNDP) provides the three-year rolling investment plan and is appended to the 2020 Budget
Law as Annex K (Etat K).
• The Special Budget for Investment (BSI), which is the annual component of the three-year investment
plan, is incorporated into the budget and presented in the 2020 Budget Law. The PTI reflects all project
costs as well as annual expenditure for each project for a three-year period.
• All ministries prepare sectoral Medium-Term Expenditure Frameworks (CDMTs).
Mali’s multiyear capital expenditure programming system is largely consistent. The multiyear budgeting
mechanism secures the allocation of resources for public investments. The programming tools (DPEBP and
PTI) are consistent with the annual budget. The mechanism to carry funds forward is used as follows: system-
atically for externally financed expenditure or subject to a government’s decision for domestically financed
expenditure. Progress made in multiyear budget management has been further consolidated by the gradual
implementation of commitment control through commitment authorizations and payment allocations, starting
in 2018.

Table 6.2.1. Medium-Term Capital Budget in Mali, 2020–22

(Millions of African financial community francs)

Three-year investment plan, 2020–22 2020 2021 2022 Total

Total 643,104 646,448 412,229 1,701,781
Including internal financing 293,104 316,491 251,376 860,971
Including external financing 350,000 329,957 160,853 840,810
Sources: Mali PIMA 2018; Mali Finance Law 2020.

Ceilings on total spending by ministry, sector, IMPORTANT DOCUMENTS

or program do not qualify as a capital spending Documents Uses
ceiling under this dimension. The ceiling should be
Annual budget call Analyze whether budget call
specifically for capital spending. If the ministries
provides multiyear ceilings
are only provided with ceilings on total spending,
and in which form
including current as well as capital, the score
Other document Analyze whether other
should be low.
specifying capital documents provide multiyear
There is no requirement that capital spending
budget ceilings ceilings and in which form
ceilings be published. Budget ceilings are primarily
a tool for internal management of the budget prep-
aration process and are confidential in many cases. EFFECTIVENESS
Although Dimension 6.a indicates that it is useful to If ministry or sector capital spending ceilings are
publish projections for aggregate capital spending, issued but the approved budget amounts are signif-
there is no similar requirement for the specific icantly different, then the ceilings do not have the
budget ceilings. desired effect. This applies for both binding ceilings
6. Allocating Investments to the Right Sectors and Projects 87

(design score high) and indicative ceilings (design Dimension 6.c: Are projections of the
score medium). The deviation should be measured total construction cost of major capital
as the deviation between total capital ceilings and projects published?
approved capital budget or as a weighted average
across ministries or sectors. The result should be
QUESTIONNAIRE
the same. It should be measured over the past
three years, if data are available. If data for ceilings Low Projections of the total construction
cost of major capital projects are not
in previous years are missing, the assessment can
published.
be made on the basis of the ceilings for the last
approved budget. Medium Projections of the total construction
• Low effectiveness indicates that approved capital cost of major capital projects are
published.
budgets are significantly higher than the ceiling.
• Medium effectiveness implies that approved capital High Projections of the total construction
budgets are somewhat higher than the ceiling. cost of major capital projects are
• High effectiveness indicates that approved capital published, together with the annual
breakdown of these costs over a 3- to
budgets are broadly in line with the ceiling.
5-year horizon.
Governments may use other methods than
formal budget ceilings to constrain capital spending
requests. For example, ministries may be informed
that they cannot request more than a certain DEFINITIONS OF KEY TERMS
percentage of the capital budget they received in Term Definition
the current year, or that they must include in their Total The total amount required
request certain projects but not others. If there is construction to plan, prepare, design,
written guidance from a central authority within the cost construct, and hand over a public
executive (for example, MoF, Ministry of Economy, investment project. Equivalent
or cabinet) that clearly constrains a ministry’s to total project cost (see
capital budget proposal, this may be considered Dimension 8.a).
as an implicit budget ceiling. The effectiveness of Publish See the Glossary.
such constraints should be assessed by comparing
Annual The amount of spending
the implicit ceiling imposed by the constraint with breakdown expected each year over the total
actual capital spending, in the same way as when period of construction.
there are formal budget ceilings. If the constraint on
capital spending can be formulated as an implicit
budget ceiling, and this implicit ceiling has proven INSTITUTIONAL DESIGN
to be effective, then this can justify changing the Total cost estimates are necessary to ensure
effectiveness score on this dimension as compared funding and to assess the performance of major
with the design score. public investment projects. Because major projects
are implemented over more than one year whereas
appropriations typically are made annually, publica-
USEFUL DATA SERIES
tion of the total project cost is necessary to identify
Questions to
financing needed beyond the budget year, including
Data Address
adjustments during project implementation (see
Compare ministry or sector What is the Dimension 14.b) and cost overruns. The total project
ceilings for capital spending effectiveness or construction cost for a project equals the sum of
with capital spending of the capital
actual expenditures through the prior year, planned
amounts in the approved ceilings?
spending in the current year, and planned spending
budget for 3 years
beyond the current year required to complete the
88 PIMA HANDBOOK

construction. It should include the cost of feasibility IMPORTANT DOCUMENTS

studies and detailed design that may have been Documents Uses
supported by separate appropriations. An alterna-
Budget and PIP Are there regulatory
tive way to present the total costs of a project would
preparation requirements for publication
be to publish both the current and the remaining
regulations of total projects costs?
expenditures for the project.
• A low score indicates that there are no published Budget Analyze whether total
documents project costs are published
estimates of total construction costs for indi-
in budget documents
vidual major projects. In these cases, it is not
possible to assess whether the funds allocated to Public investment Analyze whether total project
a project in the budget are sufficient to ensure program costs are published in public
efficient project implementation or how long it investment programs

will take to complete the project. It will not be

possible to see how total cost estimates for a EFFECTIVENESS
project evolve over time and whether there are If cost overruns and other changes in budget
cost overruns. estimates are not explicitly identified and explained,
• A medium score indicates that the total costs for the effectiveness of cost estimate publication is
each major project are estimated and published, reduced. Budget documents should explain when
but that there is no indication of the distribution and why cost estimates are changed and provide
of these costs over time. When cost estimates a reconciliation of such changes over time. This
for major projects are published it is possible to should include the initial cost estimate, the changes
assess how these estimates develop and whether over time, and the most recent cost estimate along
estimates increase over time, but it is still difficult with short explanations.
to see whether annual project implementation is • Low effectiveness indicates that changes in
in line with plans. total construction costs are not identified and
• For a high score, the total cost estimates for each explained. It may be because there are no
major project must be supplemented by indica- published estimates of total construction costs,
tions of how these costs are distributed over time, consistent with a low score on institutional design.
at least for a three- to five-year horizon. With this In addition, it may be that total construction costs
information, it will be possible to compare annual are published at some point, for instance, when a
and total project costs with available resources project is approved, but that there is no informa-
over the medium term. It will also be possible to tion about subsequent changes to this estimate.
assess annual project implementation compared • Medium effectiveness implies that total construc-
with plans. However, the information will still be tion costs are published, and changes in estimates
incomplete for projects with an implementation are recorded and explained. These changes may
period longer than three–five years. be explained in a published document, such as
Total costs of each major project should be the annual MTEF or budget documents or a PIP,
published as part of or together with a medium- or in internal government documents.
term expenditure framework (MTEF) or budget • High effectiveness implies that total construc-
documents. This can be done in the MTEF document tion costs and the annual breakdown of costs
itself, an annually updated public investment public on a three- to five-year horizon are published,
investment program (PIP), or another suitable and changes from one budget to the next are
document. The information should be available recorded and explained. These changes should
for the purpose of medium-term budgeting. This be explained in a published document, such as
is different from Dimension 8.a, which asks if infor- the annual MTEF or budget documents, or a PIP.
mation is available to the legislature at the time of Box 6.3 describes the Kiribati Development Fund
budget appropriation. budget, which provides extensive information
6. Allocating Investments to the Right Sectors and Projects 89

Box 6.3. Capital Spending Development Fund in Kiribati

In Kiribati, Development Fund reports provide useful information on the cost of capital projects over time
(Table 6.3.1). The detailed Development Fund table in the budget shows project listings organized by ministry.
The total cost of each project is approved at its inception. Full funding of projects allows contracting for
multiyear projects, prevents end of year funding pressure, and prevents the need to find funding for ongoing
projects. The Development Fund includes both recurrent and capital spending organized by ministry.
Recurrent spending in many cases is for discrete noncapital activities that will not continue once they have
been completed; projects that would not be included in baseline recurrent expenses.

Table 6.3.1. Project Information in Development Fund Reports in Kiribati

Costs and Budget and

Expenditure Before Forward Year
Details Current Year Current Year Information Information
Implementing ministry Total Approved 2017 Budget 2018 Budget
Cost of Project
Project name 2016 actual 2017 Supplemental Budget 2019 Estimate
Donor (Including the Remaining balance 2017 Revised Budget 2020 Estimate
government of Kiribati) as of January 1, 2017
2017 Estimated Expenditure 2021 Estimate
Source: Government of Kiribati 2018.

about total costs of each major project and information on all amendments to project costs
discloses any revisions. are clearly documented and explained (starting
Total cost estimates that are revised frequently with initial and showing each revision), then cost
can still be effective. Looking forward, they give overruns and delays can easily be seen (see also
an updated view of the total cost of a project. If Dimensions 13a and 14b).

USEFUL DATA SERIES

Data Questions to Address
Compare initial cost estimates and final expenditures What is the change in total project cost during
(aggregate and by year) for selected major projects project implementation?
Identify changes in total project costs from one year How have changes in total project costs occurred
to the next (that is, rolling updates and the gross over time?
amount and percentage of annual change)
90 PIMA HANDBOOK

Institution 7: Budget fall outside the definition of EBEs. Still, public

corporations may carry out important public
Comprehensiveness infrastructure investment, often without disclo-
and Unity sure in budget documents.
• Third, the process used when preparing the
To what extent are capital spending and related
operating and capital budgets, and the presen-
recurrent spending undertaken through the
tation of them, determines how well activities
budget process?
and projects financed in the two budgets are
coordinated. Budget unity becomes more
A central budgeting principle is that all spending
complicated if budget comprehensiveness is not
proposals should be evaluated together in
evenly applied across the overall budget. For
order to allocate money most efficiently. First,
example, if extrabudgetary funds pay for capital
capital projects should be selected from among
projects but the operating activities are financed
all proposed capital projects. This is called the
in the central government budget, or vice versa.
comprehensiveness of the capital budget. Second,
capital projects should be selected with the related Dimension 7.a: Is capital spending
operating activities in mind. All completed infra- mostly undertaken through the budget?
structure must be operated and maintained, and
much infrastructure supports activities with goals QUESTIONNAIRE
and objectives expressed in the operating budget.
Low Significant capital spending is undertaken
The integration of the operating and capital
by extrabudgetary entities with no
budgets, which may be complicated, is referred to legislative authorization or disclosure in
as the unity of the budget process. This institution the budget documentation.
does not cover public investment by subnational
Medium Significant capital spending is undertaken
governments, which was covered by institution 3.
by extrabudgetary entities, but with
The three dimensions in this institution are legislative authorization and disclosure in
designed to measure key aspects of the compre- the budget documentation.
hensiveness of the capital budget and the
High Little or no capital spending is undertaken
coordination of the operating and capital portions
by extrabudgetary entities.
of the overall budget.
• First, the existence of extrabudgetary entities
DEFINITIONS OF KEY TERMS
(EBEs) undermines the comprehensiveness of
the budget process overall. EBE are organiza- Term Definition
tions that carry out government functions but are Significant See the box on recommended
outside regular budgetary procedures. It affects capital spending scoring criteria.
the capital budget to the extent that the EBEs Extrabudgetary See GFSM 2014, paragraph
spend money on capital projects. entity (EBE) 2.41—“government entities with
• Second, the budget process should cover all a separate legal identity and
public investment projects, regardless of how substantial autonomy, including
they are financed. Many budget systems treat discretion over the volume and
spending from different financing sources composition of their expen-
differently. For example, externally financed ditures and a direct source of
projects, and projects procured as public- revenue, such as earmarked
private partnerships, are sometimes not taxes. Such entities are often
included in the capital budget, which reduces established to carry out specific
its comprehensiveness. Most public corpora- functions, such as road construc-
tion or the nonmarket production
tions (state-owned enterprises) primarily carry
of health or education services.”
out nongovernment (market) functions and they
6. Allocating Investments to the Right Sectors and Projects 91

extra-budgetary public investment, but this

Term Definition
investment is required to be disclosed in
Legislative Prior approval by the
budget documentation and subject to some
authorization legislature.
form of legislative authorization. This authoriza-
Disclosure Information is included in budget tion can take different forms. It can be a detailed
documents to inform the legis- approval of each major project, or it can be
lature and the public of ongoing
a more general endorsement of the EBEs’
activities, for instance, invest-
investment plans. Disclosure in the budget
ments by EBEs, but is not subject
documentation exists, for the purpose of this
to approval by the legislature.
institution, only if individual projects are named
Budget See the Glossary. Note that
and their cost indicated, or if projects of similar
documentation budget documentation
purpose are presented as a group. Excessive
under this dimension refers
grouping means that there is not enough infor-
to the government budget
mation to coordinate EBE-funded projects with
documentation, not EBE
budget documentation. projects appearing in the central government
budget.
• A high score applies when the legal and regu-
INSTITUTIONAL DESIGN latory framework requires that the volume of
The aim of this dimension is to assess whether extra-budgetary spending is small compared
selection of projects is made with knowledge of with the regular budget and is authorized or
the pool of all possible projects, and therefore if disclosed in the budget. In these cases, there are
the right projects are selected. Dimension 7.a only restrictive rules for the establishment of EBEs or
applies to investments by EBEs. Public corporations for investment activities by such entities.
(PCs) and special purpose vehicles for public-private This dimension may be concerned with organi-
partnerships (PPPs) are usually not defined as EBEs zations other than regular EBEs. Some countries
and projects funded by PCs or through PPPs should use extrabudgetary financial institutions, such as
not be considered here. They are considered in development banks or special funds, to finance
Dimension 7.b. As discussed under Dimension 5.c, projects that could be included in the govern-
there may be uncertainty about which state-owned ment capital budget. Such institutions and their
enterprises (SOEs) are PCs and which are EBEs or public investment activities should be included
government units. If this can be ascertained, the in the assessment of this dimension as long
SOEs that are EBEs should be discussed under this as they fall under the GFSM 2014 definition of
dimension. Otherwise, the whole SOE sector should an EBE.
be covered under Dimension 7.b. The assessment
should in any case clarify the institutional coverage.
IMPORTANT DOCUMENTS
• A low score implies that the legal and regulatory
framework allows for significant extrabudgetary Documents Uses
public investment and there is no formal require- Legal framework for EBEs Assess definitions of
ment for legislative authorization or disclosure. EBEs and requirements
This is the case in many countries where key parts for budget approval
of public infrastructure have been moved out of and reporting

the central government, for instance, road funds. Consolidated overview of Assess size of EBE
Significant capital spending by EBEs means that EBE activities, including investment activities
it on average constitutes more than 10 percent of in budget documentation

capital spending approved in the budget. Annual reports for major Assess size of EBE
• A medium score also implies that the legal and EBEs (If no consolidated investment activities
overview)
regulatory framework allows for significant
92 PIMA HANDBOOK

EFFECTIVENESS Box 6.4 describes the high level of capital budget

The effectiveness assessment of this dimension comprehensiveness in Armenia, including little
should reflect whether the formal rules for capital extrabudgetary spending.
budget approval and disclosure are applied in
practice. If the regulatory framework for EBEs
USEFUL DATA SERIES
requires that their investments be authorized by,
endorsed by, or disclosed to the legislature but Data Questions to Address
this is not done in practice, the effectiveness score Number and size of What is the relative
could be lower than the design score. Alternatively, EBEs importance of EBEs in
if there is a well-established practice to disclose the public sector?

EBE capital projects in budget documents although Amount of EBE capital What is the role of EBEs
this is not legally required, effectiveness could be spending on economic in the provision of public
infrastructure infrastructure?
higher than the design score indicates.
• Low effectiveness indicates that there is signifi-
cant extrabudgetary public investment without Dimension 7.b: Are all capital projects,
legislative authorization or disclosure in the regardless of financing source, shown in
budget. This might be because there are no the budget documentation?
formal requirements, as indicated by a low score
on institutional design. Or there may be formal
QUESTIONNAIRE
requirements that are not applied or followed
in practice. Low Capital projects are not
comprehensively presented in the
• Medium effectiveness implies that even if extra-
budget documentation, including
budgetary capital spending is significant, actual
PPPs and externally financed and
budget authorization or disclosure covers
PCs’ projects.
most EBE capital spending. This score may be
Medium Most capital projects are included
higher than or the same as the score on institu-
in the budget documentation, but
tional design.
either PPPs, externally financed or PC
• High effectiveness indicates that there is little
projects, are missing.
investment spending by EBEs and that most of this
High All capital projects, regardless of
spending is authorized in the budget or disclosed
financing sources, are included in the
in budget documents. This would generally
budget documentation.
coincide with a high score on institutional design.

Box 6.4. Budget Comprehensiveness in Armenia

Public investments in Armenia are mostly undertaken through the state and municipal budgets. In 2017, the
capital expenditure made by extrabudgetary funds was limited to 0.1 percent of GDP, a large majority of which
was composed of police equipment and civil servant apartments acquired by earmarked revenue. The capital
expenditures undertaken by state and municipal noncommercial organizations were also minimal.
There are no data on the capital expenditures of PPPs and PCs that would be classified as general government
units according to GFSM 2014; the former may be relatively small because three out of four PPP contracts were
concluded more than 10 years ago, and onlending that funds most of PCs’ capital projects is undertaken through the
state budget.
Source: Armenia PIMA 2018.
6. Allocating Investments to the Right Sectors and Projects 93

DEFINITIONS OF KEY TERMS as well as partially owned entities. Legal forms

Term Definition
may vary—PCs can be statutory bodies as well
as joint stock companies. PPPs may also take
Capital project See the Glossary
many different forms (see the discussion under
Not comprehensively Fewer than 75 percent of Dimension 5.b). External financing may come
presented capital projects in each
from international financial institutions, as well as
category (by value) are
multilateral and bilateral development partners,
included in the budget
and comprise grants, concessional loans, and
documentation.
nonconcessional loans.
Budget See the Glossary
• A medium score indicates that most projects
documentation
are required to be comprehensively presented,
Externally financed See the Glossary but that projects for one of the three financing
Most capital projects More than 75 percent of channels are missing in budget documentation.
capital projects in each If no projects are financed by a specific source,
category (by value). that financing source should not be considered in
Financing source See the Glossary meeting the scoring criteria. For example, if there
All capital projects More than 90 percent of are no PPPs in a country, then a budget must
capital projects in each include either externally financed or PC projects
category (by value). to achieve a medium score.
• A high score indicates that all projects under-
INSTITUTIONAL DESIGN taken through the three channels mentioned are
The aim of this dimension is similar to Dimension required to be included in budget documents:
7.a: to assess whether projects are selected with the ww For PPPs, all financing should be shown in the
knowledge of all possible projects, and therefore if budget, to indicate the size of the project.
the right projects are selected. The difference is that The budget will usually authorize and control
Dimension 7.b focuses on financing sources rather spending for direct expenditures of public
than EBEs. The term financing source is used here funds, for instance, accessibility payments.
in a broad sense. It includes PPPs and PC infrastruc- The budget should show for information
ture investments, as well as government investment purposes private investments related to
financed by external sources. The effects of EBEs the PPPs or investments by an independent
on the comprehensiveness of the capital budget agency, bank, or fund capitalized with public
are fully addressed in Dimension 7.a. As discussed funds. The budget document should also
under Dimension 5.c, there may be uncertainty disclose guarantees and other contingent
about which SOEs are PCs and which are EBEs or liabilities related to PPPs, but the assessment
government units. If this can be ascertained, the of this disclosure is done under dimension 3.c
SOEs that are EBEs should be discussed under and not here.
Dimension 7.a. Otherwise, the whole SOE sector ww For PCs, the budget should disclose invest-
should be covered Dimension 7.b. The assess- ment projects related to major infrastructure
ment should in any case clarify the institutional markets. In most cases, this information should
coverage. be provided in the budget for information
• A low score indicates that the legal and regula- purposes only. The exception would be for
tory framework requires no budget disclosure countries and PCs for which there are legal
of projects financed by any of the three major requirements that the legislature approve their
nonbudgetary financing sources (PCs, PPPs, capital budgets. This is common in many Latin
and external sources). PCs include fully owned American countries.
94 PIMA HANDBOOK

ww For externally financed projects, all project may require compilation of data from different
expenditures should be shown and authorized sources. The estimates should be reconciled with
in the budget on a gross basis. The inflow of the authorities.
external funds should be shown as revenue • Low effectiveness means that few projects imple-
(for grants) or as financing (for loans) in the mented by PCs, as PPPs or through external
budget documents. If the budget only includes financing, are comprehensively presented. This
government cofunding of externally financed may be because there are no formal require-
projects, this does not meet the requirements ments for such disclosure, as indicated by a low
under this dimension. score on institutional design, or because the
requirements are not complied with.
IMPORTANT DOCUMENTS • Medium effectiveness means that most capital
Documents Uses
projects are disclosed in budget documentation.
Projects from one category may be missing, as
Legal frameworks for Clarify formal
indicated by a medium design score.
investments by PPPs, requirements for
• High effectiveness implies that disclosure is full
externally financed authorization and
and comprehensive. Most projects are included
investments, and PC disclosure
investments from each of the three funding categories.
Box 6.5 describes how Timor-Leste budget
Summary documents Estimate the value
documents provide a complete picture of public
for PPPs, externally of these investments
investments regardless of financing source.
financed investments, compared with budget-
and PC investments, funded investments If countries meet the disclosure criteria in a
including in budget formal sense, but the information provided is not
documentation transparent or is difficult to interpret, the effective-
ness could be lower than the design score. This
Annual reports for Estimate the value
major PCs of these investments could be the case if information is highly aggre-
compared with budget- gated and does not provide any information on the
funded investments (if major projects financed by the different sources.
there are no summary PC If the information provided on PPPs is limited,
reports) the effectiveness of this disclosure may also be
lower.
EFFECTIVENESS If the number and value of projects in an
The effectiveness of this dimension is measured omitted category is small, the effectiveness score
by the compliance with formal disclosure require- may be higher than the design score. For instance,
ments. If a category of projects is only partially if externally financed projects and PC investments
presented in budget documentation, the effective- are fully presented but there is a single, small PPP
ness score may be lower than the design score. in a country that is not included, the effectiveness
This assessment requires estimating the total value score may still be high. This would require that the
of projects financed from nonbudgetary sources. value of the projects in the omitted category be
This will often have to be done in the field and negligible.
6. Allocating Investments to the Right Sectors and Projects 95

Box 6.5. All Capital Projects Shown in Budget Documents in Timor-Leste

The budget presents a comprehensive picture of capital investments (Table 6.5.1). Budget Book 3A contains
detailed information on the projects approved by the Infrastructure Fund, which is an agency under the consol-
idated fund (CFTL) and reviews all investment projects of $5 million or more. The information is presented by
project and by program undertaken by respective line ministry. Budget Book 3A also contains information
on loan-financed components of projects. Budget Book 3B covers projects implemented at the subnational
government levels. Budget Book 3C on the special economic zones of Oecusse and Atauro presents informa-
tion on their planned capital investment. Development partner grants are provided in detail in Budget Book 5,
although whether they are fully or partially capital in nature is not easily identifiable.
Information on PPP transactions is fully integrated in the budget documentation. Budget Book 1 contains
information on the underlying rationale for PPPs and a detailed description of approved and planned projects.

Table 6.5.1. Budget Expenditures in Timor-Leste, by Sources of Funds, 2018–24

(Millions of US dollars)

2018 2019 2020 2021 2022 2023 2024

Actual Budget Budget Projected Projected Projected Projected
Combined source budget 1,343.9 1,681.2 2,123.5 2,574.5 2,496.4 2,259.1 2,117.7
Government expenditures, 1,172.7 1,482.0 1,950.0 2,491.6 2,461.1 2,245.4 2,104.0
by fund
Consolidated fund 1,119.0 1,375.0 1,853.1 2,386.5 238.3 2,172.6 2,042.2
(excluding loans)
Human Capital 14.5 20.0 23.9 24.8 25.8 26.9 27.9
Development Fund
Borrowing/loans 39.2 87.0 73.0 80.2 53.9 45.9 33.8
(disbursements)
Development partner 171.2 199.2 173.5 82.9 35.3 13.7 13.7
commitments
Source: Government of Timor-Leste 2020a.

USEFUL DATA SERIES

Data Questions to Address
Total financing by source of capital Are externally funded projects, PPPs, and PC projects included
spending within the central budget in the budget?
Total financing by source of capital What is the volume of externally funded projects, PPPs, and PC
spending outside the central budget projects outside the budget?
How much of this spending is disclosed in budget documents?
96 PIMA HANDBOOK

Dimension 7.c: Are capital and recurrent Program or Any segment in the budget
budgets prepared and presented functional classification that relates to output
together in the budget? classification or outcome. A program segment
typically is unique to each country.
QUESTIONNAIRE A functional segment may reflect
COFOG, the UN Classification of
Low Capital and recurrent budgets are
the Functions of Government, or it
prepared by separate ministries, and/
may be unique to the country.
or presented in separate budget
documents.
INSTITUTIONAL DESIGN
Medium Capital and recurrent budgets are
This dimension assesses the degree of coordina-
prepared by a single ministry and
presented together in the budget
tion and integration in the preparation of capital
documents, but without using a and current budgets. Public investment spending
program or functional classification. is not efficient if it is not closely coordinated with
recurrent spending. Infrastructure supports public
High Capital and recurrent budgets are
services funded largely in the current budget, and
prepared by a single ministry and
presented together in the budget the current budget supports operational costs
documents, using a program or and routine maintenance of infrastructure. The full
functional classification. costs of a project should be presented together at
the time the decision is made to proceed with the
project. For example, the decision to build a new
DEFINITION OF KEY TERMS hospital should consider the staffing costs of more
Term Definition doctors and nurses, as well as maintenance on the
Capital budget See the Glossary hospital and the machinery therein.
Recurrent For the purpose of the PIMA • A low score on Dimension 7.c indicates that budget
budget framework, the same as the preparation or presentation is highly fragmented.
current or operating budget. Capital and current budgets may be prepared by
Budget The budget is considered to separate ministries and they may be presented
preparation be prepared by senior staff in a separately to the cabinet and to the legislature.
ministry (including the minister and There will often be separate budget documents,
other political appointees) who and the budget classification used in the current
make final decisions concerning a and capital budgets may not be consistent.
proposed budget that is presented • A medium score implies that regulations require
to the cabinet or legislature.
higher degree of coordination and integra-
Therefore, a budget is prepared by
tion. There is a single ministry responsible for
a single ministry even if separate
preparing the capital and current budgets and
units within a ministry develop
documents seen together for the they are presented to cabinet and the legisla-
first time by senior ministry staff. ture as a consolidated package. However, capital
Present The capital and recurrent
and current spending is not combined under a
together proposed budgets are delivered program or functional classification, which would
to the cabinet and legislature provide a more detailed picture of how the two
at the same time. The budget spending categories are linked and allow for
document could comprise multiple trade-offs between current and capital spending.
physical volumes. Therefore, the • A high score indicates that regulations ensure
term together refers to time, not to that budget preparation and presentation are
inclusion in the same volume. fully integrated. Current and capital spending
Budget See the Glossary are presented according to a program or func-
document tional classification, and there is a solid base for
6. Allocating Investments to the Right Sectors and Projects 97

necessary coordination of information and deci- budgets. This may be attributable to weaknesses
sion-making processes. The capital and current in the institutional setup (low score on institu-
budgets must use the same program or func- tional design) or to failure to operationalize the
tional classification. Using the same classification provisions in the institutional framework. There
means that a reader can understand how capital may be fragmentation and lack of coordination
and recurrent spending complement each other. between capital and current spending within
Having different program classifications, or if a ministry. Many central fiscal authorities have
a program classification is used by either the separate units responsible for detailed analysis
capital or the recurrent budget but not both, of the capital and recurrent budgets. If the
does not achieve this purpose. current costs of few major capital projects are
The capital and current budgets may be prepared reviewed by the department responsible for the
by a single ministry even when there is involvement current budget during budget preparation, then
from different stakeholders in the process. The effectiveness is low.1
definition of “budget preparation” is based on the • Medium effectiveness indicates that there
notion that only senior decision makers can see how is consistent and consolidated presentation
all components of a budget come together to form of capital and current spending in budget
the budget proposal. It is normal that components documents. If budgets are prepared by separate
of a budget are drafted and analyzed by multiple ministries, but with extensive coordination,
entities, including line ministries and specialized effectiveness may be higher than the design
units within a central finance or planning ministry. scores imply. For instance, current budgets
Senior ministry decision makers who have authority and medium-term estimates should include
to direct changes to the draft budget are account- references to and specific allocations for oper-
able for it. If decision makers of one ministry are ational and maintenance expenditures. If the
accountable for only the recurrent or only the capital current costs of some major capital projects are
budget proposal sent to cabinet or the legislature, reviewed by the department responsible for the
then the budget is prepared by separate ministries. current budget during budget preparation, then
Budget preparation and budget presentation effectiveness is medium.
are separate issues to assess. The definitions of key • High effectiveness implies that there is effective
terms are intended to minimize overlap between coordination, and there should be several
these two terms. It is intended that if the capital examples of the effect of this coordination on
and recurrent budgets are prepared by separate the budget. If the current costs of most major
ministries, they could still be presented together. capital projects are reviewed by the depart-
In theory, it is also possible that a single ministry ment responsible for the current budget during
prepares the capital and recurrent budgets but budget preparation, effectiveness is high.
does not present the two budgets together.

IMPORTANT DOCUMENTS USEFUL DATA SERIES

Documents Uses Data Question to Address

Budget preparation Assess degree of Examples of capital/ How has coordinated

regulations and coordination during current budget budget preparation
guidelines budget preparation linkages in budget affected budget
documents allocation?
Budget documents Assess presentation of
budget
1  When doing the PIMA , the MoF should be able to
EFFECTIVENESS document the operational cos t s related to capital
projects that were considered during the budget process.
• Low effectiveness indicates that there is little In the absence of such documentation, effectiveness
coordination between capital and current should be assessed as low.
98 PIMA HANDBOOK

Institution 8: Budgeting Dimension 8.a: Are total project outlays

appropriated by the legislature at the
for Investment time of a project’s commencement?
Are investment projects protected during
budget implementation?
QUESTIONNAIRE
Major public investment projects are typically Low Outlays are appropriated on an
implemented over multiple years, and this presents annual basis, and information on
challenges for budgeting. Budget and commit- total project costs is not included in
ment procedures can make it more likely that funds the budget documentation.
are available when needed over the multiyear Medium Outlays are appropriated on an
construction cycle of major projects. The three annual basis, and information on
dimensions under this institution focus on three total project costs is included in the
such procedures: budget documentation.
• The first dimension assesses whether the future High Outlays are appropriated on an
commitments related to investment projects annual basis and information on
are reflected in budget documents. Most total project costs, and multiyear
countries appropriate funds annually, even if commitments is included in the
they have adopted an MTEF. Budget decision budget documentation.

makers should always be aware of the total cost

of a project, the amount that must be appro- DEFINITIONS OF KEY TERMS
priated in the future before a facility becomes
Term Definition
operational, and especially the future expen-
ditures presumed under contracts already Outlay Cash outflow or expenditure. (If
a country budgets using accrual
signed.
principles, the reference to
• The second dimension concerns whether funds
outlays can be replaced with
can be reallocated from capital spending
reference to expense.)
during the budget year. The capital budget
Appropriate Legal authorization for
can be reduced if funds can be shifted to the
expenditures.
operating budget, and this can make capital
budget implementation more challenging. Total project see glossary. Equivalent to
costs total construction costs (see
Virement rules can be written to make this
Dimension 6.c).
more or less difficult and should be clear and
transparent. Budget see glossary
• The third dimension covers the prioritiza- documentation

tion of ongoing projects compared with Multiyear An obligation, in more than

new ones. If projects already started do not commitment one fiscal year, to make a
receive enough funding to cover expenditures future payment subject to the
fulfillment of certain conditions
planned in the budget year, the delay will likely
(contractual or otherwise).
increase total project costs. Cost increases may
arise through simple inflation (higher prices
compared with original cost estimates), contract INSTITUTIONAL DESIGN
penalties, damage from weathering, and loss The purpose of this dimension is to identify which
of materials and vandalism. These costs can be information is systematically available to the legis-
avoided if budget institutions give priority to lature for capital budget decisions. Given that most
funding ongoing projects before starting new countries appropriate annually for capital projects,
projects. these decisions can be made best when future
6. Allocating Investments to the Right Sectors and Projects 99

expenditure obligations imposed by ongoing and IMPORTANT DOCUMENTS

new projects are known. Some countries have Documents Uses
multiyear appropriations for capital projects, and
Budget Assess availability of information
in a few countries the practice is to appropriate
documents on project total cost and multiyear
the full cost at the beginning of the project. For the commitments to the legislature
assessment of this dimension, we do not distinguish
Public Assess whether information
between multiyear information being given through
investment outside the budget documents
disclosure in the budget or through multiyear
program provides useful information on
appropriations. The dimension is somewhat similar total project outlays
to Dimension 6.c, but the latter focuses on whether
total project costs are available for medium-term
budget purposes. EFFECTIVENESS
• A low score implies that there is no legal or regula- If information about total project costs or multiyear
tory requirement that information on total project commitments is available in another authoritative
costs be included in the budget documentation. document, effectiveness may be higher than the
The only available information is the proposed design score. A PIP might include this informa-
annual budget allocation. There is no informa- tion. However, PIPs may have limited credibility
tion about expected future costs to complete and do not always represent firm commitments. To
the project in question and no information about influence the effectiveness scoring, a PIP should be
multiyear contracts or other obligations related reconciled with the budget or MTBF and reflect what
to the projects. The legislature has no basis for is expected to happen, rather than being a wish list.
comparing the fiscal effects of different projects Approval by the legislature would also strengthen
beyond the budget year. the credibility of the PIP and its relevance for the
• A medium score implies that there is a legal or effectiveness score on this dimension.
regulatory requirement that the budget provide If a country has a formal system of central
information about total project costs. For new approval of multiyear commitments but does not
projects, the allocation for the first year of include these commitments in budget documenta-
construction will signal an intention to continue tion, this is not a basis for upgrading effectiveness
funding the project until it is completed. When on this dimension. While it is good practice for the
deciding on this funding, it is important to have MoF to approve multiyear commitments, disclo-
full information about the total costs are likely to sure to cabinet and the legislature is important.
be. A medium score on this dimension is similar to The cabinet and legislature should always know
dimension 6.c, but in 8.a it is explicitly required that that annual appropriations should at least cover this
information on total project costs be disclosed in amount for ongoing projects.
budget documents presented to the legislature. • Low effectiveness indicates that there is little infor-
• A high score indicates that there also is a mation about total project costs in any authoritative
requirement that information about multiyear budget document. This would usually coincide
commitments related to the project be available. with a low score on institutional design. Budget
These will typically include commitments related documentation includes total project costs for few
to contractual obligations, such as land purchases major projects that are appropriated.
or procurement of equipment and construction • Medium effectiveness indicates that total project
services. These commitments are different than costs are disclosed for some major projects. This
the ones covered under Dimension 12.a. While can be in the budget document itself, consistent
both dimensions refer to commitments, the focus with a medium score on design, or in another
is different. Commitments are referred to here as credible document, for instance, a PIP, that is
a way of communicating the total cost of a project. reconciled with the budget or MTBF.
Commitments are referred to in Dimension 12.a • High effectiveness indicates that total project costs
as a way of controlling expenditures in-year. and multiyear commitments are disclosed for most
100 PIMA HANDBOOK

Box 6.6. OECD Multiyear Budgeting Practices

Many OECD countries have multiyear authorizations or appropriations for capital investment projects.
Figure 6.6.1 gives an overview of the approaches in different OECD countries.

Figure 6.6.1. OECD Country Budget Practices for Multiyear Investment Projects

SVN DNK
SVK ESP
NLD EST

ITA GRC Incrementally each

year until the project
HUN JPN is completed (9)

Entire cost GBR MEX

up front
(10)
FRA NOR

DEU SWE

CZE TUR

AUT ISR

CHE NZL
Case-by-case
CHL IRL basis (2)
AUS LUX
Other Separate
(3) medium-term
capital plan (2)

Source: 2018 OECD Survey of Capital Budgeting and Infrastructure Governance

Note: OECD = Organisation for Economic Co-operation and Development.

major projects. This can be in the budget itself, or illustrates that there are several OECD countries
in another credible document, for instance, a PIP where total project costs are either appropriated
that is reconciled with the budget or MTBF. Box 6.6 or disclosed when the project is approved.

USEFUL DATA SERIES

Data Questions to Address
Estimated total multiyear cost of approved What is the total volume of multiyear project spending
projects compared with annual budget spending? (below)?
Size of commitments carried over from prior year What is the relative importance of multiyear
commitments compared with the annual budget?
Annual cost of all ongoing projects, which can be What is the share of commitments carried over
compared with commitments carried over compared to annual project costs?
6. Allocating Investments to the Right Sectors and Projects 101

Dimension 8.b: Are in-year transfers of purposes. There may be formal rules for how
appropriations (virement) from capital virements are authorized and carried out, but
to current spending prevented? these rules do not provide any protection of
capital spending.
QUESTIONNAIRE • A medium score indicates that reallocation of
funds from capital to current spending requires
Low There are no limitations on virement
approval by the MoF or an equivalent ministry.
from capital to current spending.
The procedures for such virements will typically
Medium The finance ministry may approve be regulated in budget laws and regulations, and
virement from capital to current
there may be strict limitations on when virement
spending.
is allowed and how this is carried out.
High Virement from capital to current • A high score indicates that the executive has no
spending requires the approval of authority to transfer appropriations from capital
the legislature.
to current spending; this can be approved only
by the legislature. This provides a high degree
DEFINITIONS OF KEY TERMS of protection of capital spending. Any transfer of
appropriation from capital to current spending
Term Definition
requires supplementary budget decisions.
Virement Movement of budgetary resources
between line ministries, programs,
IMPORTANT DOCUMENTS
policy areas, expenditure categories
or line items. Documents Uses

Current Spending authorized in the current, Legislation and Assess how in-year budget
spending or operating, budget. regulations regarding transfers (virements) from
virements, in particular capital to current spending
for virements are controlled and the
INSTITUTIONAL DESIGN
from capital to legal and regulatory
This dimension assesses how in-year budget
current spending framework for such
transfers (virements) from capital to current
virements
spending are controlled and the legal and regula-
tory framework for such virements. If the total capital
budget can be reduced during budget execution, EFFECTIVENESS
the institutions designed to plan, appraise, and The effectiveness of virement rules should be
select projects cannot fully realize their potential. measured by data for the level of virements over the
For the purpose of this dimension, virements past three years. If the rules are open-ended but
reduce total funding for the capital budget. In-year actual virement is low, effectiveness may be higher
reallocations between capital projects, with no net than the design score. If there are strict formal rules
change to the capital budget, are addressed in on virements, but substantial virement actually
Dimension 13.b. takes place, effectiveness may be lower than the
• A low score indicates that there are no legal or design score.
regulatory limitations on in-year transfers of If there are frequent supplementary budgets
appropriations (virement) from capital to current that transfer appropriations from capital to current
spending. Funds can be freely transferred spending, the effectiveness is lower than the design
during the year. There is no formal protection score implies. The purpose of having the legis-
of capital spending and it is up to each ministry lature approve virements is to make virements
whether they will implement their capital budget from capital to current budget difficult to accom-
according to plans or reallocate funds to other plish. However, in many countries, supplementary
102 PIMA HANDBOOK

share of the capital budget, effectiveness should

Box 6.7. Budgeting for Capital also be assessed as low.
Investment in Jordan • Medium effectiveness indicates that there is
In Jordan, capital investments are appropri- some virement from capital to current spending
ated on an annual basis. Costs of projects are during the year. The same criterion applies to
presented as indicative information for the two systematic shifting of funds through supplemen-
years following the budget year and do not cover tary budgets.
the projects’ full lifecycle. Appropriations may • High effectiveness indicates that there is little
be transferred from current expenditures items
virement from capital to current spending
to capital expenditures items under the same
during the year. The same criterion applies to
chapter upon the approval of the Minister of
systematic shifting of funds through supplemen-
Finance, but transfer from capital expenditure
to other current expenditures can be autho- tary budgets. Box  6.7 describes the restrictive
rized only by law. Unspent capital allocations virement practices in Jordan.
should fully lapse at the end of the year and
project-related expenditure should always be USEFUL DATA SERIES
reappropriated during the next year.
Data Questions to Address
In practice, capital allocations are reasonably
protected. Multiyear contracts are allowed and Total net reduction What is the
incorporated in the budget preparation process. in the capital budget effectiveness of the
The indicative budget allocation for the two years through virements provisions on virement
following the budget year provides references to from capital to current
define the line ministries’ ceilings. In-year reallo- spending?
cations remain limited: in 2016, reallocations from Gross and proportional Do frequent budget
capital expenditure to recurring expenditure changes in the supplements have
represented 4.9 percent of total capital expendi- capital budget from similar effects as
ture. Reappropriation of unspent resources from budget supplements extensive virement
the previous year is prioritized and rarely leads Number of budget from capital to current
to project interruption. In addition, the utilization supplements spending?
of trust funds to set aside resources needed to
pay some commitments for which the invoice has
not been received at the end of the fiscal year
provides a de facto mechanism to carry over Dimension 8.c: Is the completion of
some spending. ongoing projects given priority over
Source: Jordan PIMA 2017. starting new projects?

QUESTIONNAIRE
Low There is no mechanism in place to
budgets are common. If supplementary budgets
protect funding of ongoing projects.
are common and there is a pattern of the propor-
Medium There is a mechanism to protect
tion of total budget shifting from capital to current,
funding for ongoing projects in the
then virement rules are not effective.
annual budget.
• Low effectiveness indicates that there is substan-
tial virement from capital to current spending. If High There is a mechanism to protect
supplementary budgets are systematically used funding for ongoing projects in the
annual budget and over the medium
to shift funds from capital to current spending,
term.
and this on average constitutes a substantial
6. Allocating Investments to the Right Sectors and Projects 103

DEFINITION OF KEY TERMS be embedded in law or it can be a provision in

Term Definition
the instructions for preparation of medium-term
budget estimates.
Mechanism The laws, organizations,
systems, or procedures available
IMPORTANT DOCUMENTS
to achieve an objective.
Documents Uses
Protect To increase the probability
funding that funding will be provided Legal and regulatory Assess what mechanism
in accordance with the cost framework for budget is available to protect
and implementation schedule preparation funding for ongoing
estimated when the project was projects
first approved in the budget
process. EFFECTIVENESS
Ongoing See the Glossary The effectiveness of the mechanisms in place should
projects be assessed in light of the actual budget allocations
Medium term See the Glossary to ongoing and new projects over the past three to
five years. The data may demonstrate that there is
INSTITUTIONAL DESIGN customary practice, without a formal mechanism,
The purpose of this dimension is to ensure that to give funding priority to ongoing projects. If all
lack of funding does not lead to delays in imple- ongoing projects have received enough funding
mentation of ongoing projects. In many countries, to spend according to the approved project plan
there is a strong political interest in initiating new and fully meet outstanding commitments for the
projects, which may be more politically visible than past three to five years, effectiveness could be
the ongoing projects. Funding for new projects may rated as medium or high, even if there is no formal
crowd out the continued funding of the ongoing mechanism in place.
projects and lead to delays in their implementation. • Low effectiveness indicates that ongoing major
Such delays may lead to increases in total project projects have received significantly less than
costs and to inadequate project performance. the assessed funding needs. If it is not possible
• A low score indicates that the legal and regula- to estimate the level of funding compared with
tory framework provides no mechanism that needs, this assessment must be based on whether
protects funding of ongoing projects. In some there are many examples of major projects not
cases, the government has a general policy that receiving sufficient funding. A budget with many
ongoing projects should be prioritized, but this projects receiving small allocations compared
is not operationalized in a specific mechanism. with project cost is a clear indication of funding
A policy will usually not be recognized as a constraints. If there are many projects that are
mechanism for the purpose of this dimension. delayed because of funding shortages over time,
• A medium score indicates that there is a effectiveness is low.
mechanism that protects funding of ongoing • Medium effectiveness indicates that ongoing
projects. This may be a legal provision, or it may major projects have received somewhat less than
be embedded in budget preparation regula- the assessed funding needs. If it is not possible
tions. It is common that budget regulations or the to estimate the level of funding compared with
annual budget call specifies that the ministries needs, medium effectiveness requires that there
need to identify funding for all ongoing projects are few examples (not more than one or two
before they can suggest any new projects. each year) of major projects not receiving suffi-
• A high score implies that the protection of cient funding.
funding for ongoing projects also covers • High effectiveness indicates that all ongoing
medium-term budget estimates. Again, this can major projects have received the assessed
104 PIMA HANDBOOK

Box 6.8. Capital Budgeting Practices in the Philippines

In the Philippines, budget legislation provides an effective framework for the protection of capital invest-
ment during budgeting. Ongoing projects (Tier 1) are required to be considered before new projects. Annual
budget estimates for ongoing projects are first prepared by the line agencies, discussed with the budgeting
department, and then approved by the Development Budget Coordination Committee (DBCC) and included
in the published Budget Priorities Framework (BPF). The allocation of new spending is discussed later during
new projects (Tier 2) hearings. Outlays are appropriated on an annual basis, with multiyear obligation authority
for new projects and multiyear commitments included in the budget documentation. However, information
on total project costs is not included in the budget documentation. Virement from capital to current spending
within a project or program is allowed with the approval of the Department of Budget and Management
(DBM).
In effect, capital investments are generally protected during project implementation. The two-tier
budgeting approach protects funding for ongoing projects in the annual budget and over the medium term.
Multiyear contracts are allowed and authorized by DBM. For projects of one-year duration, it may be difficult
to protect the investment with appropriations on a cash basis if early procurement cannot be done in a timely
manner. Insignificant amounts of in-year transfers of appropriation from capital to current spending have
taken place with the approval of DBM.
Source: Budget law, staff assessment.

funding needs. If it is not possible to estimate of major projects not receiving sufficient funding.
the level of funding compared with needs, high Box 6.8 describes how capital investments are
effectiveness requires that there are no examples effectively protected in the Philippines.

USEFUL DATA SERIES

Data Questions to Address
The share of funding for new projects versus How effective are the provisions to prioritize ongoing
ongoing projects in the annual budget, compared spending?
with assessed funding needs for the ongoing
projects
Average delays in implementation of major projects Is funding sufficient to ensure efficient project
in budget implementation or are there indications of long
implementation times caused by funding constraints?
Reference to data on project delays, noted in Are project delays related to funding shortfalls for
Dimension 13.a ongoing projects?
6. Allocating Investments to the Right Sectors and Projects 105

Institution 9: Maintenance DEFINITION OF KEY TERMS

Funding Term Definition

Standard Methods, rules, or procedures
Are routine maintenance and major improvements
methodology that consistently guide
receiving adequate funding?
the actions of persons or
organizational units. Must
Infrastructure cannot deliver the benefits promised
be written and issued or
in its design if it is not maintained properly. This
designated by an appropriate
institution focuses on whether maintenance needs
government body.
are known, and how these maintenance needs are
Routine Typically, cosmetic and
reflected in the budget and in planning.
maintenance preventive maintenance that
• The first dimensions focus on the existence
is performed regularly to keep
of methodology for determining the need for an asset operating according
routine maintenance. For practical purposes, to its design. Funding needs
routine maintenance is maintenance funded in are usually calculated using
the operating budget. the age and number of
• The second focuses on the existence of meth- assets in an asset class, not
odology for determining the need for capital project by project. In other
maintenance (major repairs and reconstruction). words, budgeting for routine
For practical purposes capital maintenance is maintenance can be estimated
with a formula, rather than
maintenance funded in the capital budget.
on the basis of asset-by-asset
• The third dimension focuses on the avail-
inspection. Maintenance
ability of information to determine how much
funded through the operating
funding is included in national or sectoral plans,
budget is usually routine
and allocated in the budget, to meet mainte- maintenance. See GFSM 2014
nance needs. paragraph 8.25–8.27.
Generally Allocated within an acceptable
allocated range over time.
Dimension 9.a: Is there a standard
methodology for estimating
routine maintenance needs and INSTITUTIONAL DESIGN
budget funding? The aim of this dimension is to determine if there
are methodologies to assure that the funding needs
QUESTIONNAIRE for routine maintenance are known. This is essential
information to know if infrastructure asset values
Low There is no standard methodology
and service levels are to be retained over time.
for determining the needs for routine
• A low score on this dimension implies that there
maintenance.
are no standardized methodologies for assessing
Medium There is a standard methodology for
current maintenance needs. Maintenance planning
determining the needs for routine
and allocations will then often be based on mechan-
maintenance and its cost.
ical approaches, such as continuing the funding
High There is a standard methodology for levels from last year’s budget. In some cases, main-
determining the needs for routine tenance allocations might be residual, reflecting
maintenance and its cost, and the what remains within the overall budget ceiling
appropriate amounts are generally after, higher-priority programs have received
allocated in the budget. their allocations.
106 PIMA HANDBOOK

• A medium score on institutional design indicates maintenance approaches. Annual maintenance

that there are standard methodologies used cost needs vary with assets classes, but a minimum
for assessing maintenance needs. Standard level across several different asset classes is at
methodologies will often vary based on type of least in the range of 2–3 percent of replacement
asset to be maintained, and standard method- values, and often more. If there are data available
ologies may not be developed for small asset for actual maintenance levels compared with asset
classes. The methodology should describe
replacement values for main asset classes, effec-
the asset class to which it should be applied.
tiveness can to some extent be assessed, even in
For the purpose of this dimension, standard
the absence of systematic methodologies. In the
methodologies for routine maintenance exist
absence of comprehensive data, the assessment
if they address at least buildings and roads
and are consistently applied to those asset should be based on maintenance of buildings and
classes. roads, which usually are important government
• A high score on design implies that standard assets in all countries.
methodologies exist and that there is a formal In the absence of comprehensive asset registers
requirement that budget submissions are based and balance sheets, asset replacement values can
on these methodologies. The responsible minis- be estimated from standard construction costs.
tries and agencies are required to provide an Table 6.1 provides an overview of average costs
assessment of maintenance needs based on for road construction in different countries, taken
the relevant methodologies when submitting from an extensive international study. These can be
their budget proposals to the MoF. On the other used as a basis for discussion with relevant country
hand, the MoF will be expected to prioritize the authorities about asset replacement values and
funding of these maintenance needs within the
maintenance requirements in their country. Most
available fiscal envelopes.
countries will have some information on the volume
of assets that can be used for this discussion (for
IMPORTANT DOCUMENTS
example, square meters of building, kilometers of
Documents Uses roads).
Regulations regarding Assess overall • Low effectiveness indicates that maintenance
maintenance of requirements for levels are clearly inadequate to retain asset
infrastructure assets current maintenance values. If standard methodologies are system-
Maintenance guidelines— Assess detailed atically used, actual maintenance allocations that
general and for main methodologies for only provide a small share of estimated needs
asset classes current maintenance would imply a low score on effectiveness.
• Medium effectiveness indicates that mainte-
EFFECTIVENESS nance levels are better matched to the funding
It is difficult to know the appropriate Amount of needs to retain asset values. If standard meth-
funding without a standard methodology. Countries odologies are systematically used, actual
often use ad hoc approaches and rules of thumb maintenance allocations of a significant share of
for assessing maintenance needs and allocating estimated needs would imply a medium score
resources to maintenance. Without a consistent on effectiveness.
methodology, it is not possible to determine • High effectiveness indicates that maintenance
whether the priorities and funding needs estimated levels are clearly adequate to retain asset values.
through these ad hoc approaches are fully appro- If standard methodologies are systematically
priate and adequate. used, actual maintenance allocations should be
However, maintenance funding levels compared in line with estimated needs. This requires that
with asset replacement values do provide a there is a standard methodology for assessing
rough indicator for the effectiveness of ad hoc maintenance needs, as indicated by a medium
6. Allocating Investments to the Right Sectors and Projects 107

Table 6.1. Standard Construction and Maintenance Costs for Roads, Various Countries
(Thousands of US dollars per kilometer)

N Mean Minimum Maximum 

Construction
New 6-lane expressway 1 5,571 5,571 5,571
New 4-lane expressway 65 2,839 937 7,810
New 4-lane highway 11 2,196 660 4,561
New 6-lane highway 2 1,990 1,289 2,691
Widening and reconstruction 108 874 178 6,533
Widening 138 843 9 5,786
New 2-lane highway 68 750 22 1,986
Partial widening and reconstruction 117 261 8 682
Upgrading 360 250 4 941
Partial widening 12 138 67 168
New 1-lane road 7 92 58 168
Total (Average) 889 678 4 7,810
Preservation
Concrete pavement restoration 4 539 69 788
Reconstruction 745 220 2 2,616
Strengthening 422 139 27 554
Asphalt mix resurfacing 458 65 12 211
Surface treatment resurfacing 230 25 3 17
Gravel resurfacing 275 18 2 113
Bituminous pavement preventive treatment 47 7 1 31
Unsealed preventive treatment 101 4 2 8
Routine maintenance 119 2 0.3 9
Grading 23 0.5 0.1 3
Total (average) 2,424 110 0.1 2,616
Source: Collier, Kirchberger, and Söderbom 2015.
Note: Updated information is available from the Road Cost Knowledge System at https://www.doingbusiness.org/en/reports/
thematic-reports/road-costs-knowledge-system.

or high score on institutional design. Box 6.9 broadly in line with the assessed needs, Estonia
provides an example of maintenance practices had a high score on both institutional design
in Estonia. Because maintenance is based and effectiveness for this dimension in the
on standard methodologies and funding is 2019 PIMA.
108 PIMA HANDBOOK

Box 6.9. Maintenance Practices in Estonia

In Estonia, routine and capital maintenance needs are determined on the basis of sector-appropriate meth-
odologies and systematic physical monitoring of the infrastructure (Table 6.9.1). For example, the Road
Administration maintains a database of 16,600 km of national roads, and physical road condition inspections
as well as electronic testing methods are conducted at regular intervals to determine maintenance require-
ments. Planned service levels have been set, and each road has been categorized accordingly. Estimates are
comprehensive and include reconstruction and maintenance of road surfaces, lighting, pedestrian walkways
and bridges, reconstruction of hazardous areas, and other items, such as road furniture and road markings. All
costs for routine and capital maintenance are calculated per item as per object type in a standardized template.
Maintenance of public assets is seen as a high priority and prioritized over new construction. Capital project
allocations will be reduced, if the capital maintenance needs cannot be met. Seventeen road maintenance
contracts have been awarded to conduct routine maintenance on the road network to maintain service levels.
For Estonian Railways, five out of seven major projects are dedicated to maintenance and renovations, to
preserve the network and to modernize the network control system.

Table 6.9.1. Budget Allocation for Road Maintenance in Estonia

(Thousands of euros)

Funding 2018 2019 2020 2021 2022

State funding 242,784 253,259 249,260 209,260 209,260
External funding 45,821 46,750 65,610 50,000 10,000
Total funding 288,605 300,009 314,870 259,260 219,260
Road network preservation 159,451 143,349 148,364 140,248 163,059
Development of road 101,949 128,956 138,152 90,131 26,782
network
Administration 27,205 27,704 28,354 28,882 29,419
Road management works 288,605 300,009 314,870 259,260 219,260
Road maintenance cost as 55.2 47.8 47.1 54.1 74.4
percentage of total budget
Source: Estonia PIMA 2019.

USEFUL DATA SERIES

Data Questions to Address
Estimated funding need for routine maintenance, based How do funding needs compare with actual
on standard methodology allocations?
Funding for routine maintenance included in budgets
Estimates for asset replacement values for main asset What is the ratio of maintenance funding levels
classes compared with asset replacement values
(simplified indicator of effectiveness)?
6. Allocating Investments to the Right Sectors and Projects 109

Dimension 9.b: Is there a standard phased out earlier than planned. Capital mainte-
methodology for determining major nance also includes activities to enable an asset to
improvements (for example renovations, extend its life and to increase its capacity. This is
reconstructions, enlargements) to often referred to as reconstruction. Rehabilitation
existing assets, and are they included in and reconstruction activities typically are funded
national and sectoral investment plans? through the capital budget and are collectively
referred to as capital maintenance.
• A low score implies that there is no systematic
QUESTIONNAIRE
use of standardized methodologies for assessing
Low There is no standard methodology
capital maintenance needs. There may be some
for determining major improvements,
ad hoc assessment of rehabilitation and recon-
and they are not included in national
struction needs, but often there is no analysis
or sectoral plans.
at all. When the needs become sufficiently
Medium There is a standard methodology for
pressing, rehabilitation or reconstruction of key
determining major improvements,
assets, such as major roads, may be defined as
but they are not included in national
or sectoral plans. separate, new projects and funded as any other
new project.
High There is a standard methodology for
determining major improvements,
• A medium score indicates that there is a standard
and they are included in national or methodology that is used for assessing capital
sectoral plans. maintenance needs, but these assessments
are not reflected in national or sectoral plans.
DEFINITIONS OF KEY TERMS Methodologies will differ across sectors and
Term Definition
may not cover all asset classes. For the purpose
of this score, there should be standard method-
Standard See definition in Dimension 9.a.
ologies for capital maintenance at least for roads
methodology
and buildings.
Major Capital maintenance
• A high score implies that standard methodolo-
improvement (renovations, reconstructions, and
enlargements) to existing assets gies exist and that the capital maintenance needs
that increase their productive are fully reflected in national and sectoral plans.
capacity, extend their service lives, It is preferable that capital maintenance projects
or both. Maintenance funded are included in national or sector plans and are
through the capital budget will subject to appraisal.
generally be considered capital
maintenance. See GFSM 2014 IMPORTANT DOCUMENTS
paragraph 8.25–8.27.
Documents Uses
National or See Dimension 2.a.
Regulations regarding Assess overall
sectoral plans
maintenance of requirements for capital
infrastructure assets maintenance
INSTITUTIONAL DESIGN
The aim of this dimension is to determine whether Maintenance Determine which
the funding needs for capital maintenance are guidelines—general and methodologies are
for main asset classes used to assess capital
assessed and funding for capital maintenance
maintenance needs
is evaluated against other project proposals in
national or sectoral plans. Capital maintenance National and sectoral Identify how capital
is often necessary to enable an asset to reach its plans maintenance projects
planned life. Without periodic rehabilitation, for are reflected in national
and sectoral plans
instance, every 10 years, the asset may have to be
110 PIMA HANDBOOK

EFFECTIVENESS classes are at least in the range of 2–3 percent of

The effectiveness of this dimension depends on replacement values, and often more (see Box 6.10
whether the assessed needs for capital mainte- for South Africa’s guidelines for adequate mainte-
nance are reflected in budget allocations. The nance of public infrastructure). See the discussion
needs for capital maintenance should be reflected under Dimension 9.a for suggestions on how to
in national and sectoral plans, but the actual prioriti- make rough estimates for capital replacement
zation will be determined during budget selection. values.
This assessment is difficult when there are no stan- • Low effectiveness indicates that capital main-
dardized methodologies or there is a lack of data tenance levels are clearly inadequate to retain
on capital stocks. Average annual allocations for asset values. If actual capital maintenance allo-
capital maintenance vary with asset classes, but cations only provide a small share of estimated
a minimum level across several different asset needs, effectiveness is low.

Box 6.10. Maintenance Guidelines for Public Infrastructure in South Africa

Many countries have established guidelines and standards for maintenance of public infrastructure, to ensure
that maintenance levels are sufficient to avoid deterioration of public asset values. In South Africa, the cabinet
approved the National Infrastructure Maintenance Strategy in 2007. The Department of Public Works and
Infrastructure has a lead role in implementing the strategy, which includes indicative budget requirements for
maintenance of different types of assets (Table 6.10.1).

Table 6.10.1. South Africa Maintenance Budget Guidelines

Replacement or Major Rehabilitation

Over and Above the Annual
Average Annual
Maintenance Budget Requiring Specific
Maintenance Budget
Capital Budget
as a Percentage of
Type of Infrastructure Replacement Cost Every 20–30 years Every 30–50 years
Bulk water storage 4–8 ×

Water treatment works 4–8 ×

Water reservoirs 2–3 ×

Water reticulation 4–8 ×

Sewage treatment works 4–8 ×

Sewer reticulation 4–8 ×

Roads and storm water 5–10 ×

Electricity reticulation 10–15 ×

Public buildings 4–6 ×

Hospitals 5–8 ×

Schools 4–6 ×

Electricity generation 5–8 ×

Electricity reticulation 10–15 ×

Source: Construction Industry Development Board 2021.

6. Allocating Investments to the Right Sectors and Projects 111

• Medium effectiveness indicates that capital DEFINITIONS OF KEY TERMS

maintenance levels are better matched to the Term Definition
funding needs to retain asset values. If actual
Routine See Dimension 9.a.
allocations for capital maintenance provide a
maintenance
significant share of estimated needs, this would
Major See Dimension 9.b.
imply a medium score on effectiveness.
improvement
• High effectiveness indicates that capital mainte-
nance levels are clearly adequate to retain asset Reported Approved budget allocations
values. Actual maintenance allocations should be and actual spending are
included in standard reports as
in line with estimated needs. This requires that
part of the budget documents.
there is a standard methodology for assessing
maintenance needs, as indicated by a medium or
high score on institutional design. INSTITUTIONAL DESIGN
The aim of this dimension is to determine whether
budget allocations and spending on maintenance
USEFUL DATA SERIES
are systematically disclosed in budget documents
Data Questions to Address in a consistent manner over time. This information
Estimated funding How do funding needs is necessary for the legislature to have a view on
need for capital based on standard the medium- and long-term adequacy of mainte-
maintenance, based on methodologies nance allocations.
standard methodology compare with • A low score indicates that it is not possible to
Funding estimates for estimates included in identify either routine maintenance or capital
capital maintenance in national and sectoral maintenance in the budget documents. In
national or sectoral plans plans? some cases, maintenance is combined with
Funding for capital How do capital other spending items and does not appear as a
maintenance in maintenance funding separate category in the budget classification.
budgets needs compare with In other cases, maintenance might be identi-
actual allocations? fied under some ministries or programs but
not under others, because there is no common
Dimension 9.c: Can expenditures budget classification for this type of expenditure.
relating to routine maintenance and Maintenance might appear at different levels of
major improvements be identified in the economic or program classification.
the budget? • A medium score implies that maintenance
funding can be identified using either
the budget classification or the analytical
QUESTIONNAIRE
information regularly provided in budget docu-
Low Routine maintenance and major mentation. The program or activity classification,
improvements are not systematically if available, is best suited to identifying routine
identified in the budget.
maintenance. If at least some routine mainte-
Medium Routine maintenance and major nance is carried out by government employees,
improvements are systematically the economic classification should not be used
identified in the budget. because such maintenance requires spending
High Routine maintenance and major on wages, equipment, and material. Grouping
improvements are systematically routine maintenance expenditures into one
identified in the budget and are economic classification item distorts reporting
reported. on other economic classification items. However,
112 PIMA HANDBOOK

capital maintenance can be identified using the even if the design score is medium. The assess-
economic classification. Capital projects are ment could focus on maintenance of buildings and
sometimes considered activities, if that classifi- roads, which presumably would constitute a signifi-
cation exists. cant share.
• For a high score, both routine maintenance and The effectiveness also depends on whether
capital maintenance must be systematically maintenance data are used systematically for
identified and regularly reported. At a minimum, analysis and for decision-making. If maintenance
there must be standard reports that show the reporting is merely a technical routine exercise
approved budget allocations and the actual with no analysis and no follow-up, effectiveness
spending for routine and capital maintenance by may be only medium even if the design score is
ministry or agency responsible for it. Preferably, high. If external audits regularly address needs
reports should aggregate such spending to and spending on maintenance, this does not meet
show total spending on current maintenance and the intent of this dimension. The auditor general is
capital maintenance in the budget. Additional usually independent, and the nature and subject
detail, such as maintenance funding by program of audits can change at any time. Thus, audits do
or by asset class, is desirable. Budget docu- not systematically identify maintenance budgets
mentation frequently includes analysis of the or expenditures.
capital budget by type and geographic location • Low effectiveness indicates that maintenance
of projects, and this could also include capital data are not transparent and not actively used
maintenance. for analysis or decisions. Only part of estimated
maintenance funding is identified in the budget.
IMPORTANT DOCUMENTS There are no specific examples that the data are
Documents Uses used during planning or budgeting.
• Medium effectiveness indicates that mainte-
Budget classification Analyze how maintenance
is reflected in the budget nance data are reasonably transparent and
classification there are some examples of analysis or decisions
based on these data. Most estimated mainte-
Budget documents Assess disclosure and
nance funding is identified in the budget. Budget
reporting of maintenance
budgets and spending documents could include analysis that has led to
adjustments in maintenance funding.
• High effectiveness indicates that maintenance
EFFECTIVENESS data are transparent and used actively and
The effectiveness of this dimension should reflect systematically for analysis and decision-making.
what share of maintenance spending is transpar- Most estimated maintenance funding is identi-
ently disclosed and reported in budget documents. fied in the budget and there are regular published
In many cases, maintenance spending is identified reports of budget allocations compared with
in the budget but not systematically, and there is no actual spending, by ministry. Budget documents
explicit reporting. To get a picture of overall mainte- may also provide an overview of actual mainte-
nance spending it may be necessary to compile data nance spending compared with target levels and
from different parts of the detailed budget through outline how the government will bridge this gap.
manual, ad hoc methods. There may also be uncer- Box 6.11 illustrates the transparent reporting
tainty about whether all maintenance data are fully of maintenance expenditures in Armenia’s
reflected. In these cases, effectiveness may be low budget documents.
6. Allocating Investments to the Right Sectors and Projects 113

Box 6.11. Budget Visibility of Maintenance Spending in Armenia

Expenditures related to routine maintenance and major works are visible in the state budget and consistent
with GFSM 2014 definitions on page 124, paragraph 6.45 (“goods and services consumed for the ordinary
maintenance and repair of fixed assets constitute use of goods and services. However, major renovations,
reconstructions, or enlargements of exiting fixed assets are recorded as an acquisition of fixed assets.”).
There is a budget line for current repairs and maintenance under the goods and services category and a
separate line for the capital repairs of buildings and construction under nonfinancial assets. As part of the
MTEF process, line ministries submit project details that specify allocations to these budget lines. It is possible
to assess execution of these lines in the quarterly and annual budget execution reports. The same report also
contains an annex on the execution for routine road maintenance.
Maintenance spending has been well protected during budget execution. Figure 6.11.1 illustrates that all
three major components of the maintenance budget have maintained significant levels of execution, suggesting
these budget lines are not vulnerable to in-year cuts. The execution rate for capital maintenance (major works)
has been the most volatile, with an execution rate of 86 to 89 percent for three of the past five years but an
execution rate well over 100 percent in one year. Routine road maintenance averaged 99 percent and routine
maintenance for all other sectors averaged an execution rate of 94 percent over the five-year period.

Figure 6.11.1. Budget Execution Rates for Maintenance in Armenia, 2013–17

(Percent)
Major works Routine maintenance (roads) Routine maintenance (others)
140

120

100

80

60

40

20

0
2013 2014 2015 2016 2017

Sources: Armenia budget implementation reports; and IMF staff estimates.

USEFUL DATA SERIES

Data Questions to Address
Summary table for maintenance data reported in How transparently are maintenance data reported?
budget documents
Examples of analysis and subsequent decisions on How are maintenance data used for analysis and
revised maintenance approaches or funding decision-making?
114 PIMA HANDBOOK

Institution 10: Project Dimension 10.a: Does the government

undertake a central review of major
Selection project appraisals before deciding to
Are there institutions and procedures in place to include projects in the budget?
guide project selection?

Project selection is in its nature a separate process QUESTIONNAIRE

from planning and appraising projects, although Low Major projects (including those
many real-life public investment systems fail to funded by donors or PPPs) are not
recognize this distinction. Plans commonly offer reviewed by a central ministry before
more projects than can be funded in a single year inclusion in the budget.
or a medium-term budget timeframe, and project Medium Major projects (including those
appraisals typically address the qualities of an funded by donors or PPPs) are
individual project without ranking it relative to reviewed by a central ministry before
other projects. Project selection involves picking inclusion in the budget.
and choosing projects from a plan or from a pool High All major projects (including those
of appraised projects, with due consideration to funded by donors or PPPs) are
relevant economic, social, environmental, and scrutinized by a central ministry, with
political conditions. This is not only a technical input from an independent agency or
process; it involves fundamental political consider- experts before inclusion in the budget.

ations, for instance, regarding the role of the state

and future development paths (Beetsma and Van
DEFINITIONS OF KEY TERMS
der Ploeg 2007). Selection criteria address how
to pick and choose in this context. This institution Term Definition

covers the following issues: Major See the Glossary.

The first dimension addresses the review of projects
major projects before their inclusion in the budget. Central Carries out a function that
The unit that reviews projects should be objective— ministry potentially affects many or
meaning it is not the organization that developed substantially all ministries.
the project proposal. In addition, projects Typical examples are a ministry
should be reviewed centrally to reap the benefits of finance, a ministry of economy,
and a planning ministry or
of comprehensiveness.
agency. Some countries establish
Published selection criteria and a clearly defined
specialized agencies for public
selection process, addressed in the second
investment oversight and
dimension, increase the objectivity of project
support.
selection. These also make the work of line minis-
Scrutinize Same meaning as “review.”
tries more efficient by focusing their attention
during budget preparation on projects that are Input Submission of data, comments,
more likely to be selected for funding. analysis, conclusions, or
recommendations. This does not
The third dimension focuses on the existence of
imply approval.
a pipeline of eligible projects. Projects should be
selected only from projects already appraised. Independent See the Glossary.
6. Allocating Investments to the Right Sectors and Projects 115

INSTITUTIONAL DESIGN agency or independent experts. Some countries

The aim of this dimension is to determine whether have set specialized agencies for this purpose,
there is a required process for reviewing major while others rely on independent expertise from
projects objectively before their selection for technical universities or from private consultants.
inclusion in the budget proposal. As mentioned The use of independent experts adds another
earlier, the selection process is separate from the layer of objective scrutiny and further promotes
appraisal process. Institution 4 focuses on filtering the realism of the project proposals.
out projects with poor or negative value, whereas The review process will often lead to projects
institution 10 focuses on prioritizing projects being returned to the promoting ministry for further
among those previously appraised. Still, there are development. The reviewers may raise specific
close links between the two and the assessments of questions regarding the strategic alignment of the
institutions 4 and 10 must be closely coordinated, project with government priorities, whether the
to ensure consistency. specific concept that has been proposed is best
• A low score on this dimension means that there suited to meet project objectives, and whether
is no formally required central review process project costs, benefits, and implementation plans
for major capital investment projects before are realistic and viable. These questions must be
they are considered for inclusion in the budget. addressed before the project can be resubmitted
This will often mean that projects are selected for central review.
and submitted by the sector ministry without The operation of a special mega-project unit,
systematic involvement from other parts of the separate from the customary budget office, will
government. The sector ministry will generally usually not constitute central review and scrutiny.
have strong incentives to give as positive a This dimension assumes that line ministries
picture of the project as possible, and projects propose projects that are reviewed centrally.
that have not been subject to independent Central review, then, suggests that a disinterested
review will often have optimistic assumptions party conducts the review, and that the review of a
regarding costs, benefits, and timetables. single project is made in light of all projects being
• A medium score indicates that there is a formally proposed. If a mega-project unit develops mega-
required central review process for major projects and reviews only mega-projects, then it
projects. This review will often be undertaken does not review projects centrally for the purposes
by a specialized department in the MoF or the of this dimension.
Ministry of Planning, or by a specialized agency.
These entities will be more objective than the
IMPORTANT DOCUMENTS
ministry promoting the project and have more
realistic expectations for the project. There Documents Uses

should be a thorough review of the key features Regulations for project Verify the existence of
of the project, including strategic alignment, selection and approval required central review
project concept, costs, benefits, and implemen- of project proposals
tation plans. The review should be conducted Guidelines for project Assess the stringency
before budget consideration—the general review and consistency of
budget process will usually not include a project methodologies for
review of this type. central project review

• A high score implies that there is a formal require- Project review Assess the rigor of a
ment that major projects are reviewed and that documents representative sample
this review include inputs from an independent of project reviews
116 PIMA HANDBOOK

EFFECTIVENESS Some international financial institutions have

The assessment of effectiveness of this dimension rigorous internal processes that include indepen-
should focus on how well formal review require- dent scrutiny, but this is not always the case. Many
ments are complied with in practice and the effects development partners and international financial
of these reviews. The assessment should be based institutions do not have procedures for indepen-
on a representative sample of documents from dent scrutiny of projects.
the major project review process. These should • Low effectiveness implies that there is no central
include examples of the initial project proposals, review of major project proposals or that it is
the documents produced by the central ministry formalistic and cursory, and few projects are
conducting the review, inputs from indepen- rejected or returned for further development.
dent experts, and e adjustments to initial project Documentation of the review process is missing
proposals. Project selection effectiveness requires or limited. The number of projects rejected or
a review process that translates into recommenda- returned is low.
tions for improvement, with some projects returned • Medium effectiveness implies that central review
for further development. Consistent and system- has a reasonable level of rigor, and some major
atic central review of major projects should foster projects are rejected and returned. The review
a culture of rigor in sector ministries, and therefore process is documented and some projects are
the number of rejected projects would be expected rejected or returned.
to be reduced over time. • High effectiveness implies that there is rigorous
A high degree of external financing of capital central review of major project proposals and
projects will usually not add to the effectiveness of proposals are regularly rejected or returned for
this dimension. The focus is on the government’s further development. In this case, the rigor of the
review process. Development partners and inter- review process should be clearly documented
national financial institutions cannot be considered in project review documents and at least 10
as independent in the context of this institution. percent of the reviews should include indepen-
They will typically be involved in promoting specific dent inputs. It would be expected that several
projects that are aligned with their country or project proposals are rejected or returned for
business strategies and will often have interests further development. Box 6.12 describes the
similar to the ministries promoting the projects. central review process in Ireland.

USEFUL DATA SERIES

Data Questions to Address
Number and value of projects submitted for What is the share of project proposals that are rejected
central review or returned?
Number and value of projects rejected or Do central review reports include relevant
returned for resubmission (with examples of recommendations for further development of
central review reports recommending further the project?
development)
Number of project reviews that involve external What is the share of project proposals that benefit from
independent inputs external independent inputs?
6. Allocating Investments to the Right Sectors and Projects 117

Box 6.12. Central Review of Project Appraisals in Ireland

The appraisals of all major projects are subject to review by the Irish Department of Public Expenditure and
Reform (DPER) (Figure 6.12.1), with input from external experts on an “as-needed” basis. The Public Spending
Code requires the sponsoring agency to seek the views of the DPER before the sanctioning authority makes
its official “decision in principle” to proceed with the project. The sponsoring agency sends the appraisal to
the relevant vote section in the DPER, who then confers with the in-house Irish Government Economic and
Evaluation Service (IGEES) team, with whom the department’s project analysis capability is situated. Depending
on the nature of the project, the DPER will also draw on expert advice from the National Development Finance
Agency (NDFA) and New Economy and Recovery Authority (NewERA), when necessary.
There is no formal obligation for the sponsoring agency to take account of the DPER’s views, but it is
implicitly understood that not doing so would be detrimental to future requests for funding. As a kind of
sanction, the Public Spending Code allows for the DPER to publish its review on the department website,
although this lever seems to be rarely used, if at all. The review function is reinforced by the secondment of
IGEES staff to departments acting as sanctioning authorities in investment-heavy sectors. These teams—the
Economic and Financial Evaluation Unit in the Department of Transport, Tourism and Sport (DTTaS) being the
best example—review appraisals using the same criteria as central IGEES staff, thus ensuring consistency of
approach and greater objectivity in the sanctioning authorities’ decision making.

Figure 6.12.1. Appraisal and Selection Process in Ireland

Decision/checkpoint Approval of sanctioning authority required

Project
Proposal

Preliminary
Appraisal if
Project Costs
More Decide to proceed to
Than €5 Million detailed appraisal

If detailed appraisal
Detailed costly get approval
Appraisal
If CBA
submit to
Approval in principle
DPER for
review
Planning &
Design Check project as planned in line
with approval in principle

Approval to proceed to tender

Invitation to
Tender
Check price is in line with
expectations. Would appraisal
decision have been different?
Place
Contract

Source: Ireland PIMA 2017.

Note: CBA = cost-benefit analysis.
118 PIMA HANDBOOK

Dimension 10.b: Does the government selection process is not explicitly defined in law,
publish and adhere to standard criteria, regulation, or instructions. In this case, projects
and stipulate a required process for are often selected through ad hoc methods and
project selection? approaches. Project discussions may include
references to strategic priorities and goals,
QUESTIONNAIRE but there are no detailed criteria for assessing
whether the project contributes to these. The
Low There are no published criteria
actual selection is often done implicitly through
or a required process for project
the budget process, without any attention to
selection.
project benefits and the realism of implementa-
Medium There are published criteria for
tion plans.
project selection, but projects can
• A medium score implies that there are published
be selected without going through
selection criteria, but that these are general
the required process.
and do not provide clear guidance on which
High There are published criteria for
projects should be selected or not. It is common
project selection, and generally
that countries require projects to be consistent
projects are selected through the
with national plans and priorities. However,
required process.
these documents are often general and do
not necessarily provide clear guidance. If all or
DEFINITION OF KEY TERMS
most projects are deemed to be consistent with
Term Definition the selection criteria, these are not precise. The
Publish See glossary legal framework may include some exemp-
tions from the standard process and criteria,
Required A process defined in law, regulation,
process or instructions governing the budget for instance, for priority projects or emergency
process. “Process” implies that there projects.
are tasks assigned to organization • A high score indicates a stringent selection
units, with specified outputs, that process defined in law or regulation: there are
must be carried out in a specific published selection criteria, and these provide
sequence. clear guidance on which projects are to be
Project The government’s decision to selected. There can be more than one required
selection implement a specific investment process. For example, a separate process may
project. be required for mega-projects. The main issue
is that there is a defined process for selecting
all projects for the budget and that the same
INSTITUTIONAL DESIGN
selection criteria are applied.
The aim of this dimension is to verify that there
are specific criteria and a well-defined selection
process to ensure that projects are selected in an IMPORTANT DOCUMENTS
objective and comprehensive manner. Project
Documents Uses
selection may be done before the budget decision,
for instance, through a separate cabinet decision Regulations for Verify the existence and
project selection and stringency of project
or as part of the budget decision process. The
approval selection process and
institution focuses on the government’s decision
criteria
regarding the project, although this may be subject
to subsequent endorsement by the legislature. Project review Assess the application of
• With a low score, there are no published, specific documents project selection criteria
in practice
criteria for project selection and the project
6. Allocating Investments to the Right Sectors and Projects 119

EFFECTIVENESS the specified criteria and through the required

The effectiveness assessment should include a process. Box 6.13 describes the well-regulated
discussion of the actual stringency of the selection project selection process in Mexico.
process and criteria. If projects are selected
outside the required process and without applying USEFUL DATA SERIES
the defined selection criteria, effectiveness is
Questions to
limited.
Data Address
• Low effectiveness implies that actual project
Number and value Which share of
selection is not significantly affected by a required
of projects that were projects is selected
selection process and defined selection criteria.
selected outside in accordance with
These may be missing completely. Alternatively,
published criteria and prescribed criteria?
if there is a required process and criteria but outside the prescribed
many projects are selected outside the formally selection process
required process, effectiveness is low. In some
Number and value How stringently is
countries, it is not uncommon that some projects
of projects that have project selection
are presented and approved at cabinet meetings,
been rejected because criteria applied?
without any prior analysis or review by the admin- they did not meet Total number and
istration. Unfortunately, these may be large and the defined selection value of projects that
complex mega-projects, where the needs for criteria have been analyzed
stringent project preparation, appraisal, and using the defined
selection are particularly high. selection criteria/
• Medium effectiveness would indicate that the needed to determine
majority of projects (by value) are selected the share of projects
in accordance with the prescribed process selected outside
process or rejected.
and criteria. In many countries, there are dual
processes, whereby some projects go through Total number and value Needed to determine
the prescribed procedures and others are of projects that have the share of projects
selected through ad hoc approaches. been analyzed using selected outside
the defined selection process or rejected.
• High effectiveness requires that the entire
criteria.
capital budget is selected in accordance with

Box 6.13. Project Selection Process and Criteria in Mexico

The process for selection of public investment projects for the federal budget is governed by Article 34 of
the Federal Budget and Fiscal Responsibility Law. The law is supplemented by project selection guidelines.
Following the criteria set out in the law, selection is carried out in two phases; the first-level prioritization is
for what is called “irreductible investment” (for example, pluri-annual projects, ongoing projects, and mainte-
nance for productive infrastructure, followed by administrative acquisitions and maintenance, and then new
projects).
The second level of prioritization (primarily for new or reformulated projects) uses the following criteria:
(1) progress on feasibility studies; (2) net present value; (3) regional effects; (4) extensiveness of beneficiaries;
and (5) support to the Green Budget initiative. Each project is ranked following a valuation of all projects
based on weights assigned to each of these five criteria. The project ranking relative to the total expenditure
budget ceiling generates the list of selected projects. This list of projects is reviewed and formally approved

Box 6.13 continues on next page

120 PIMA HANDBOOK

Box 6.13 (continued)

by the Inter-ministerial Commission for Public Expenditure, Financing and Disincorporation (Comisión
Intersecretarial de Gasto Público Financiamiento y Desincorporación).
The selection of projects for inclusion in the budget follows a clear, criteria-based, and consistent process
(Figure 6.13.1). This process is applied to all ministry submitted projects approved by the Ministry of Finance
Investment Unit (IU) and registered in the project portfolio (cartera). Additional projects of up to 10 percent
may be proposed by Congress for inclusion in the budget. These projects must be registered in the cartera
and thus go through the same IU review and selection process required for ministry-submitted projects,
including socioeconomic and financial analyses. In principle, the IU can reject poor projects proposed by
Congress. Active project selection by the IU is limited to projects funded by the federal budget; other projects
funded by nonbudgetary sources (for example, EPE public corporations such as Pemex or CFE, or extrabud-
getary sources and from some trust funds are not part of the selection process.

Figure 6.13.1. Types of Projects Covered by the Mexican Government’s Project Selection Process

1. Projects included in 2. Projects reported to the 3. Projects not in IU-managed

IU-managed process and in IU for inclusion in the process, not reported to IU,
the portfolio (cartera) portfolio (cartera) and not in the portfolio
(est 403 billion Mexican pesos) (est 250 billion Mexican pesos) (cartera)

Projects funded by EPE public Projects funded by

Project funded by federal
corporations non-EPE public
ministries
(Pemex and CFE) corporations (paraestatales)

Projects funded by sub- PPP projects funded by EPE Projects funded by

national governments using public corporations autonomous
earmarked federal grants (Pemex and CFE) government agencies

Projects funded by
PPP projects partnered by extrabudgetary
federal ministries entities (including trust funds),
excluding the nonreimbursable
portion of Fonadin
Projects funded by the non-
reimbursable portion of Projects funded by
FONADIN subnational governments
using participaciones
(revenue sharing)
or their own revenues

Revenue projects funded by the

preceding types of institutions

Source: Mexico PIMA 2019.

Note: CFE = Federal Electricity Commission; EPE = Empresas Productivas del Estado (category of public corporation,
such as PEMEX and CFE); FONADIN = Fondo Nacional de Infraestructura (federal infrastructure fund);
IU = Ministry of Finance Investment Unit; Pemex = Mexican Petroleum.
6. Allocating Investments to the Right Sectors and Projects 121

Dimension 10.c: Does the government INSTITUTIONAL DESIGN

maintain a pipeline of appraised The aim of this dimension is to determine if there is
investment projects for inclusion in the a pool of appraised projects, to which the selection
annual budget? criteria and process are applied. This pipeline
or pool is important to facilitate efficient project
selection.
QUESTIONNAIRE
• A low score indicates that there is no formal
Low The government does not maintain requirement for a pipeline of appraised invest-
a pipeline of appraised investment
ment projects. This may be because there is no
projects.
pipeline at all, so that investment projects are
Medium The government maintains a pipeline not identified before the line ministries propose
of appraised investment projects, them, often during budget deliberations.
but other projects may be selected
Alternatively, there may be a pipeline of projects,
for financing through the annual
but the projects in this pipeline have not been
budget.
subject to appraisal. In both cases, there is a clear
High The government maintains risk that projects are selected for implementa-
a comprehensive pipeline of
tion without having gone through the necessary
appraised investment projects,
preparation and appraisal.
which is used to select projects for
• A medium score implies that there is a pipeline
inclusion in the annual budget, and
of appraised projects, but no formal requirement
over the medium term.
that projects be selected only from this pipeline.
The pipeline exists and there is a mechanism in
DEFINITIONS OF KEY TERMS
place to facilitate efficient selection from this
Term Definition pipeline, but there is no requirement that this
Pipeline of A group of projects that mechanism is always applied.
appraised have been appraised and • For a high score, there must be a comprehen-
investment through the appraisal have sive pipeline in place, and there is a formal
projects been judged to be eligible requirement that this pipeline must be used
for selection for the budget. to select previously appraised projects in the
The pipeline can be an annual budget and in the medium term. The
unsequenced list of projects
pipeline should encompass all funding modali-
or it can be a list of projects
ties, including externally financed projects and
sequenced by year.
PPPs. Several practices may meet the intent of
Comprehensive A pipeline is comprehensive
the condition that the pipeline must be used to
pipeline if it includes enough projects,
select projects in the medium term:
across all types of projects
ww There is an MTEF and specific projects are
and all financing sources,
shown for forward years, even on an indicative
to fully absorb estimated
aggregate funding for the basis, or
capital budget. Such a ww There is an annual budget process and budget
pipeline is continuously built documents show for information projects
and updated, not only to expected to be funded for future years, or
feed the coming budgetary ww There is a multiyear PIP wherein projects
space, but also to prepare for are scheduled by year and the total cost
subsequent budgets. of projects for each year is constrained by
Medium-term See the Glossary. forward estimates of aggregate funding
available for the capital budget.
122 PIMA HANDBOOK

For the purpose of this dimension, projects in • Low effectiveness indicates that many projects
the pipeline must be appraised before selection. It are selected from outside the pipeline.
is not sufficient if projects are appraised afterward. • Medium effectiveness indicates that the majority
If projects are added by cabinet or the legislature of projects are selected from the pipeline.
and were not previously appraised, it is unlikely that • High effectiveness indicates that all projects are
an appraisal would be rigorous or the supplemental selected from the pipeline. Box 6.14 describes
selection process objective and comprehensive. Chile’s integrated project pipeline, which was
The pipeline could include projects that have probably the first fully operational system of this
been subject to different levels of appraisal. It is type in the world during the 1980s.
common that appraisal guidelines differentiate
between small, routine projects that may be subject USEFUL DATA SERIES
to simplified appraisal procedures, and large,
Data Questions to Address
complex projects that are subject to comprehen-
Number and value What is the rigor and
sive appraisal procedures. See institution 4 for a
of projects that have objectivity of the
discussion on this.
been appraised and selection process?
are viewed as eligible
IMPORTANT DOCUMENTS for selection (i.e.,
Documents Uses a pipeline)
Number and value
Regulation for Assess institutional design
of projects that
preparation of
were appraised and
investment project
rejected as being
pipeline (or similar)
inefficient and thus
Project pipeline Assess comprehensiveness were not included in
document and coverage of projects the project pipeline
in the pipeline
Number and value of What is the effectiveness
projects selected for of this dimension?
EFFECTIVENESS implementation from
The effectiveness assessment should reflect how the pipeline in past
consistently projects are selected from the pipeline. 5 years
If the design score is medium, then there may be List of projects
projects selected from outside the pipeline. If this selected for
is common, then effectiveness is low. If it rarely or implementation from
outside the pipeline
never happens, although it is allowed, then effec-
in past 5 years
tiveness could be assessed as being high:
6. Allocating Investments to the Right Sectors and Projects 123

Box 6.14. Integrated Project Pipeline in Chile

Chile is a pioneer in the development of public investment management systems. The Chilean System of
National Investment was developed during the 1980s and has been a model for similar systems in many
countries. It includes a framework for identification and development of project proposals, with a database
of projects that are available for funding decisions (Integrated Project Bank—BIP). The BIP is available
online for all public institutions, and the public can access summary information about specific projects
and programs.
Projects are subject to extensive analysis before being allowed to enter the BIP. Table 6.14.1 shows the
value of projects in different sectors that were included in the project pipeline for each of the years 2008–11,
as well as the percentage of proposals that were allowed to enter the pipeline each year (bottom line).

Table 6.14.1. Cost of Projects in Chile’s Integrated Project Database, by Sector, 2008–11
(Million US dollars)

Sector 2008 2009 2010 2011

Water supply and sewerage 24.5 35.5 13.9 11.8
Communications 1.2 12.6 0.0 0.0
Defense and security 45.8 70.4 63.6 96.0
Sports 7.7 42.9 11.8 38.3
Education and culture 734.0 705.1 582.2 426.8
Energy 0.0 0.6 0.7 0.2
Industry, commerce, finance, and tourism 27.3 20.4 14.3 19.0
Justice 136.9 125.0 94.7 111.8
Mining 1.3 1.2 0.7 0.0
Multisectoral 150.8 140.4 256.6 466.7
Fishing 5.8 5.0 36.2 58.3
Health 95.7 196.3 201.8 205.7
Agricultural and forestry 38.2 29.4 36.9 16.1
Transport 164.9 199.3 182.0 462.1
Housing 85.6 74.9 22.1 7.0
Total 1,519.7 1,659.0 1,517.5 1,919.8
Percentage of approved initiatives 76.8% 74.6% 68.8% 65.4%
Source: Gómez-Lobo 2012.
 7
Delivering Productive and Durable
Public Assets
Timely and cost-effective implementation of capital budget execution. Project management and
public investment projects requires institutions portfolio monitoring must contribute to effective
that ensure projects are fully funded, transparently implementation, identification, and resolution of
monitored, and effectively managed throughout implementation challenges, as well as systematic
their implementation. Procurement practices must and continuous learning. Capital assets must be
be transparent and encourage competition, and transparently and efficiently managed.
funds must be made available to ensure timely

125
126 PIMA HANDBOOK

Institution 11: Procurement Dimension 11.a: Is the procurement

Is procurement based on effective competition and process for major capital projects open
subject to adequate oversight? and transparent?

The procurement process aims to operationalize the QUESTIONNAIRE

key characteristics of a project as it was appraised
Low Few major projects are tendered in a
and selected. The contract and choice of contractor
competitive process, and the public
establish, but do not finalize, estimates of (1) the cost has limited access to procurement
of the project, (2) the schedule of contract imple- information.
mentation (which determines when the benefits
Medium Many major projects are tendered
from operating the facility begin), and (3) the quality
in a competitive process, but the
of the physical structure (which determines, in part,
public has only limited access to
the likelihood that the design function and life of
procurement information.
the facility will be realized). The three dimensions of
High Most major projects are tendered in
this institution cover the following topics:
a competitive process, and the public
The first dimension relates to the competitive-
has access to complete, reliable, and
ness, openness, and transparency of the tender
timely procurement information.
process. In other words, whether the system encour-
ages all qualified contractors to bid. If so, then the
award is most likely made to the bidder who is able DEFINITIONS OF KEY TERMS
to deliver the most advantageous combination of Term Definition
cost and quality. Tender The process of inviting bids, evalu-
The second dimension requires that there is ating them, and awarding contracts
a system in place to ensure that procurement is Competitive Competitive procurement involves
monitored adequately. The monitoring arrange- opening the process to multiple bids
ments for the procurement process should be to generate competition among
established to determine whether the system bidders and obtain the best value. In
is working according to legal requirements and contrast, noncompetitive procure-
obtaining the intended results. ment happens when the buyer
The third dimension analyzes if the procurement either selects the company to buy
from or restricts the bidding process
complaints review process is conducted in a fair
to certain suppliers. Procurement
and timely manner. Complaints by bidders have
from a list of prequalified bidders
the effect of monitoring the tender process from
is considered competitive if the
the perspective of a participant in the procure-
prequalification process has been
ment system. The fairness and transparency of the open to all potential bidders.
complaints mechanism is an indicator of the quality Access to See “published” in the Glossary.
of the procurement system. information
This institution covers all central government Procurement Includes
procurement, including procurement of public- information • The notice of procurement
private partnerships (PPPs). If public corporation (PC) opportunities
investments are included in budget documents and • Procurement documents
approved by the parliament, then they should also (including technical standards
be covered by the assessment of this institution. In and evaluation criteria)
some countries, PCs follow the same procurement • Number of presented bids,
framework as central government even if they are number of accepted bids, and
not included in the budget, but this is not a require- identification of bidders
• Notice of award of contract
ment under this institution.
7. Delivering Productive and Durable Public Assets 127

It may also include procurement plans, summary must be requested directly from the procuring
of contract, standard procurement monitoring agency, or if access to information requires
reports, and decisions on bidder complaints. website-user registration, then access should be
considered limited.
INSTITUTIONAL DESIGN • A medium score indicates that the legal and
The aim of this dimension is to determine whether regulatory framework requires competitive
the system of procuring capital projects is struc- procurement of major projects but that it does
tured to maximize value for money. The focus of the not establish requirements for access to timely
design assessment is on the legal and regulatory and complete procurement information. If
framework for procurement. A general require- major projects are only competitively procured
ment for competitive procurement does not mean when externally financed, then the procurement
that all procurement will have to be competitive. system does not qualify for medium scoring in
Procurement legislation will often specify circum- this dimension.
stances in which other procurement methods may • A high score indicates that there are legal and
be accepted. However, the provisions for excep- regulatory requirements for competitive procure-
tions should not be so broad that they undermine ment of major projects, and publication of
the general requirement for competitive procure- timely and complete procurement information
ment. For that purpose, in addition to monitoring is required. Open, transparent, and competi-
and legal action by procurement-supervision tive procurement is required for major projects.
departments and agencies, competition authori- There are institutions mandated to monitor and
ties will often have a mandate to oversee relevant propose correction of noncompetitive behavior
markets and impose sanctions in case of violations. of procuring agencies and bidders. Cartelization
• A low score on institutional design implies that and collusion among bidders are legally punish-
the legal and regulatory framework for procure- able. Complete, reliable, and timely information
ment is weak. Competitive procurement is not should be proactively disclosed. Procurement
required and there are no strong provisions laws or regulations specify the type of information
for public disclosure of procurement informa- and timetable for publishing procurement infor-
tion. Limited access to information means that mation. Box 7.1 describes procurement legislation
procurement information is not easily available, in Bulgaria, which was assessed high on institu-
for instance, on an open website. If information tional design but lower on effectiveness in 2018.

Box 7.1. Procurement in Bulgaria: Legal Framework and Institutions

Bulgaria’s public procurement law was substantially overhauled in 2006 as part of the country’s accession to
the EU and has been amended frequently, including in 2016 and 2018 (Table 7.1.1).
The Public Procurement Agency (PPA) is an independent body under the Ministry of Economy. Its mandate
includes drafting law on public procurement, giving methodological and other forms of guidance, performing
mandatory ex ante controls, monitoring and analyzing procurement markets, alerting supervision authori-
ties to possible irregularities, and maintaining an electronic database with information on all procurement
procedures that contracting authorities are required to submit the Public Procurement Register. In cases of
irregularities, the PPA would inform the National Audit Office, the State Financial Inspection Agency, and the
respective managing authorities.
The Commission for the Protection of Competition (CPC) is charged with implementing the Law on
Protection of Competition, as well as with control of procedures under the procurement and concessions
laws. As the first-instance review body, the CPC examines and decides on claims of irregularities in public
procurement and may interrupt public procurement procedures and impose sanctions for noncompliance.

Box 7.1 continues on next page

128 PIMA HANDBOOK

Box 7.1. (continued)

The National Audit Office performs independent audits of national public finance for legality, efficiency,
and effectiveness in the use of public funds. It audits ministries, departments, and municipalities. However, it
has limited ability to sanction and can only forward its findings to the Financial Inspection Agency.
Under the Ministry of Finance, the Financial Inspection Agency is an entity set up in 2006 to ensure the
protection of public financial interests. It carries out inspections of the budget and the financial-economic and
accounting activities of public bodies, and it has the authority to impose sanctions.
In addition, the managing authorities of each individual operational program and the Audit of EU Funds
Executive Agency carry out audits and controls on the distribution and use of EU funds in Bulgaria.
If a claimant is not satisfied with the decision of the CPC, it may appeal against the decision before the
Supreme Administrative Court. The decision of its three-member chamber will be final and binding for all
parties in the case.
Sources: Public Procurement Law 2018; PPA.

If procurement is conducted by multiple entities, If procurement of PPPs (including concessions)

under several parallel procurement systems, does not follow the general procurement legisla-
then scoring should be based on the two most tion, then their procurement systems should be
widely used systems. Some countries, instead of assessed. The military, intelligence agencies, and
an integrated procurement system, allow some police, being sectors in which security reasons
ministries, agencies, or class of projects to follow sometimes constrain competition, should not
specific procurement legislation—in such cases, the be considered in the assessment—extension
assessment should address at least the two major of this exemption to other sectors should be
procurement systems involving major projects. avoided.

IMPORTANT DOCUMENTS
Documents Uses
General procurement legislation, plus legislation Assess provisions for competitive procurement
including alternative provisions for specific sectors,
ministries, PCs, and PPPs, including concessions
Legislation establishing procurement monitoring Assess provisions for monitoring procurement and
departments or agencies correcting deviations from standard practices
Assess provisions against cartelization and bidder
collusion
Procurement regulations, including regulations for Assess if regulations also support competitive
specific sectors procurement

Periodic or sporadic reports of procurement Assess the existence and functioning of monitoring
monitoring departments and agencies, including provisions and corrections mechanisms (also relevant
statistics, procurement analysis, and notice of for the assessment of effectiveness regarding effective
corrective action and punitive legal processes competition)
Call-for-tender documentation of several Assess qualification requirements and selection criteria
major projects (also relevant for the assessment of effectiveness)

Procurement audits Assess whether audits indicate systemic weaknesses in

procurement practices
7. Delivering Productive and Durable Public Assets 129

EFFECTIVENESS of procurement is done according to IFI or DP rules,

The effectiveness rating should apply the three then this may affect the share of competitive procure-
reference answers to PIMA question 11.a (Is the ments and the effectiveness on this dimension.
procurement process for major capital projects The effectiveness assessment should be based
open and transparent?), looking at actual procure- on procurement statistics and verify whether the
ment results. Procuring entities may engage system is working as intended. It is not uncommon
in tailoring of qualification requirements and that formal procurement regulations require that
selection criteria in ways that repel competition. most procurement be competitive, but that the
And, in the absence of anticollusion legislation and actual share of competitive procurements is consid-
corresponding enforcement tools, bidders may erably lower. Effective competition means not only
neutralize formally competitive public procurement. open, transparent, and competitive tenders, but
The effectiveness assessment should cover whether also more than one bidder presenting accepted
poor practices result from deficiencies in the insti- bids, as well as absence of evidence of carteliza-
tutional design (for example, restricted mandate for tion or collusive behavior. Also, formal regulations
competitive procurement; too-broad exceptions to often mandate a high degree of transparency in
competitive procurement; absence of institutions procurement activities, but actual transparency is
aiming at monitoring procurement and fostering much lower, for instance, because procurement
competition; absence of legal provisions against websites have limited coverage or are not updated
cartelization and collusion) or from implementation in a timely manner.
issues (for example, low capacity, corruption). • Low effectiveness implies that few major
The assessment should clarify the share of projects are subject to clearly perceived
procurement that is subject to national procurement effective competition.
rules. Many international financial institutions (IFIs) • Medium effectiveness implies that many major
and development partners (DPs) have their own projects are subject to clearly perceived
procurement rules that have to be followed unless effective competition.
there is an explicit decision to rely on national rules • High effectiveness indicates jurisdictions where
or the rules of another agency (see Box 7.2 on World the vast majority of major projects are effec-
Bank practices in this regard). If a significant share tively competitively procured and where there is
proactive, open disclosure of complete, reliable,
and timely procurement information.
Box 7.2. World Bank’s Alternative The ministry in charge of public procure-
Procurement Arrangements ment policy and control, or the main contracting
At the Borrower’s request, the Bank (subject to agencies, should be able to provide evidence that
its policies and rules, and applicable fiduciary procurement rules are complied with. If this cannot
and operational requirements), may agree to
be documented, then there may be discrepancies
the following:
between formal requirements and actual practices.
• rely on and apply the procurement rules
The scores should be downgraded if the assessment
and procedures of another multilateral
or bilateral agency or organization, and
team perceives evidence of significant challenges
may agree to such a party taking a leading to an effective competitive procurement, such as
role in providing the implementation pervasive corruption or mismanagement of the
support and monitoring of procurement procurement processes, unreliable data, or lack of
activities; and critical relevant data.
• rely on and apply the procurement rules If there are many failed tenders or the average
and procedures of an agency or entity of number of bidders for competitive and open tenders is
the Borrower. consistently low, then the competition may be impaired.
Source: World Bank 2018. Absolute absence of failed tenders for lesser projects
may also signal competition issues, particularly when
130 PIMA HANDBOOK

most tenders have a single bidder—hinting at market These issues should be explored and commented
partition among bidders. In those cases, monitoring on in the assessment, in particular whether they are a
reports and action plans addressing poor competi- result of an ineffective procurement system design or
tion should be requested from authorities for analysis. whether there are other causes.

Table 7.1.1. Public Works Contracts in Bulgaria (2016 to Mid-2017)

Procurement with a value equal to or above 5 Procurement with a value greater than 2 but
million Bulgarian lev less than 5 million Bulgarian lev
Amount Amount
Type of (millions (millions
Procurement Number Percent of leva) Percent Number Percent of leva) Percent
Open tender 238 94 6,790 94 325 95.3 1,022 95

Negotiated with 5 0.20 40 0.50 1 0.30 5 0.50

a prior call for
particiaption
Negotiation 2 0.08 15 0.20 6 1.70 22 2
without prior
notice
Limited 3 0.12 177 2.30 5 1.50 13 1.25
Undefined 6 0.25 211 3 4 1.20 13 1.25
Total 254 100 7,233 100 341 100 1,075 100
Sources: Public Procurement Law 2018; PPA.

USEFUL DATA SERIES

Data Questions to Address
Number and value of tenders conducted by the What is the share of different procurement methods?
category of procurement process ((for example,
international open tender, open tender, restricted
tender, direct award)
Number and value of major projects conducted by
the category of procurement process
Average number of received bids and accepted What is the actual degree of competition in
bids for each tender, using competitive and open competitive tender processes?
tender classes What is the actual degree of competition in major
Average number of received bids and accepted bids projects?
for each major project
Number of failed tenders (tenders announced but for What share of tenders is unsuccessful?
which no contract was issued) What share of major projects is unsuccessful?
Average number of failed bids for each major project
Shares of competitive procurement following What is the importance of IFI and DP projects in the
national rules and following IFI/DP rules, by category tender process?
of tender process and by major project What is the importance of IFI and DP projects in
major projects?
7. Delivering Productive and Durable Public Assets 131

Dimension 11.b: Is there a system in place to INSTITUTIONAL DESIGN

ensure that procurement is monitored This dimension aims to determine whether there
adequately? is a procurement database to monitor whether the
procurement system is operating as intended. Legal
QUESTIONNAIRE systems that aim at competitive procurement must
require mechanisms for monitoring procurement and
Low There is no procurement database, or the
information is incomplete or not timely for acting when actual procurement practice deviates
most phases of the procurement process. from the standard and when bidding behavior signals
Medium There is a procurement database with cartelization or collusion among bidders. As recom-
reasonably complete information, but no mended by the OECD, the system should allow free
standard analytical reports are produced access through an online portal for all stakeholders,
from the database. including civil society and the general public, to public
High There is a procurement database with procurement information (OECD 2018). The database
reasonably complete information, and and the monitoring mechanism should help identify
standard analytical reports are produced problems in the procurement system and bring these
to support a formal monitoring system. problems to the attention of responsible officials.
• A low score implies that, there is no procurement
DEFINITIONS OF KEY TERMS database or the information in the database
Term Definition is incomplete or not timely. Significant parts of
Procurement Relational database software that government may be excluded from the require-
database includes a dataset in which all major ment to feed the procurement database or be
steps of each tender are recorded. obliged to provide only limited information.
Phase of the A step defined in procurement There may also be inadequate rules to ensure
procurement regulations, which may vary based
that information is recorded in a timely manner.
process on the tender type. Examples
• A medium score means that the database has
include public announcement of
reasonably complete information. It should be
tender, clarifications, receipt of bids,
evaluation of bids, notice of tender
used by all procuring agencies, with possible
award, and contract signing. exceptions for remoteness and lack of communi-
Reasonably Information should be available cation capabilities. It should record information
complete according to the steps described on at least 75 percent by value of all nonmilitary
information above under “Phases of the public procurement. The information should
procurement process.” have a level of detail that is consistent with
Standard A standard report drawing information what is required under the different steps of the
analytical from the procurement database, government procurement process. Procurement
report centrally designed and readily
not subject to tender should be recorded in
available. It may be periodically
the database.
published or ready to be run at any
• A high score implies that the database is used to
time with no additional programming
produce standard analytical reports and support
required. It should not only present
statistical information, but also a formal procurement monitoring system. The
present some analysis of the degree existence of a standard report conveys that
of effective competition in public the report represents the views of manage-
procurement. A user-defined report ment and is expected to be run frequently. It is
does not qualify as a standard report. generally not possible to produce reasonably
Formal A set of activities designed to complete standard reports without a procurement
monitoring evaluate the ongoing performance of database—standard reports must be timely and
system the procurement system and propose reasonably complete, which is difficult to achieve
improvement or corrective action.
if data are collected and reports are prepared
132 PIMA HANDBOOK

manually. A formal monitoring system constitutes person must be dedicated to monitor the procure-
a set of activities designed to evaluate the ongoing ment system, and that person must have freedom
performance of the procurement system. It must to identify and report problems with the procure-
be required by law or regulation and define a ment system. Ideally, the monitoring system should
responsible entity and requirements for data be operated by a unit separate from the primary
collection, data analysis, and reporting. procuring agency. The monitoring system should
be considered less effective if it does not appear to
IMPORTANT DOCUMENTS operate independently, even if not located organi-
Documents Uses zationally within the primary procuring agency. The
Procurement database Assess scope and rating can be downgraded if the assessment team
documentation functionality perceives evidence of significant misrepresentation
of procurement data or recommendations deviating
Regulations on the Assess whether
from open, transparent, and competitive practices.
collection and recording regulations ensure
of information in the comprehensive Timeliness of analytical reports is a key indicator
procurement database coverage and timeliness of effectiveness. If analytical reports are not
released in a timely manner, then problems cannot
Analytical reports Assess quality,
be identified and addressed in a timely manner.
produced from the comprehensiveness,
procurement database. and timeliness of reports
Ideally, analytical reports should be available within
one month of the end of the reporting period, if not
EFFECTIVENESS on a real-time basis.
A formal monitoring system must consist of more If there is no procurement database or the infor-
than distribution of standard reports. Standard mation in the database is incomplete or not timely
reports, by definition, facilitate some type of and analytical reports are not available at all, or are
analysis, if nothing more than by the way data is published more than six months after the analyzed
presented. A monitoring system needs to (1) analyze period, effectiveness should be low.
data in standard reports; (2) draw conclusions and Medium effectiveness implies that the procure-
possibly make recommendations; (3) communi- ment database is reasonably comprehensive, but
cate those conclusions and recommendations to analytical reports are missing or produced more
senior officials for the purpose of improving the than six months after the analyzed period or do not
procurement system. A formal monitoring system is cover annual procurement.
not effective if it does not perform these activities The high effectiveness rating is reserved for juris-
based on standard reports. dictions where the procurement database is used
An effective monitoring system requires dedicated by a monitoring system that produces monthly or
and independent staff. Just publishing standard quarterly analytical reports drawing conclusions and
reports on the procurement system website does not making recommendations for improvement. Box 7.3
constitute an effective monitoring system. At least one describes the e-procurement system in Bangladesh.

USEFUL DATA SERIES

Data Questions to Address
Frequency of analytical What is the frequency of analytical reports? Are monthly, quarterly, or annual
reports (for example, procurement performance results analyzed? Are results compared over time?
monthly, quarterly, annual) Are actual results compared with performance goals?
Are procurement practices analyzed and recommendations produced?
Publication dates for What is the timeliness of analytical reports over time?
analytical reports
7. Delivering Productive and Durable Public Assets 133

Box 7.3. Electronic Procurement System in Bangladesh

With assistance from the World Bank in 2011, the Bangladeshi government introduced a web-based electronic
government procurement system, e-GP. The system is managed by the Central Procurement Technical Unit,
part of the Implementation Monitoring and Evaluation Division, Ministry of Planning. The system is currently
used by 1,252, or 95 percent, of 1,324 procuring entities, with the 71 entities not participating being small rural
units of government. The system covers procurement of works, goods, and services, with the exception of
consulting services. Therefore, virtually the entire development budget that requires procurement is acquired
through e-GP, which captures data on each step in the procurement process. The public has access, through
the e-GP website, to tender documents, bid statistics and summary contract data relating to each tender, and
key performance information covering all tenders announced. Bangladesh plans to extend use of the e-GP to
all procuring entities by 2022. The procurement methods used in e-GP have been overwhelmingly competi-
tive, as shown in Table 7.3.1.

Table 7.3.1. Methods Used for Tendering in Bangladesh’s e-GP Procurement System, July 2011 to
September 2018

Value
  Tenders (billions of
Procurement Method Initiated Percent taka) Percent
Open-tendering method 141,529 68.0 1,628.6 86.8

Limited-tendering method 63,318 30.4 183.3 9.8

Request for quotation 1,777 0.9 0.2 0.0
One-stage, two envelopes tendering 1,452 0.7 64.9 3.5
Direct procurement 23 0.0 0.0 0.0
Selection under a fixed budget 8 0.0 0.0 0.0
Selection-based consultant qualifications 5 0.0 0.0 0.0
Quality cost-based selection 4 0.0 0.0 0.0
Total 208,116   1,877.2  

The e-GP system has the capability to produce analytical reports. The system has a reporting module
containing a variety of standard reports to monitor the procurement system. Additional standard reports can
be added as desired. Data on manual procurements by the 5 percent of procuring entities that do not use
e-GP are not entered into the system and thus are not reflected in system reports. This problem will diminish
over time as the remaining procuring entities use e-GP. The e-GP system currently publishes quarterly on its
website a performance indicators report covering 42 indicators. Data contained within the report are cumu-
lative, beginning in fiscal year 2015/16. Two enhancements are currently being developed that will promote
transparency: a data dashboard available to the public and a civil engagement feature that will allow the
public to provide feedback on contract implementation.
The e-GP system represents a significant achievement. The system is a modern, fully functional informa-
tion system, containing all the features expected of such systems. The main challenges going forward are
to expand the coverage of the system, disclose more information on tenders processed, and ensure that
discretionary data not captured through mandatory system controls, for example, complaint information, are
entered accurately and in a timely manner. The last of these challenges may be the most difficult to achieve,
as it relates to human behavior. Detailed monitoring of the system can minimize shortcomings in this regard.
Source: e-GP, MOP.
134 PIMA HANDBOOK

Dimension 11.c: Is the procurement The independence of the complaints system

complaints review process conducted in regarding the procuring agency will be assessed.
a fair and timely manner? There is no independence if the review entity is
the procuring agency, an entity dependent from
it, an entity dependent on the same parent line
QUESTIONNAIRE
ministry, or the parent ministry itself. Independence
Low Procurement complaints are not is sometimes difficult to assess, given that in some
reviewed by an independent body.
countries, membership in a complaint review body
Medium Procurement complaints are may be short term—even appointed for review
reviewed by an independent body, of a single tender. At a minimum, independence
but the recommendations of this requires that the majority of the reviewers are not
body are not produced on a timely
employees of the procuring agency.
basis, nor published, nor rigorously
• A low score indicates that the legal and
enforced.
regulatory framework does not require an inde-
High Procurement complaints are pendent complaints system. In some cases,
reviewed by an independent body
there is no formal complaints mechanism at all.
whose recommendations are timely,
In other cases, complaints may be filed, but they
published, and rigorously enforced.
are handled by an entity not independent from
the procuring agency.
DEFINITIONS OF KEY TERMS • For a medium score, the legal and regula-
Term Definition tory framework does require an independent
Tender must be registered according to complaints body, but the arrangements for
procurement law, regulation, or enforcement of the decisions of this body are
written procedure. inadequate. Recommendations of the review
Independent See glossary body are not required to be delivered on a
Timely A recommendation is timely if it is timely basis, to be published, or to be rigorously
made before the contract is signed. enforced.
Publish See glossary • For a high score, the legal and regulatory
Rigorously Implement as intended. framework ensures that the independent
enforce
complaints body has the necessary legal
standing and capacity to produce recommenda-
INSTITUTIONAL DESIGN tions that are timely, published and rigorously
This dimension aims to assess if there is a enforced. The recommendations of the review
complaints system to ensure that the procurement body should have legal force and cannot be insti-
system is properly designed and is operating as tutionally disregarded.
designed. Complaints may suggest procurement
procedures were not properly followed for a single
tender. They can also mean that the procedures are IMPORTANT DOCUMENTS
not well designed. The complaints system should
Documents Uses
identify these types of issues and make recom-
mendations to resolve them or prevent them in Legal framework for Assess institutional
procurement complaints design
the future. A complaints review system does not
review body
exist if bidders are not given a reasonable time
window, compatible with the complexity of the Representative sample of Analyze whether
tender, for presenting complaints. For example, in decisions issued by the decisions are
complaints review body published in a
Estonia complaints must be presented within 10
timely manner
days (Box 7.4.)
7. Delivering Productive and Durable Public Assets 135

A low number of complaints can also be an indica-

Legal framework for decision Analyze whether
review after issuance complaints review tion that it is difficult to lodge complaints and that
of complaints review recommendations the mechanism is not effective.
body recommendations are rigorously If independent reviews are not published or
Representative sample enforced enforced, the complaints review system could
of procurement decision and whether receive a medium effectiveness rating in terms of
revision after issuance procurement efficiency if the average time to resolve complaints
of complaints review legislation allows for is two to six months.
recommendations nonenforcement Independent reviews that are published and
rigorously enforced could receive a high effective-
ness rating if the average time to resolve complaints
EFFECTIVENESS is less than two months. Box 7.4 describes the
The effectiveness assessment should include procurement complaint system in Estonia, which
analysis of the performance of the complaint was deemed to be highly effective in the 2019
mechanism. This should include the number of PIMA.
complaints that have been lodged the past three
years, the average time to consider a complaint,
USEFUL DATA SERIES
and the share of complaints for which procurement
decisions are overturned or penalized. A breakdown Data Questions to Address
by type of procurement and by government sector Number of complaints Do the complaint
could be useful. The rating can be lower if there are as a percentage of shares indicate that the
indications of corruption, significant misrepresenta- total tenders complaint mechanism is
tion of complaints, or unfair recommendations. The well established?
assessment should give adequate weight to the Number of complaints Do the complaint
complaints related to major projects. related to major shares indicate that the
High fees to file a complaint may undermine projects as a complaint mechanism
the effectiveness of the complaint system. Small percentage of tenders is well established for
fees may be appropriate to discourage frivolous of major projects major projects?
complaints. However, large fees might discourage Average time for a What is the
genuine complaints, and thus reduce openness and decision on a complaint effectiveness of the
transparency. See Box 7.4 for examples of fees in to be made, by stage of complaint mechanism?
the Estonian procurement complaints mechanism. review
Even if there is no system for compiling and Actual time for the What is the
analyzing complaints, the complaint system may decisions on complaints effectiveness of the
be partly effective. The complaint system is aimed related to all major complaint mechanism
at addressing irregularities on an individual tender projects in the last 3 regarding major
and bid basis, and this function may be filled even years projects?

in the absence of a system for compiling and Number of tenders Does the complains
analyzing complaints. However, complaints also audited and mechanism
have a bearing on system design and overall opera- percentage in which indicate systemic
tions of the procurement system. violations of procedure weaknesses in the
are noted procurement system?
The timeliness of the complaint mechanism, as
well as its independence and the disclosure and Number of complaints How timely and fair
enforcement of review decisions, are core indica- that end up in court. are decisions about
tors for its effectiveness. Number of court ruling complaints?
Low effectiveness implies that the average time confirming the Review
Committee’s rulings
to resolve complaints is more than six months.
136 PIMA HANDBOOK

Box 7.4. Procurement Complaints Mechanism in Estonia

Estonia has a well-organized public procurement system, and the legal and institutional framework is in line
with the relevant European directives. Making a complaint to the independent Public Procurement Review
Committee, whose proceedings are organized by the Ministry of Finance (MoF), is the mandatory first step
to settle disputes as stipulated in the Public Procurement Act. Its decisions are binding unless challenged in
courts. This provides a three-level dispute resolution mechanism in accordance with the judicial system.
A request for review must be received by the Review Committee within 10 days as of the day when the
requester learned or had to learn of the infringement of its rights or harming of its interests, except in certain
specified cases, but not after the award of the public contract.
After the awarding of the public contract, a request for compensation of damage may be filed with the
Review Committee by an economic operator not awarded the public contract because of an unlawful decision
of the contracting authority or entity or because of a procurement document, unless the economic operator
failed to contest the decisions of the contracting authority or entity or the procurement documents in a timely
manner even though it had the opportunity. A request for compensation of damage may be filed with the
Review Committee within one year from the award of a public contract.
Upon filing a request for review and a request for compensation of damage, requestors will be required to
pay a state fee in one of the following amounts:
• €640 if the estimated value of a public procurement is below the international threshold
• €1,280 if the estimated value of a public procurement equals or exceeds the international threshold
The Review Committee may, based on a reasoned request of the requester, decide to suspend the
public procurement at any stage of the review proceedings, taking account of the possible conse-
quences of the suspension to all interests that might be harmed. The Review Committee hears a
request for review based on submitted documents in a written procedure or holds a public hearing of
the request for review with the participation of the parties to the proceedings, if the Review Committee
considers it necessary for adjudication of the request or if the requester and the contracting authority
or entity both demand it.
About 2 percent of the procedures are challenged by the economic operators and generally
concern the result of the evaluation process. Review Committee decisions must be issued within
30 days and are usually handed down within 20–25 days. Only about 10 percent of the decisions are
appealed in court, with the court proceedings generally confirming the Review Committee’s rulings.
Sources: Republic of Estonia PIMA 2019, Public Procurement Review Committee.
7. Delivering Productive and Durable Public Assets 137

Institution 12: Availability the anticipated dates of major expenditures or

payments are estimated by regularly seeking infor-
of Funding mation from project implementing agencies.
Is financing for capital spending made available in a The second dimension looks at cash management
timely manner? arrangements to ensure timely payments. Payment
can be made in a timely manner after approval of a
This institution addresses the systems, processes, payment request if there is adequate cash balance.
and tools in place to ensure the availability of This requires taking cash management measures
cash when needed to make payments for public to address any expected temporary cash shortfalls
investments. In a modern treasury system, the as informed by the cash forecast. If cash shortfalls
term “cash” is equivalent to liquid resources that cannot be addressed, and cash rationing or arrears
are readily available—mainly cash or equivalent in are the only options, then money is not available
bank accounts, but also sometimes cash kept in when needed. Cash rationing can occur without
money chests—to make payments. Depending on arrears if monthly or quarterly budget allocations
the public financial management system system in are reduced, contracts for approved projects are
a country, government payments for public invest- not signed, or contractors are told to slow down
ments could either be centralized through the their work.
Treasury or Ministry of Finance (MoF) or decen- The third dimension addresses whether external
tralized to line ministries and agencies that are in financing flows are integrated with the government
charge of executing the public investment projects. bank account structure that is under the oversight
Government payments to contractors during of the treasury or MoF. The ownership and location
project implementation are often large, and the of bank accounts carrying external fund proceeds
date of payment could be difficult to predict (either external grants or loans) make it easier or
precisely because it is typically based on comple- harder for governments to track external financing
tion of certain milestones as specified in respective flows and balances, and to forecast and manage
contracts. These characteristics increase the risk their cash resources accordingly.
that cash may not be available when payment orders
are issued to make payments against the invoices
received from contractors, even if there is adequate
Dimension 12.a: Are ministries/agencies
budget authority to spend. If payments are not made
able to plan and commit expenditure on
on time, arrears emerge and could accumulate over
capital projects in advance on the basis
time, leading to a substantial increase in government
of reliable cash flow forecasts?
liabilities. The arrears also increase project costs
QUESTIONNAIRE
directly through explicit late payment penalties
(typically under the contract) and indirectly through Low Cash flow forecasts are not prepared
higher tender bids if contractors see a pattern of or updated regularly, and ministries/
delayed payments by government agencies. agencies are not provided with
The first dimension under this institution commitment ceilings in a timely
manner.
addresses cash flow forecasting and the predict-
ability of cash flows. Government cash planning is Medium Cash flow forecasts are prepared or
based on a system of forecasting cash inflows and updated quarterly, and ministries/
outflows for the period ahead. Recording expendi- agencies are provided with commitment
ceilings at least a quarter in advance.
ture commitments helps capture the size of planned
expenditures or payments but does not precisely High Cash flow forecasts are prepared or
identify the dates of payments, particularly when updated monthly, and ministries/
multiple payments in stages are envisaged for agencies are provided with commitment
ceilings for the full fiscal year.
a single commitment or contract. Typically,
138 PIMA HANDBOOK

DEFINITIONS OF KEY TERMS have a similar, but less direct, effect to commit-
Term Definition
ment controls and could be seen as an alternative
to commitment controls when assessing the design
Cash Funds readily available in
of the system.
government bank accounts
• A low score indicates that there is no legal
to make payments through a
treasury system. or regulatory requirement for systematic
cash flow forecasting. In this environment,
Cash flow A forecast of cash inflows and
cash management will often be ad hoc and
forecast outflows that shows gross
there may be uncertainty regarding whether
flows and cash balances (net)
on daily, weekly, monthly, or an investment project will be able to make
quarterly intervals. payments in a timely manner to ensure efficient
project implementation.
Prepare or The word “prepared” suggests
update that there is a clear starting • For a medium score, there is a legal or regula-
point. In some countries, tory requirement for cash flow forecasts to be
cash flow forecasts start prepared at least quarterly and ministries are
anew each fiscal year and are provided commitment ceilings at least a quarter
updated during the year. More in advance. The commitment ceilings may cover
commonly, forecasts are always all spending, or be limited to certain types of
rolling, looking forward for a spending, for instance, capital investments.
fixed period. In these cases, • A high score implies that there is legal or regu-
cash flow forecasts are being
latory requirement for an advanced cash
updated on a rolling basis.
management system. This includes monthly
Commitment Limit on a ministry’s or agency’s cash forecasts, and commitment ceilings for the
Ceiling authority to commit to future whole fiscal year are provided at the beginning
spending, that is, incur a
of the year.
potential future obligation
to pay, for instance, through
signing a contract. Ceilings may IMPORTANT DOCUMENTS
relate to either (1) the maximum Documents Uses
sum of new commitments that
can be entered into in a period, Legal framework for Assess formal
or (2) the cumulative total of cash planning and requirements for cash
outstanding commitments. cash management planning
Regulations for Assess design of
INSTITUTIONAL DESIGN expenditure/ commitment control
commitment control mechanism
The aim of this dimension is to determine whether
and/or budget
there are mechanisms to ensure that cash to make
execution
payments is available when needed. The detailed
focus is on the formal regulations regarding
commitments, and on cash flow forecasting EFFECTIVENESS
and management. The effectiveness assessment should focus on how
In-year budget or payment ceilings contribute consistently the mechanisms defined in laws and
to cash management. Budget appropriations regulations are applied in practice. This assess-
are recorded in the treasury expenditure control ment should be based on specific data for cash
system as authorizations to spend (make payments). flow forecasts and commitment ceilings, compared
Many countries sub-divide the annual appropria- to actual cash flows, commitments, and payments,
tion into monthly or quarterly allocations. These for the past three years. Does government make
7. Delivering Productive and Durable Public Assets 139

cash with fund capital expenditure available as and ceilings not being funded. Box 7.5 describes
when needed? cash forecasting arrangements in Armenia.
• Low effectiveness indicates that cash forecasts
are not reliable. Cash forecasts may be missing USEFUL DATA SERIES
altogether, or not documented. Alternatively,
Data Questions to Address
actual cash payments tend to be lower than
forecast and cash payments during the year are Cash flow forecasts, Is there a bias toward
lower than commitment ceilings. broken down by restricting funding
quarter or months early in the year?
• Medium effectiveness indicates that the reli-
ability of cash forecasting is mixed and ministries Actual cash flow, Are there systematic
are provided commitment ceilings at least a broken down by differences between
quarter in advance. There may be examples of quarter or months forecasts and actual
cash flows?
commitment ceilings not being funded in terms
of ensuring cash availability. Commitment ceilings How effective is the
• High effectiveness means that cash forecasts are compared with commitment control
reliable and commitment ceilings for the whole commitments and system?
actual spending for the
fiscal year are provided at the beginning of the
same set of projects
year. There are no examples of commitment

Box 7.5. Cash Forecasting in Armenia

Almost all payments in Armenia for general government capital expenditure are currently made from the
Treasury Single Account (TSA) at the Central Bank of Armenia. Central and local government noncommer-
cial organizations currently execute their capital expenditures through commercial bank accounts, but their
proportion of total general government capital expenditure is minor, and these expenditures will in the near
future also be executed through the TSA. The bank accounts for donor-funded projects, including those in
foreign currencies, have been subaccounts of the TSA since 2012; these subaccounts are under the control of
the line ministry’s Project Implementation Units established and operating according to agreements with the
relevant donors.
For capital expenditures funded by general state budget resources, monthly cash flow forecasts at
aggregate and line ministry levels are prepared for the fiscal year. Cash forecasts are used as the basis of the
quarterly budget allocations approved by the government following parliamentary appropriation of the annual
budget. This is a bottom-up process that starts with the officials in the MoF’s budget departments respon-
sible for monitoring line ministry expenditures. These forecasts are updated monthly on the basis of actual
inflows and outflows. The forecasts are broken down by month and week, and the cash planning processes is
structured around weekly meetings. Line ministry commitment limits are the annual appropriations. Although
expenditures may be contractually committed by line ministries with a time horizon for payments up to one
year, payments during the year are still subject to the quarterly payment limits equal to the quarterly budget
allocation breakdowns. Line ministries may request adjustments to these limits if warranted by circumstances
(for example, contractors submitting payment certificates according to schedules different from planned).
The centralized cash planning and commitment control does not apply to donor-funded capital expenditures,
as these are subject to the cash planning and commitment controls of the donors’ procedures.
Since the economic and financial crisis year of 2009, there have been no significant problems in releasing
cash for capital expenditures in a timely manner. For capital expenditures funded by general state budget
resources, the Treasury maintains a cash buffer to enable it to cope with shortfalls of receipts; this, together
with well-established and highly automated cash forecasting and commitment control systems, means that
supplier invoices are usually paid on a timely basis. For donor-funded projects, the Project Implementation
Unit TSA subaccounts are usually prefunded by donors so that contractor invoices are paid promptly.
Source: Armenia PIMA 2018.
140 PIMA HANDBOOK

Dimension 12.b: Is cash for project INSTITUTIONAL DESIGN

outlays released in a timely manner? The aim of this dimension is to determine whether
there are formal mechanisms to ensure that contrac-
tual obligations for payment can be met. Such
QUESTIONNAIRE
mechanisms can be based on laws and regulations
Low The financing of project outlays and or on lower-level instructions, for instance, treasury
payments are frequently subject to
guidelines. The language in the questionnaire refers
cash rationing.
to the actual effects. The effects should be covered in
Medium Cash for project outlays is sometimes the effectiveness assessment, while the assessment
released/paid with delays. of institutional design should focus on the formal
mechanisms established to handle this issue.
High Cash for project outlays is normally
released/paid in a timely manner, • A low score on institutional design means that
based on the appropriation. there are no formal mechanisms to ensure
timely release of project funds when payments
DEFINITIONS OF KEY TERMS become due. In this situation, the Treasury may
have full flexibility in delaying payments in times
Term Definition
of cash shortages, and to reduce cash releases
Outlays See glossary
or payments below approved appropriations for
Cash Cash is rationed when there are the year as a whole.
rationing more invoices to be paid than can • A medium score implies that there are formal mech-
be paid, and invoices are paid anisms to ensure timely release of project funds,
selectively. This leads to cash not
but they are not sufficiently strong to ensure that
being released within due time
funds always are released for payment in line with
(usually 30 days from the date of
appropriations. The treasury may be authorized
an invoice, but it can vary among
countries, sometimes being 45 or to delay release of funds within certain confines,
even 60 days). for instance, for a limited period of time, or curtail
releases to a certain level of appropriations if this is
Cash release Cash is released when a
required. Some countries have legal provisions that
payment request is approved. It
is assumed that if the payment budget releases can be limited to 90 or 95 percent
request is approved, the of appropriations if there are cash shortages.
payment is made—in other • A high score indicates that there are strong
words, that cash rationing mechanisms to ensure timely release of funds for
decisions are made before a payment, in line with the annual appropriations.
payment request is approved. This may include a legal provision that all appro-
The mode of payment can priated funds shall be released during the year,
be electronic, check, or unless there is a formal budget amendment.
replenishment of petty cash.
Timely Payment is made in due time, IMPORTANT DOCUMENTS
manner based on the date of the invoice. Documents Uses
Cash release Expenditures are made
Legal and regulatory Assess institutional
based on the according to the intended
framework for budget design
appropriation purpose and maximum amount
execution
authorized in an appropriation.
This assumes that expenditures Detailed guidelines for Assess detailed provi-
can be made by the end of the treasury operations sions for cash releases
fiscal year up to the amount of
the appropriation.
7. Delivering Productive and Durable Public Assets 141

EFFECTIVENESS • If there is limited information on whether invoices

The effectiveness asses`sment should use the are paid in a timely manner, an alternative could
criteria in the questionnaire to assess the actual be to look at whether major projects have accu-
performance of the cash management system: mulated payment arrears due to cash shortages:
• Low effectiveness means that “frequently” cash is • If cash shortages frequently lead to arrears,
rationed—several invoices for major projects are effectiveness would be low.
not paid in a timely manner. • If cash shortages have caused arrears in a few
• Medium effectiveness indicates that “sometimes” major projects, effectiveness is medium.
cash is rationed—most invoices for major projects • If there are no accumulated arrears, effectiveness
are paid in a timely manner.
is high.
• High effectiveness implies that invoices are
always paid in a timely manner, except for inci-
USEFUL DATA SERIES
dental human errors. In addition, cash releases
should be in line with the appropriations. Questions to
The assessment should look at cash releases Data Address
compared with budget appropriations, including Size of new, or the Does cash rationing
any budget amendments during the year. Payment cumulative total of, arrears lead to systemic
delays may be caused by a fiscal shock, poor fiscal for capital projects arrears?
forecasts, and poor budget estimates, as well as Average time between the What is the
poor cash management. If these lead to formal date of invoices and the average maturity
budget amendments, the assessment of cash authorization of payment of outstanding
management practices should be based on the invoices?
revised appropriations. Box 7.6 illustrates that even
a robust institutional design may be insufficient to
ensure effectiveness in a difficult situation.

Box 7.6. Legal Framework for Cash Rationing in Moldova

In Moldova, cash rationing is regulated by paragraph 69 of the Law on Public Finance and Fiscal Responsibility
(LPFFR). According to this law, any cash rationing is a short-term measure, and expenditure sequestration
must be authorized through budget amendment within two months.
Major spending agencies plan their annual cash flow in collaboration with the MoF, and smaller agencies
generally get the cash to cover authorized expenditures. Paragraph 67 of the LPFFR establishes a clear priority
among budget payments. The MoF generally plans priority payments, including salaries, pension, and
external debt, during the first half of each month, and nonpriority payments, which include procurement of
goods and capital spending, during the second half of the month. If payment orders for capital are submitted
early in the month there may be some weeks before they are paid, but all payments are processed by the end
of the month.
A 2019 moratorium on contract registration was an exception to the otherwise predictable arrange-
ments for budget commitments. In February 2019, preelection spending decisions had created significant
uncertainty about the realism of the approved fiscal deficit for 2019. The Minister of Finance decided that
the Treasury should temporarily refrain from registering contracts for spending that was not strictly needed
for the ongoing operations of ministries and agencies. According to law, government commitments are only
created when a contract is registered with the Treasury. This measure served as an ad hoc commitment control
on nonessential government expenditures, including discretionary capital spending. The measure was in
force until a new government took office in July 2019.
Source: Law on Public Finance and Fiscal Responsibility.
142 PIMA HANDBOOK

Dimension 12.c: Is external (donor) INSTITUTIONAL DESIGN

funding of capital projects fully The purpose of this dimension is to assess how
integrated into the main government well external financing of capital projects is inte-
bank account structure? grated with government funds. For some countries,
external financing can be an important component
of the capital budget. Integration of donor bank
QUESTIONNAIRE
accounts into the government’s bank account
Low External financing is largely held in structure gives the government an opportunity
commercial bank accounts outside
to see donor bank balances and flows, and thus
the central bank.
to better plan and manage cash flows related to
Medium External financing is held at the project expenditures. The assessment of institu-
central bank but is not part of the tional design focuses on the formal rules, policies,
main government bank account
and agreements governing the external financing,
structure.
whereas the influence of these are covered in the
High External financing is fully integrated effectiveness assessment below.
into the main government bank • A low score indicates that there is no legal or
account structure.
regulatory requirement that external financing
flows are at the central bank. External funds are
largely outside the scope of government cash
DEFINITIONS OF KEY TERMS forecasting and cash flow management. The
government will usually have limited consoli-
Term Definition
dated information about the balances in the
External See the Glossary. commercial bank accounts containing external
financing funds, and the inflows and outflows through
Commercial bank Provides retail banking these accounts. Some partial information may
services to private individuals be available from different sources, but this can
and organizations, including generally not be used for cash management.
government agencies. It may
• A medium score indicates that external financing
be privately owned or owned
is required to be held at the central bank, but not
by the government.
as part of the main government bank account
Main government If a treasury single account structure. Information about the balances and
bank account (TSA) system exists, the
the transactions in these accounts will often be
structure structure includes all
available to the government and can be used
bank accounts and their
for cash forecasting purposes. However, the
subaccounts that make up
the TSA system, with a top funds held in these accounts are not fungible
account that consolidates with other government funds and thus cannot be
cash resources by netting off incorporated in the government cash manage-
balances in other accounts. ment function.
Some accounts included in • A high score indicates that there is a legal or
the TSA system may be in regulatory requirement for full integration of
commercial banks. If a TSA external funds in the main government bank
does not exist, the main account structure. The external funds can be
account structure includes
considered part of the government’s cash
only accounts and their
planning and management framework, although
subaccounts held in the
there will often be limitations on how these
name of the Treasury or MoF
funds can be utilized in the agreements with the
in the central bank.
financing sources.
7. Delivering Productive and Durable Public Assets 143

IMPORTANT DOCUMENTS • Medium effectiveness means that there are

Documents Uses some delays in providing information to the
Funding agreements Clarify requirements for MoF or treasury on accessing and releasing
with major donors banking arrangements and external funds.
access to external funds • High effectiveness means that information on
Overview of Assess consistency external funding is up to date and the funding
government banking between banking is always available when required. Box 7.7
arrangements arrangements for internal describes banking arrangements for external
and external funds financing in Mauritius.

EFFECTIVENESS USEFUL DATA SERIES

The effectiveness assessment should include an Data Questions to Address
analysis of the volumes of external funds available in
External funds What is the volume of financial
commercial bank accounts, in the central bank outside
held under resources under the different
the TSA, and in the TSA. If there are inconsistencies
different banking banking arrangements?
between the formal arrangements for external funds arrangements
and the actual practices, then effectiveness could be
Processing time Are there delays in the
lower or higher than what the design score implies.
for releases of releases of external financing?
The assessment of effectiveness should focus on
external financing
whether there is adequate treasury or MoF oversight
Time taken/delay When and how do the donors
of external financing flows and whether flows are
in informing the inform the MoF/treasury
available when needed. If an IFI or a DP exhibits a
MoF/treasury about the cash releases/
pattern of not providing financing when needed,
about the release payments made by them on
then the bank account structure is not effective in
of external funding projects funded by them?
achieving the aims of this dimension. On the other
hand, if the external source keeps money in commer-
cial banks but the Treasury or MoF is promptly Box 7.7. Banking Arrangements for
informed about the external financing flows and External Funds in Mauritius
they are available when needed, the system may be Most external financing in Mauritius is processed
more effective than indicated by the design score. through a TSA, with a few exceptions for which
The assessment should be based on how funds are held in commercial accounts. The
promptly the information on external financing flows Treasury maintains one main account at the
is provided to the the Treasury or MoF so that it can central bank plus several foreign currency
be incorporated in the government’s cash manage- accounts that have a direct link to the central
ment framework. The information should include bank. Only a small part is held in commercial
the date and amount of cash releases or payments banks (0.6 percent of total external financing in
2013, 1 percent in 2014, and 3.8 percent in 2016)
for the related projects. Some financing releases,
because of donor requirements. Although the
for instance, the first release under a new financing
system does not sweep funds on a nightly basis,
arrangement, may be subject to special safeguards
the bank accounts of self-accounting ministries
and not be representative. Delays related to conflicts and departments are only replenished on a
between the country and the donor, for instance, daily basis for the amount to be paid out on that
because reporting requirements are not being met, particular day, thus leaving minimal balances
should not be included in this assessment. overnight. External finance is fully reflected in
• Low effectiveness means that there are signifi- the budget estimates and in the annual financial
cant delays in providing information to the statements prepared by the Accountant General.
MoF or treasury on accessing and releasing Source: Mauritius Ministry of Finance.
external funds.
144 PIMA HANDBOOK

Institution 13: Portfolio Dimension 13.a: Are major capital

projects subject to monitoring during
Management and Oversight project implementation?
Is adequate oversight exercised over implementa-
tion of the entire public investment portfolio?
QUESTIONNAIRE
Monitoring of the public investment portfolio Low Most major capital projects are
should include all capital projects previously not monitored during project
approved in the budget. There is an important implementation.
difference between issues that require the financial Medium For most major projects, annual
oversight of projects by the Ministry of Finance in project costs, as well as physical
the context of the overall capital budget, and those progress, are monitored during
issues that deal with their physical implementation project implementation.
and project management by sector ministries and High For all major projects, total project
agencies. This institution looks at the former; insti- costs, as well as physical progress,
tution 14 looks at the latter. are centrally monitored during
The first dimension under institution 13 covers project implementation.
monitoring of project implementation. Financial
and physical monitoring identifies projects expe- DEFINITIONS OF KEY TERMS
riencing delays and cost overruns, and action can
Term Definition
be taken to address these problems. The sooner a
Major capital See the Glossary.
project is completed, the sooner planned benefits
projects
of the project can be realized. Some countries
establish high-level committees to identify Monitor Monitoring should capture
physical and financial progress
and remove obstacles to implementing major
for major projects under a
projects.
ministry and is separate from
The second dimension examines reallocation
supervision of individual
of funds between investment projects. Because projects. A supervising engineer
projects progress at different rates, budget allo- employed by the government
cations to projects experiencing delays might be who supervises and certifies
shifted to those progressing quickly. In this way, the work done in compliance with
average time to implement projects is shortened. the contract does not constitute
Such re-allocations do not reduce total funding monitoring in this context.
for the capital budget, and thus should be distin- Project Implementation in this context
guished from virements (see Institution 8). implementation means the work performed from
The third dimension examines ex post project budget approval to when the
reviews. Broad lessons can be learned, which physical structure is ready to
will improve design, costing, and implementa- become operational.
tion of future projects, by conducting reviews of Physical progress Construction contracts typically
completed projects. Ex post project reviews are have well-defined milestones of
carried out by the government, while ex post audits, physical work to be done. The
which are covered in institution 14, Management milestones are usually the basis
of Project Implementation, are conducted by the for making progress payments
to the contractor, allowing for
external auditor.
measuring physical execution
against financial execution.
7. Delivering Productive and Durable Public Assets 145

INSTITUTIONAL DESIGN
The aim of this dimension is to ascertain if there Box 7.8. S-Curve Project Monitoring
are legal or regulatory requirements that the The S-curve provides a simple early-warning tool
government have a monitoring system for major to monitor whether projects are on track. Based
capital projects. This system should assess, on a on cash flow forecasts contained in the implemen-
regular and relatively frequent basis, if project tation plan, an S-curve chart can set out a lower
implementation is going according to the plan, or and higher bound for expected project expen-
diture during the implementation timeframe.
if the project faces cost overruns, delays, or other
If observed project expenditure and revised
problems.
forecasts stay between the two boundaries, the
• A low score implies that there is no legal or
project is on track. However, if expenditures
regulatory framework for systematic moni-
proceed too slowly, the project is delayed and
toring of major capital projects. Projects are likely facing challenges, which will result in cost
managed individually, and there is no consoli- overruns. Intervention by the supervisor can be
dated information about project progress across initiated as soon as warning signs emerge.
government departments.
• A medium score implies that there is a legal or Figure 7.8.1. S-Curve for Project Management
regulatory framework for monitoring annual Actual cost/time Planned cost/time
project costs, as well as physical progress for Phase 6
most major projects. Monitoring of costs typically Phase 5
is made against appropriations and against Phase 4
the project implementation plan or contracts.
Phase 3
Physical monitoring should indicate the project
Cost

status compared with the broad stages in the

project cycle, the project implementation plan,
or physical milestones in the contract. The Phase 2
monitoring information may be reported and Phase 1
consolidated for groups of ministries or the
whole government. Time
• A high score means that there is a legal or regula- Source: IMF staff, based on Pinto and Venkataraman
(2008).
tory framework for central monitoring of all major Note: The S-curve is used to monitor actual cost/time
projects, including for in-year reports. Central against planned cost/time.
monitoring means that information on the imple-
mentation status of all major projects is brought
IMPORTANT DOCUMENTS
together in one place. This allows identification of
overall trends, such as a pattern of delays or cost Documents Use
overruns, and creates the potential to reallocate Regulations for Assess legal requirements
funds between projects. The monitoring should project and portfolio for monitoring
cover developments in expected total project monitoring
as well as annual costs. Central monitoring can Guidelines for Analyze methodologies
be conducted by a wide range of organizations, project and portfolio and templates for
including a specialized monitoring unit. Box 7.8 monitoring monitoring
describes the S-curve approach that is commonly
Representative sample Assess how
used for project monitoring. of monitoring reports methodologies are
applied in practice
146 PIMA HANDBOOK

EFFECTIVENESS • Low effectiveness implies that systematic data on

The assessment of effectiveness should be based portfolio delays and cost overruns are missing
on how monitoring information is used to improve for the majority of projects in the portfolio or
portfolio performance. The greatest benefit of that many projects in the portfolio are behind
monitoring implementation of a group of projects schedule or over budget (average past three
is to identify trends that might warrant actions. If years).
information is collected on implementation status, • Medium effectiveness implies that there are
but no analysis is made or conclusions drawn, the systematic data on portfolio delays and cost
monitoring system is not effective. Likewise, if the overruns for the majority of projects in the
monitoring system is focused on resolving problems portfolio and that some monitored projects are
for individual projects in isolation, the monitoring is behind schedule or over budget.
not effective for the purpose of this dimension. • High effectiveness implies that there are system-
The assessment of the effectiveness of moni- atic data on portfolio delays and cost overruns
toring should cover all projects in the public for the majority of projects in the portfolio and
investment portfolio, regardless of funding sources. that few projects are behind schedule or over
It should include projects procured as PPPs as well budget. Box 7.9 describes portfolio monitoring
as externally financed projects. arrangements in Honduras.

USEFUL DATA SERIES

Data Questions to Address
Number and cost of major projects that are subject What is the overall scope of portfolio monitoring?
to monitoring
Number of major projects that are behind schedule, What are average project delays?
and by how much
Number of major projects experiencing cost What are average cost overruns?
overruns, and by how much
Examples of corrective actions taken based on How does monitoring affect issue resolution?
monitoring reports

Box 7.9. Portfolio Monitoring in Honduras

Important investment projects in Honduras are monitored during their execution, from the financial and
physical progress point of view. The executors are responsible for monitoring the projects. They report via the
integrated financial information system, with additional reporting on presidential priority projects. Monthly,
the Budget Directorate produces budget execution reports by institution and for the central administration.
Reports of physical and financial execution of the programs and projects incorporated in the public invest-
ment program (including companies and decentralized entities) are published quarterly and forwarded to
the National Congress. Likewise, enhanced monitoring is carried out on strategic and high-risk projects,
and portfolio reviews are carried out periodically with the main international financing agencies. The Public
Investment Directorate (DGIP) prepares reports of projects and programs at risk, calling attention to situa-
tions that warrant corrections or more detailed investigation.
DGIP data for 186 projects started and concluded between 2003 and 2015 show that US$1,765 million was
executed, of a total of US$2,446 million budgeted (72 percent, Figure 7.9.1). The average duration was percent
higher than initially planned, and the variations in the execution period were significant (Figure 7.9.2).

Box 7.9 continues on next page

7. Delivering Productive and Durable Public Assets 147

Box 7.9. (continued)

Figure 7.9.1. Final Project Cost Compared Figure 7.9.2. Final Project Duration Compared
With Plan, 2003–15 With Plan, 2003–15
( Percent ) ( Percent )

0–40% 41–80% 81–120% 0–40% 41–80% 81–120%

121–160% +160% 121–160% +160%

9.14 18.82 3.76

20.43 3.23
6.45 58.06

14.52
45.70 19.89

Sources: IMF staff estimates, Honduras Ministry of Finance.

Dimension 13.b: Can funds be DEFINITIONS OF KEY TERMS

reallocated between investment Term Definition
projects during implementation? Reallocation Revision to appropriations
specific to capital projects
QUESTIONNAIRE by moving funds from one
appropriation to the other.
Low Funds cannot be reallocated
Reallocations are made by
between projects during
the executive with authority
implementation.
delegated to it by the
Medium Funds can be reallocated legislature. This might show up
between projects during in budget execution reports as
implementation, but not using “revised budget.”
systematic monitoring and
During In this context, means any time
transparent procedures.
implementation after a project appropriation
High Funds can be reallocated has been approved.
between projects during
Systematic See the Glossary.
implementation, using
systematic monitoring and Monitor See Dimension 13.a.
transparent procedures. Transparent See the Glossary.
Procedure Includes both process and
criteria
148 PIMA HANDBOOK

INSTITUTIONAL DESIGN under dimension 13.a. Systematic monitoring,

The aim of this dimension is to see whether fund including of total project costs, would imply
reallocations can be used to expedite implemen- that if the score on 13.b is high the score on 13.a
tation of the portfolio of projects. This is done by should be medium or high.
shifting funds to projects that are progressing
more quickly than planned from those that are IMPORTANT DOCUMENTS
progressing slower than planned. Shifts between
Documents Use
projects for the purpose of this dimension require
Legal framework for Assess institutional
that projects fall under separate appropriations.
reallocation of funds design
When multiple projects are included under a single
between investment
appropriation, the legislature is giving explicit
projects
authority to the executive to shift funds between
Documents for projects Analyze how
projects within that appropriation. This dimension
that have had reallocation reallocation effects
is oriented to a portfolio-wide perspective, which
of funds and the effects on implementation
assumes multiple appropriations.
project implementation.
• A low score indicates that the legal or regula-
tory framework does not allow reallocation of
funds between projects under different appro- EFFECTIVENESS
priations during project implementation. It is not The analysis of effectiveness should be based on
possible to transfer unspent funds under one whether reallocations have allowed for acceler-
appropriation to another project requiring addi- ated implementation of some projects and whether
tional funds, without going through a budget there have been delays in the projects the funds
amendment process. were reallocated from. The analysis should use data
• A medium score indicates that the legal or regu- for actual reallocations in the past three years and
latory framework does allow reallocation of show how much has been reallocated as share of
funds between projects under different appro- the total capital budget.
priations, but the mechanism does not ensure The effectiveness assessment should include
that reallocation decisions are based on system- whether rules regarding reallocations have contrib-
atic monitoring and transparent procedures. uted to high execution rates for the capital budget.
There is therefore a risk that funds are reallo- There may also be other reasons for high capital
cated from a project that might be able to utilize budget execution, but reallocations have a major
the funds or to another project that will not be effect on budget execution rates. Low execution
able to use all the additional funding. There may rates indicate that the mechanism is not effective,
also be ambiguities regarding the rules for when whereas high execution rates imply the opposite:
reallocations are allowed and any restrictions on • Low effectiveness: There is no evidence that
the reallocations, for instance, as a share of the reallocation has promoted accelerated imple-
initial budget. mentation of projects or capital budget execution
• A high score indicates the legal or regulatory is low.
framework allows reallocation of funds between • Medium effectiveness: There is some evidence
projects under different appropriations based on that reallocation has promoted accelerated
systematic monitoring and transparent proce- implementation of projects and capital budget
dures. This framework provides clear rules for execution is medium.
when reallocations are allowed and how they • High effectiveness: There is significant evidence
are carried out, often with limits on the amount that reallocation has promoted accelerated
or share that can be reallocated, and depends implementation of projects and capital budget
on a monitoring system of the type described execution is high.
7. Delivering Productive and Durable Public Assets 149

USEFUL DATA SERIES DEFINITIONS OF KEY TERMS

Data Questions to Address Term Definition
Total amount of What is the importance Ex post review See glossary for a definition of
money that has been of the budget “review.” Ex post means that
reallocated between reallocation mechanism? reviews are conducted after
projects, and as a construction has been certified
percentageof the as completed or if the project
total capital budget has been officially terminated
before completion.
Rate of overall How effective is capital
capital budget budget execution? Deliverable and In this context, the deliverable
execution—under- output is the physical structure built.
or overspending This is synonymous with output
compared with initial as defined in Dimension 2.c.
approved budget Independent See glossary
For a sample of Has the reallocation Project A policy or procedure included
projects subject allowed for accelerated implementation in regulations or manuals
to reallocation, implementation policy and and other written documents
financial and physical of projects? procedure intended to guide project
progress reports Has the reallocation implementation.
caused delays in the
Systematic See glossary
projects the funds were
reallocated from?
INSTITUTIONAL DESIGN
Dimension 13.c: Does the government The aim of this dimension is to determine whether
adjust project implementation policies the executive has procedures in place to learn
from implementation experience and whether this
and procedures by systematically
learning is used to improve implementation policies
conducting ex post reviews of
and procedures. The assessment of the institutional
projects that have completed their
design should focus on the formal mechanisms in
construction phase?
place to initiate such review, whether they are estab-
lished in law, by regulation, or through practice.
QUESTIONNAIRE
It should focus on ex post reviews carried out by
Low Ex post reviews of major projects are government agencies. Ex post reviews carried out
neither systematically required nor by IFIs and DPs will inform the collaboration between
frequently conducted. the government and these institutions but will
Medium Ex post reviews of major projects, usually have limited effect on general government
focusing on project costs, practices. If there is uncertainty about whether an
deliverables, and outputs are ex post review constitutes a government review, the
sometimes conducted. assessment should look at who defines the terms of
High Ex post reviews of major reference and manages the review process.
projects focusing on project • A low score implies that there is no formal
costs, deliverables, and outputs requirement for ex post review of major projects.
are conducted regularly by an Projects will usually be subject to financial control
independent entity or experts and are and audit, but this does not qualify as an ex post
used to adjust project implementation review. In most cases, project completion reports
policies and procedures. will not qualify as ex-post reviews either. Ex post
150 PIMA HANDBOOK

reviews should as a minimum assess final project including how the results are presented and used.
costs and outputs, compared with initial plans. This should be compared to the formal require-
• A medium score indicates that there is a formal ments, to see whether the number of reviews and
requirement for ex post review of major projects the contents of these are in line with the inten-
focusing on project costs, deliverables, and tions. Systematic presentation of review findings
outputs. The review should also cover the timeli- to senior officials will strengthen the review
ness of project implementation. This dimension is mechanism. Specific effects of ex post reviews on
focused on procedures of the executive designed policies and practices should be identified and
to improve implementation policies and proce- documented.
dures for all projects. Review conducted by an • Low effectiveness: Government ex post reviews
internal audit entity would qualify as ex post cover few major projects
review for this purpose, provided it includes • Medium effectiveness: Government ex post
assessment of final project costs and outputs. reviews cover some major projects
External audits do not qualify as ex post reviews • High effectiveness: Government ex post reviews
from the perspective of the executive, but are cover many major projects and the information
covered separately under Dimension 14.c. has been systematically used to adjust policies
• A high score indicates that there is a formal
and procedures
requirement for ex post review of major projects
There must be a demonstrable link between the
focusing on project costs, deliverables, and
ex post reviews and changes to implementation
outputs conducted by independent parties and
policies and procedures. Policies that are affected
systematically used to adjust policies and proce-
might relate narrowly to the requirements for a
dures. There should be a clear policy for when ex
proper project implementation plan or address
post reviews are carried out.
broader issues such as the use of eminent domain
for land acquisition or bulk purchasing of construc-
IMPORTANT DOCUMENTS tion materials. Box 7.10 describes arrangements for
Documents Use project monitoring (13.a) and ex post reviews (13.c)
Legal framework for Verify requirements for
in Malaysia.
investment projects, ex post review
including for ex post USEFUL DATA SERIES
reviews Data Questions to Address
Guidelines and Assess methodologies Number of ex post What is the scope of ex
templates for ex post and specific content of reviews conducted post reviews?
reviews reviews annually
Representative Assess how guidelines Number of ex post What are the effects of
sample of ex post are applied and the reviews that led to ex post reviews?
review documents quality of the reviews revisions to project
preparation, appraisal
EFFECTIVENESS or implementation
The effectiveness assessment should be based on manuals, or their
how ex-post reviews are conducted in practice, equivalent.
7. Delivering Productive and Durable Public Assets 151

Box 7.10. Project Monitoring and Ex Post Project Reviews in Malaysia

The Malaysia Project Monitoring System II, called SPPII, assists the Malaysian government in the effective
monitoring of all projects. The system generates monitoring reports that can be used for weekly monitoring by
ministries and agencies, as well as producing monthly monitoring reports that are helpful for senior manage-
ment (Figure 7.10.1). Yearly reports are generated to enable politicians to have a condensed view regarding
progress and status of all projects.
The objective of the system is to monitor the financial and physical progress and status of all projects,
both at the federal- and at the state-level execution of government funding. It also identifies project risks
monthly. This empowers project managers and central agencies to act quickly when problems are identified
in projects. The system measures the projects through the California Expenditure Curve (S-curve) principle,
which indicates percentage of time lapsed versus percentage of money spent and generates an early warning
on project issues and risks. The system contains vital project information such as the Geographic Information
System Module that enables the users of the system to have a clear view of the physical location of the project.
This information is also of vital importance to monitor progress by region.
The SPPII system generates a problem identification report that identifies all categories of issues that were
not managed well during the year and that resulted in cost overruns as well as time overruns. The purpose of
the problem identification report is to compile a lessons-learned matrix. Reports are simple to interpret and
understand and can be interpreted by technical and financial personnel and by politicians. There is no wasted
information to clutter the system.

Figure 7.10.1. Status of Physical Projects behind Schedule in Malaysia, by Activity, March 2017

Site Determination 0

Site Accquisition 3

Project Brief/Confirmation of Project Brief 5

Design 15

Offer/Procurement 19

Site Takeover 2

Site Prepration 1

Construction Work 68

Handover 0

Tools and Machinery/Equipment 0

Grace Period 0

Final Payment 2

0 10 20 30 40 50 60 70 80
Number of projects
Source: Malaysia PIMA 2017.

Box 7.10 continues on next page

152 PIMA HANDBOOK

Box 7.10. (continued)

Ex post reviews are conducted routinely by the Implementation Coordination Unit (ICU) through the SPPII
Project Management System on projects after their completion, and results are presented to the National
Action Working Committee. ICU has also issued a guideline for line ministries on evaluation of development
programs. Aside from coordinating evaluation on programs and projects by all line ministries, ICU has since
the 10th Malaysia plan undertaken annual assessment to determine lessons learned and best practices in
project management in all phases of the project cycle. This initiative covers 10 percent of completed projects.
The ex post reviews led by ICU provide the opportunity to identify deficiencies that occurred during the life
cycle of the project and to learn from them.
Source: Malaysia PIMA 2017.
7. Delivering Productive and Durable Public Assets 153

Institution 14: Management Dimension 14.a: Do ministries/agencies

have effective project management
of Project Implementation arrangements in place?
Are capital projects well managed and controlled
during the execution stage?
QUESTIONNAIRE
This institution focuses on the management of Low Ministries/agencies do not
individual projects, whereas the oversight of the systematically identify senior
portfolio of projects was the subject of institu- responsible officers for major
tion 13. Ideally, project management begins at the investment projects, and
implementation plans are not
project concept stage, because different staff with
prepared before budget approval.
different skills are needed to perform preliminary
design, costing, and risk assessment even before Medium Ministries/agencies systematically
approval in the budget. Project management ends identify senior responsible officers
for major investment projects,
with ex post audits or ex post reviews, whichever
but implementation plans are not
is later. Efficient public investment requires that
prepared before budget approval.
projects are appraised, selected and implemented
as planned. Public investment spending is, by defi- High Ministries/agencies systematically
nition, not efficient if there are significant delays identify senior responsible officers
for major investment projects, and
in implementation, cost overruns, or shortfalls in
implementation plans are prepared
project outputs or outcomes.
before budget approval.
The first dimension under institution 14 assesses
the project management arrangements that are
established, in particular whether there is a senior DEFINITIONS OF KEY TERMS
officer responsible for every major project and when Term Definition
implementation plans are prepared. The project
Senior Has authority to make project
implementation plan lays out the major tasks, responsible management decisions and
schedule, and resources required to implement officer is accountable for its overall
a project. success or failure; will often
The second dimension addresses how project be designated as project
adjustments are done and what might trigger owner or project manager.
a fundamental review of the project before it is Implementation A project implementation
completed. If circumstances change during imple- plan plan breaks down a project
mentation in a way that significantly affects the into the distinct steps
assumptions on which the project was appraised required to accomplish a
and selected, the project might be modified or particular goal. (See Box 7.11).
even terminated. Budget Approval by the legislature.
The focus of the third dimension is whether approval
ex post audits are conducted for major projects.
These audits provide a basis for the legislature to
ensure that the implementation plan was written INSTITUTIONAL DESIGN
and carried out effectively, money was spent The aim of this dimension is to ensure that project
appropriately, the planned project outputs were implementation proceeds according to expected
produced, and the intended outcomes were scope, cost, and schedule. The assumption is that
achieved. this requires at least two key elements and there
154 PIMA HANDBOOK

must be formal requirements for these in the regu- officers be appointed for all major projects, but
latory framework: not for implementation plans before projects are
• A senior officer who is responsible for the project approved. These plans may be prepared later in
and accountable for successful implementa- the process, or the projects may go ahead without
tion. Often, this person oversees all facets of proper implementation plans. The failure to have
project implementation on a day-by-day basis, implementation plans in place before project
but not always. For major projects, it is becoming approval is a major factor in project delays and cost
increasingly common to separate the functions overruns in many countries. The preparation of such
of project owner and project manager. If a staff plans will bring out key project preconditions, risks,
engineer supervises project implementation and bottlenecks, all of which should be addressed
day to day but must clear project management before project approval. If there are requirements
decisions with a supervisor (project owner), then for implementation plans, but not for senior respon-
the senior responsible officer is the supervisor, sible officers, the score will also be medium.
not the staff engineer. The purpose of naming • For a high score, there are legal or regulatory
a responsible officer is to establish a point of requirements for both senior responsible officers
contact, provide consistent guidance over for all major projects and implementation plans
project implementation, and ensure account- prepared before projects are approved.
ability. The person responsible must also have
Implementation issues can affect the scope, cost,
the necessary capacity to carry out project
and schedule in the original project definition. For
management. If a department director is the
this reason, it is important that the implementation
formal project manager for several different
strategy is discussed as early as possible, prefer-
projects under the department’s responsibility,
ably in the project appraisal process. The detailed
he or she will have limited capacity to carry out
implementation plan should build on this strategy
real project management.
and be included in the project submission to MoF
• A comprehensive project implementation plan to
in the budget preparation process. The implemen-
guide the detailed implementation of the project.
tation plan must capture all key project features,
This plan should include roles and responsi-
including risk identification and risk management.
bilities of the project manager and key staff,
Box 7.11 outlines the key elements of a project
major tasks, schedule, budget and necessary
implementation plan.
resources, major risks and key success factors,
reporting, and document management. It should IMPORTANT DOCUMENTS
be prepared before project approval, to ensure
Documents Uses
effective project mobilization after approval.
The assessment of institutional design should Legal and regulatory Assess institutional
reflect the legal and regulatory requirements for a framework for project design
senior responsible officer and for a project imple- management
mentation plan: Guidelines for project Assess compre-
• A low score implies that there are legal or regula- management and hensiveness of
tory requirements for neither of these two features. templates for project project management
Project responsibilities may be diluted, for instance, implementation plans guidelines
they are is shared among different departments, or Representative Assess quality of
if projects are allocated to an organizational unit sample of project project implementation
that has no accountability for the results. In many implementation plans plans
countries, implementation plans are rudimentary Decision documents Assess when project
and prepared late in the project cycle. for appointment of managers are
• A medium score implies that there are legal or project managers appointed and what
regulatory requirements that senior responsible their responsibilities are
7. Delivering Productive and Durable Public Assets 155

practices when it comes to senior responsible

Box 7.11. Project Implementation Plan officers. When these are appointed and how active
The project implementation plan is a document are they in managing the project implementation
that sets the key arrangements for the imple- process? Are they actually held accountable for
mentation of an investment project, to be then project progress? How comprehensive are project
managed and monitored during the implemen- implementation plans, when are they developed,
tation stage. and how high is the quality of these plans? The
It contains the following elements:
assessment should be based on review of a repre-
• Description of project
sentative sample of project implementation plans.
management approach
• Low effectiveness implies that many major
• Scope statement
projects have neither identified senior respon-
• Work breakdown structure
• Cost estimates, scheduled start dates, and sible officers nor project implementation plans
responsibility assignments before project approval.
• Performance measure baselines for • Medium effectiveness means that most major
schedules and cost projects have identified senior responsible
• Major milestones and target dates for officers or project implementation plans before
each milestone project approval.
• Key staff required • High effectiveness indicates that most major
• Key risks projects have identified senior responsible
Source: IMF staff, based on Blumenthal and Stoddard officers and project implementation plans before
(1999).
project approval. Box 7.11 describes the content
of a project implementation plan.
IFIs and DPs often require specific project manage-
EFFECTIVENESS ment arrangements for projects in which they
The effectiveness assessment should focus on how contribute to the financing. This may affect the effec-
well the formal regulations are followed in practice. tiveness score on this dimension. If there are many
It is not uncommon that the formally appointed externally funded projects and these are based on
project managers have little direct involvement in effective project management practices, this may
project management and limited accountability. In influence the overall share of major projects that meet
some countries, the appointments follow organiza- the requirements of this dimension. To influence the
tional lines and managers are formally in charge of effectiveness assessment, both the project manage-
several hundred projects. Therefore, the effective- ment practices that are applied and the share of
ness assessment must look at what are the actual projects covered by these should be documented.

USEFUL DATA SERIES

Data Questions to Address
For a sample of major projects recently completed What is the effectiveness of requirements for
and projects currently ongoing, the stages of project identified project managers?
implementation at which the project manager was
appointed
List of implementing agencies that consistently What is the effectiveness of requirements for
produce project implementation plans, and at what implementation plans prepared before projects are
project stage they are produced approved?
Share of major externally financed projects that Do externally financed projects increase the overall
apply stringent project management practices share of projects that are effectively managed?
156 PIMA HANDBOOK

Dimension 14.b: Has the government This could mean that project adjustments
issued rules, procedures, and guidelines are not done—once a project is approved the
for project adjustments that are applied project parameters remain unchanged, at least
systematically across all major projects? formally. It could also mean that any project
adjustments are done ad hoc, without a clear
regulatory basis. In some countries, there are
QUESTIONNAIRE
rules for adjustment of contracts related to
Low There are no standardized rules and projects, but these adjustments do not lead to
procedures for project adjustments.
documented changes in the project plans (cost
Medium For major projects, there are estimates, timetables, and expected results).
standardized rules and procedures Such contract adjustments do not constitute
for project adjustments, but do not project adjustment from the perspective of
include, if required, a fundamental
this dimension.
review and reappraisal of a project’s
• For a medium score, there are standardized rules
rationale, costs, and expected
in place. Standardized rules and procedures
outputs.
must address two issues: what triggers an adjust-
High For all projects, there are
ment, and how a project is adjusted. Projects
standardized rules and procedures
have different risk profiles and vary regarding
for project adjustments and, if
the ease with which project adjustments can be
required, include a fundamental
made. Rules and procedures may be different for
review of the project’s rationale,
costs, and expected outputs. school projects than for road projects. However,
rules and procedures must be standard for
similar types of projects.
DEFINITIONS OF KEY TERMS • A high score indicates that the rules require
Term Definition a fundamental review of a project under
predefined circumstances. For instance, if the
Standard See the Glossary.
cost for milestone X increases by 20 percent,
Project Changes to the project scope,
then a fundamental review and reappraisal of
adjustment location, function, schedule, or
the project must be conducted. This may lead to
cost.
major project changes and even to cancellation.
Major projects See the Glossary. Rules and procedures may differ based on the
Fundamental Repeated assessment of sector or size of the project.
review and the project concept, project
reappraisal appraisal, and selection,
without regard to sunk costs. IMPORTANT DOCUMENTS
Documents Uses
INSTITUTIONAL DESIGN
Regulatory framework Assess institutional design
The purpose of this dimension is to assess whether
for project adjustment
project adjustments are based on clear and trans-
parent rules. Standardized rules and procedures Guidelines and Assess comprehensiveness
templates for project of project adjustment
for adjustments aim to identify the full effect on
adjustment guidelines
the project, as soon as possible, of major changes
in assumptions used when the project was Representative Assess comprehensiveness
first selected. sample of documents and quality of project
prepared for proposed adjustment proposals
• A low score implies that there are no standardized
project adjustments
rules and procedures for project adjustments.
7. Delivering Productive and Durable Public Assets 157

EFFECTIVENESS • Medium effectiveness means that project

The effectiveness of this dimension depends on how adjustment proposals are consistently analyzed
adjustments are made in practice and whether they and documented, and a few major investment
follow the issued rules. If the design score is medium projects are subject to formal adjustment over
or high, but the regulations are not systematically the implementation period.
applied and enforced, the effectiveness score • High effectiveness indicates that a few
should be lower than the design score. projects are subject to formal adjustment
The effectiveness assessment should look at over the implementation period and some of
the rationale for project adjustments. If project these projects are cancelled or substantially
adjustments are made routinely, without careful redesigned following fundamental review.
consideration of the causes and the justification, Box 7.12 describes the arrangements for
the process is not effective. This is particularly true project adjustments and fundamental review in
when scope change and cost escalation is accepted Korea.
without being challenged and discussed. This factor Adjustments can be made through the budget
should be assessed by reviewing a representative process as well as in-year by the executive. The
sample of project adjustment documents. focus is on ongoing projects. The executive has
The assessment should also reflect how often authority to stop work on a project. However, the
projects are subject to formal adjustment. Given the revised total project cost must be reflected in
uncertainty related to major investment projects, it the budget process, along with an explanation
is reasonable to assume that it will be necessary to for any change in the project and project
make adjustments in project plans for at least some implementation plan. The budget process should
of the major projects under implementation. If this include references to projects that have been
never happens, project implementation is unlikely terminated.
to be effective. In a well-functioning system, it is also
reasonable to assume that at least some projects may USEFUL DATA SERIES
need to be cancelled or substantially redesigned
Data Questions to Address
following fundamental review. When adjustments
Number and size What is the share
are done, there should be a consistent update of
of major projects, of projects that are
cost estimates, timetables and implementation
number that were adjusted?
plans. Adjustments should not be done implicitly
formally adjusted—how
by allowing annual budget allocations to exceed and why
initial project estimates without transparent
Number and size What is the frequency
disclosure.
of projects that of project cancellation
• Low effectiveness means that project adjustment
were terminated or substantial
proposals are not analyzed and documented or
or substantially redesign?
no or few major investment projects are subject redesigned before
to formal adjustment over the implementation completion
period.
158 PIMA HANDBOOK

Box 7.12. Project Adjustments in Korea

In Korea, a fundamental review is triggered if the costs of a project rise in real terms by more than 20 percent, or
if forecast demand falls by more than 30 percent. The review process involves the Korea Development Institute,
which is a specialized, independent agency that reviews all major public investment projects, including PPPs.
During 2006–10, 24 out of 140 projects subjected to a fundamental review in Korea were terminated
because they were no longer viable. Total project cost savings of 18 percent were achieved (compared with
the requested adjustments) on those projects that continued.
The adjustment process is governed by guidelines on total project cost management, which set out
detailed procedures for the review and project adjustments. The review entails the following phases:
• Reassessment study of feasibility to determine the validity of the project and to suggest alternatives
• Reassessment of project plan to review the appropriate project scale, total project cost, and efficient
alternatives of the project
• Reassessment of demand forecast to enhance the efficiency of financial investment and prevent
the waste of budgets in advance by closely managing the change in demand in large-scale public
investment projects
• Assessment of design modification to review the design changes proposed
Source: Government of Korea 2013.

Dimension 14.c: Are ex post audits of INSTITUTIONAL DESIGN

capital projects routinely undertaken? The aim of this dimension is to assess whether ex
post audits of projects contribute to ensure transpar-
ency and accountability regarding the expenditure
QUESTIONNAIRE
of public funds on capital projects. For the purpose
Low Major capital projects are usually not of this dimension, an audit is one that is devoted
subject to ex post external audits.
exclusively to one major capital project or group of
Medium Some major capital projects are projects. An audit of the organization responsible
subject to ex post external audit, for the project, which would include spending on
information on which is published by the project, does not constitute an audit for this
the external auditors.
purpose. Audit should go beyond financial regu-
High Most major capital projects are larity and look explicitly at project implementation,
subject to ex post external audit final project costs compared with initial estimates,
information that is regularly published and whether planned outputs were achieved.
and scrutinized by the legislature.
• A low score indicates that the legal mandate for the
external auditor does not cover ex post, external
DEFINITIONS OF KEY TERMS project audits or allow publication of the audit
results. The SAI legal mandate may restrict its ability
Term Definition
to do this type of audit. Alternatively, ex post project
External audit In-depth review conducted by audits may be allowed under the SAI mandate, but
the supreme audit institution
it is not allowed to publish the audit results.
(SAI) according to internationally
• A medium score indicates that the legal mandate
recognized audit audit
for the external auditor covers ex post, external
principles, or by an independent,
project audits and allows publication of the
external audit company.
results of these audits. The institutional design
Publish See the Glossary.
assessment focuses on whether there are any
7. Delivering Productive and Durable Public Assets 159

legal impediments to ex post audits and publi- • Low effectiveness means that no or very few
cation of audit results. The questions of whether major projects completed during the past three
such audits actually are conducted and if the years have been subject to ex post audit.
audit results are published are discussed under • Medium effectiveness means that a few major
“Effectiveness.” projects have been subject to ex post audits that
• A high score indicates that the legal mandate are published.
for the external auditor covers ex post, external • High effectiveness means that some major
project audits and requires that the results be both projects have been subject to ex post audits
regularly published and scrutinized by the legisla- that are published and scrutinized by the legis-
ture. Regular publication requires that the external lature. Box 7.13 describes ex post audit of capital
auditor has a published policy describing what projects in Mongolia.
type of audit will be published and when. Audits Clear evidence of government decisions based
are scrutinized if they are presented to a public on the audit findings may influence the effective-
accounts committee of the legislature or its equiva- ness assessment. If audits have critical findings
lent. The scoring of design should not be based on that are published and scrutinized by the legis-
what the legislature does with the audit information. lature, this would be expected to affect how the
government implements future projects. If such
IMPORTANT DOCUMENTS critical findings never lead to any legislative or
executive actions, effectiveness might be lower
Documents Uses
than what is indicated by the numerically based
Legal framework for SAI Assess institutional
score. On the other hand, if there are several
design
clear examples that audits influence government
Annual or medium-term Assess criteria for decisions, the effectiveness score could be higher
audit plans. selection of projects than the pure numerically based score indicated
for ex post audit
previously.
Representative sample Assess scope and
of ex post audit reports comprehensiveness
USEFUL DATA SERIES
of ex post audits
Data Questions to Address
Documentation Assess whether audits
of hearing by the are scrutinized by the The number and What is the share
legislature legislature percent of completed of completed and
major projects that published audits?
were audited, and the
EFFECTIVENESS
audits published
A key indicator for the effectiveness of this
dimension would be the number of audits that have Documentation of How many audits have
legislative or executive had documented
been undertaken over the past three years and that
actions based on audit effects on government
have been published. This would be consistent with
findings decisions?
the criteria for institutional design:1

1  The quantitative thresholds recommended for this

dimension are lower than what usually follows from the
terms “some” and “most” in the PIMA framework. The
reason is that audit selection typically is risk based and
the auditor would usually focus on a limited sample of
major projects.
160 PIMA HANDBOOK

Box 7.13. Ex Post Audit of Capital Projects in Mongolia

In Mongolia, all capital projects are subject to ex post external audit. In addition to auditing annual capital
expenditure execution for each budget entity, the National Audit Office (NAO) also undertakes ex post audits
for all finished capital projects. NAO produces an annual audit report on capital budget execution, based on
completed entity and project audits. NAO may comment on public investment policy, feasibility studies, and
procurement policies affecting capital project execution. The NAO submits this report to the Parliament in
June every year. This report is also published on the Auditor General Office’s website. Table 7.13.1 provides a
summary of capital project execution in 2018, indicating that financial execution is 84.9 percent, while physical
execution is 72.6 percent.

Table 7.13.1. Mongolian National Audit Office’s Report on Public Investment Execution

Prepayment, Performance of
No. of Projects

Financial Performance etc. Actual Work

Total Annual
Portfolio Budget Budget Amount Amount Amount
Minister (tugriks) (tugriks) (tugriks) Percentage (tugriks) Percentage (tugriks) Percentage

Cabinet of the 3 770.7 770.7 754.3 97.9 – – 754.3 97.9

President

Speaker of the 1 1,913.3 1,913.3 1,701.4 88.9 – – 1,701.4 88.9

Parliament

Prime Minister 8 5,685.3 3,762.8 2,709.9 72.0 – – 2,709.9 72.0

Deputy Prime 12 12,695.2 6,006.4 5,843.3 97.3 125.0 2.1 5,718.3 95.2
Minister

Head of the 32 23,920.9 11,881.8 10,459.8 88.0 580.0 4.9 9,879.8 83.1
Cabinet of
Ministers

Minister of 13 12,789.5 10,389.5 10,178.7 98.0 4,286.4 41.3 5,892.3 56.7

Environment
and Tourism

Minister of 3 1,800.0 1,800.0 1,800.0 100.0 – – 1,800.0 100.0

Foreign Affairs

Minister of 14 78,098.1 32,810.0 20,786.3 63.4 – – 20,786.3 63.4

Finance

Minister of 40 59,590.9 37,390.0 37,204.3 99.5 – – 37,204.3 99.5

Justice

Minister 25 36,723.3 17,340.0 16,852.6 97.2 1,650.9 9.5 15,201.7 87.7

of Labor
and Social
Protection

Minister of 4 19,417.4 3,599.5 3,334.8 92.6 – – 3,334.8 92.6

Defense

Minister of 78 430,501.9 80,338.4 67,408.4 83.9 10,608.2 13.2 56,800.2 70.7

Construction
and Urban
Development

Box 7.13 continues on next page

7. Delivering Productive and Durable Public Assets 161

Table 7.13.1. (continued)

Prepayment, Performance of

No. of Projects
Financial Performance etc. Actual Work

Total Annual
Portfolio Budget Budget Amount Amount Amount
Minister (tugriks) (tugriks) (tugriks) Percentage (tugriks) Percentage (tugriks) Percentage

Minister of 325 739,860.0 262,817.6 222,404.6 84.6 40,658.6 15.5 181,746.0 69.1
Education

Minister of 64 342,951.3 80,796.9 68,408.6 84.7 7,057.0 8.7 61,351.6 76.0

Road and
Transportation
Development

Minister of 5 3,980.0 3,980.0 3,623.1 91.0 526.9 13.2 3,096.2 77.8

Mining

Minister of 32 41,521.3 27,818.5 22,154.1 79.6 2,018.8 7.3 20,135.3 72.3

Agriculture
and Industry

Minister of 20 151,489.7 37,661.9 36,905.0 98.0 1,809.0 4.8 35,096.0 93.2

Energy

Minister of 63 193,319.5 60,754.8 46,422.7 76.4 14,554.9 24.0 31,867.8 52.4

Health

Head of the 1 195.6 195.6 195.6 100.0 – – 195.6 100.0

Independent
Authority
Against
Corruption

Head of NDC 1 340.0 340.0 339.4 99.8 – – 339.4 99.8

Prosecutor 4 1,562.0 452.0 450.8 99.7 – – 450.8 99.7

General

Auditor 1 500.0 500.0 498.0 99.6 – – 498.0 99.6

General

Total 749 2,159,625.8 683,319.8 580,435.7 84.9 83,875.7 12.3 496,560.0 72.6

Source: Government of Mongolia 2019.

Note: NDC = National Development Authority.
162 PIMA HANDBOOK

Institution 15: Monitoring of Dimension 15.a: Are asset registers

updated by surveys of the stocks,
Public Assets values, and conditions of public
Is the value of assets properly accounted for and assets regularly?
reported in financial statements?
QUESTIONNAIRE
This institution covers monitoring of public
Low Asset registers are neither
assets. The PIMA framework is based on a cycle.
comprehensive nor updated regularly.
Monitoring of public assets is the last institution
in the questionnaire, but it feeds information into Medium Asset registers are either
many of the institutions listed earlier. Notably, comprehensive or updated regularly
at reasonable intervals.
financial statement information is useful when
establishing sustainable fiscal policy (institution 1), High Asset registers are comprehensive
knowledge of existing physical assets is essential and updated regularly at reasonable
input to national and sectoral plans (institution intervals.
2), and the condition of facilities is important
DEFINITIONS OF KEY TERMS
when budgeting for maintenance (institution 9).
Information about public assets is also important Term Definition
when selecting new capital projects for implemen- Asset register A documented list of fixed assets
tation (institution 10). Comprehensive In this context, a comprehensive
• The first dimension under this institution asks asset register includes most fixed
whether there are regularly updated asset assets purchased using money
registers. An asset register provides informa- appropriated in the budgetary
tion on physical assets. Asset registers are often central government capital
centralized and include a variety of information budget, and for each asset lists
useful for the purposes noted previously. The at least:
focus is on fixed assets. Small and inexpensive • Name and description
durable goods will generally be standardized • Organization accountable
for it
items with limited dependence on the public
• Location
investment system.
• Date of purchase, delivery,
• The second dimension covers recording of nonfi-
or installation
nancial assets in government financial accounts. • Historic cost
Physical asset registers provide the basis for • Disposal status
recording financial asset values in financial • Asset class
statements. While valuation can be made using • Current value
many methods, generally asset values are more Update Implies that new assets are added
accurate the more often they are updated. to the register, assets disposed
• The third dimension covers how depreciation of are deleted, and significant
is calculated and recorded. Depreciation is a changes in existing assets are
major factor in the valuation of fixed assets. recorded.
Depreciation cannot be used to estimate Updat regularly asset registers are updated at
concrete maintenance needs for specific assets fixed dates or on rolling dates
or groups of assets, but it does give an indicator on fixed intervals, defined in a
of necessary reinvestment over time to maintain regulation, manual, or written
asset values. instruction.
Reasonable Ideally, an asset register should be
interval updated at least every two years.
7. Delivering Productive and Durable Public Assets 163

INSTITUTIONAL DESIGN IMPORTANT DOCUMENTS

The aim of this dimension is to determine whether Documents Uses
information on existing assets is known. This is an
Legal and regulatory Assess institutional
important basis for the production of information
framework for asset design
that is needed for other institutions. Asset registers
registration
are often maintained by line ministries and include
Guidelines and templates Assess compre-
specialized information for management purposes.
for asset registration hensiveness and
For example, a roads department frequently has a
timeliness of asset
register of road and bridges that includes detailed
register updates
design and condition information needed for
planning maintenance. Individual assets must be Documentation of asset Analyze actual
registry contents
identifiable in an asset register, meaning that non-
financial assets reported in financial accounts do
not constitute an asset register. EFFECTIVENESS
• A low score indicates that there is no legal or The effectiveness assessment should gauge
regulatory requirement for comprehensive, whether the information in fixed asset registers is
regularly updated fixed asset registers. In some in line with the formal requirements. Do the actual
countries, legal or regulatory mandates for data match the requirements in terms of compre-
asset registers are missing completely. In other hensiveness? Are the data updated regularly,
countries there may be regulatory require- within the timeframes defined in regulations? Are
ments for asset registers in some institutions or there specific challenges that may undermine the
for some types of assets, but not systematically comprehensiveness or the quality of the data?
across government. In addition to being comprehensive and
• A medium score indicates that there are fixed regularly updated, information on fixed assets must
asset registers and that these are required to also be accessible. The asset register is used for the
be either comprehensive or regularly updated. purposes of preparing financial statements, national
If most of the government entities have asset and sectoral planning, and budgeting for mainte-
registers, then the system is comprehensive. nance (Institutions 1, 2, and 9). This dimension is
This would qualify for a medium score even if the concerned with accessibility of information across
register only provides historic costs and there is organizations and projects, not within a single
no mechanism for updating. If only a ministry of organization. If information is not easily accessible
transport enters information in the asset register to meet the needs of these three institutions, it is
with no other ministry, then the asset register is not effective. It is unlikely that a register that is not
not comprehensive. However, if this ministry of centralized is fully effective in this regard.
transport each year enters information on new Unless there is a comprehensive government or
roads and bridges, then it is updated regularly. public sector balance sheet (see dimension 15.b),
For the regularity requirement to be meaningful, the assessment of comprehensiveness could be
it must cover a reasonable share of govern- based on comparing the contents of the fixed asset
ment assets. register with the PIMA estimate of capital stock.
• A high score means that the registers are required • Low effectiveness: There is no centralized
by law or regulation to be both comprehensive register of fixed assets, or fixed asset registers
and regularly updated. The legal framework maintained by respective agencies have only
should include provisions to ensure that the partial coverage.
information in the asset registers is accessible, • Medium effectiveness: Either there is a central-
and that it is updated at least every second ized fixed asset register or fixed asset registers
year. maintained by respective agencies are regularly
164 PIMA HANDBOOK

updated. The registers should cover most govern- and updated at least every two years to ensure
ment fixed assets and be readily accessible. their comprehensive coverage. The registers
• High effectiveness: Fixed asset registers are main- should cover all government fixed assets. Box 7.14
tained or consolidated centrally and are verified describes the asset registry in Indonesia.

USEFUL DATA SERIES

Data Questions to Address
Overview of assets in centralized and/or What is the volume of assets recorded in government
decentralized asset registers asset registers?
What is the level of detail contained in the asset register, such as
asset classes, type of asset, volume physical location, control?
If asset registers are not centralized, a list of Which ministries keep separate asset registers?
ministries/agencies that keep asset registers Are these registers accessible to the MoF?
and with what type of data
Dates when asset values and conditions were How often are asset values updated?
revised in last 10 years

Box 7.14. Fixed Asset Recording in Indonesia

Fixed assets are comprehensively recorded in Indonesia, and the data are used for reporting nonfinancial
assets and depreciation in financial statements. The MoF Directorate General for State Asset Management
(DGSAM) is responsible for tracking the purchase, use, transfer, and disposal of nonfinancial assets. To carry
out this responsibility, it has created the State-owned Asset Financial Accounting Management System,
SIMAK-BMN, which was introduced in 2006–07. SIMAK data include land, buildings, infrastructure, and
equipment. All civilian line ministries enter data into the system continuously and submit formal reports
semiannually to one of 71 operational offices of DGSAM located around the country. Data include the nature
of the asset, age, historical cost, current value (if revalued), location, responsible agency, condition, asset
class, and state of disposal. Assets are revalued when ordered by the president and revaluation was done
in 2006 and 2018. DG Treasury includes fixed assets in the financial statements, using data from SIMAK.
Depreciation is calculated on a straight line, based on rates for specific asset classes applied to asset-specific
data in SIMAK.
SIMAK data are reliable and used for planning capital projects. Asset data from SIMAK are used by line
ministry planning and budgeting staff to evaluate proposed capital projects. Existing facilities are identi-
fied using SIMAK, and judgments are made as to whether a new or expanded facility is required. The staff
is also involved in evaluating asset disposal. Condition and value are verified in SIMAK before approval for
disposal is given. The scope and quality of data in SIMAK are reasonably good overall. To verify data accuracy
regarding newly purchased assets, spending units and DGSAM reconcile the data with capital spending
recorded in SPAN for the comparable period. In addition, the Audit Board of Indonesia (BPK) audits SIMAK
annually. For 2019, BPK issued an unqualified opinion at the central government level. Table 7.14.1 shows
government fixed assets at the end of 2018 and 2019, illustrating a major revaluation in particular of govern-
ment land during 2019.

Box 7.14 continues on next page

7. Delivering Productive and Durable Public Assets 165

Box 7.14. (continued)

Table 7.14.1. Fixed Assets of the Indonesian Government, 2018 and 2019
(Billions of rupiah)

Asset 2019 2018

Land 4,565,754 1,018,648
Equipment and machinery 643,684 590,287
Buildings 365,443 287,028
Roads and other networks 852,163 593,241
Other fixed assets 50,631 55,538
Construction in progress 137,289 130,585
Total fixed assets (gross) 6,614,964 2,675,327
Accumulated depreciation 665,369 744,276
Total fixed assets 5,949,595 1,931,051
Sources: Government Financial statement years 2018 and 2019; Indonesia PIMA 2019; and IMF staff compilations.
Note: SPAN = State Treasury and Budget System.

Dimension 15.b: Are nonfinancial asset INSTITUTIONAL DESIGN

values recorded in the government The purpose of this dimension is to assess whether
financial accounts? government financial statements provide informa-
tion on nonfinancial fixed assets (for example, see
Box 7.15). This information assists in the calculation
QUESTIONNAIRE
of capital stock and net worth, and thus contributes
Low Government financial accounts do to institution 1. There is some synergy between
not include the value of non- financial
Dimension 15.a (asset register) and this dimension.
assets.
Dimension 15.a addresses knowledge of the char-
Medium Government financial accounts acteristics of nonfinancial assets. This dimension
include the value of some nonfinancial addresses the accounting value of nonfinan-
assets, which are revalued irregularly.
cial assets.
High Government financial accounts • A low score implies that there is no legal or regu-
include the value of most nonfinancial latory requirement that government financial
assets, which are revalued regularly. statements provide systematic information
about nonfinancial assets. There may be some
DEFINITIONS OF KEY TERMS ad hoc information available in government unit
Term Definition accounts, but this information is not included in
the government financial statements in a system-
Government Financial statement of accounts
atic and comprehensive manner.
financial as defined in national accounting
account standards.
• A medium score implies that there is a legal or
regulatory requirement for inclusion of some
Revalue To value an asset after initial
fixed assets in the government financial state-
delivery to ascribe the current
ments, but not for revaluation of these assets on a
value of the asset.
regular basis. A medium score also applies if most
Irregularly Not regularly.
assets are required to be included but there is no
Regularly See definition in Dimension 15.a. provision for them to be revalued regularly, or if
166 PIMA HANDBOOK

few assets are required to be included but they • Low effectiveness means that few government
should be revalued regularly. fixed assets are included in the accounts.
• A high score implies that most fixed assets are • Medium effectiveness means that some govern-
required to be included in the government ment fixed assets are included in the accounts.
financial statements, and that these should be • High effectiveness means that most are included
revalued regularly. in the accounts, and that these are revalued
regularly. Box 7.15 describes accounting of
government assets in Estonia.
IMPORTANT DOCUMENTS
Documents Uses
USEFUL DATA SERIES
Legal basis for Assess legal requirements Data Questions to Address
government for inclusion of nonfinancial
Value of nonfinancial How comprehensive
accounts assets in government
assets in government is the coverage of
financial statements
financial statements nonfinancial assets
Accounting Assess accounting in the financial
regulations, standards and guidelines statements?
standards, and for accounting and Volume of assets in Are the financial
guidelines revaluation of asset values asset registry statements consistent
Government Assess whether and how with the asset registry?
financial statements nonfinancial assets are Estimated public Is the value of
for the past 3–5 disclosed in actual financial capital stock from nonfinancial assets
years. statements (effectiveness). PIMA database in the financial
statements comparable
to estimated public
EFFECTIVENESS capital stock?
The effectiveness of this dimension depends on External audit reports Does the external
the share of government assets that are included audit report have
in the financial statements. The assessment of observations regarding
comprehensiveness could be based on comparing recording or valuation
the stock of non-financial assets in the government of government
accounts with the PIMA estimate of capital stock. non-financial assets?

Box 7.15. Accounting for Fixed Assets in Estonia

Estonia introduced accrual accounting for government in 2000, and all government assets are appropri-
ately recorded and accounted for in the financial statements. National accounting standards are based on
International Public Sector Accounting Standards and cover all material parts of these standards. According
to law, all government assets are identified by unique serial numbers and included in government asset regis-
tries. Asset values are reviewed and updated annually. Depreciation schedules are adjusted when capital
maintenance projects are undertaken. All central government entities (approximately 150) do their accounting
through a common accounting application, managed by the Shared Service Center under the MoF. For these
entities, depreciation of assets is computed monthly, on the basis of depreciation rates determined by each
entity but following central guidelines. All other general government and public sector entities (approximately
850) use separate accounting applications but submit monthly accounting reports in a predefined format for
consolidation with central government reports.

Box 7.15 continues on next page

7. Delivering Productive and Durable Public Assets 167

Box 7.15. (continued)

State Audit Office reports confirm that government accounting and financial statements are comprehen-
sive and of high quality. Financial statements are consolidated and reported at three different levels: Central
government, local government, and consolidated public sector, including corporations controlled by central
or local government entities. There are detailed statements of public assets, including depreciation, acqui-
sition, revaluations and disposal during the year. The consolidated statements are based on the central
government accounting system and the reports provided by the other public sector entities. These reports
do not include transaction-level data but provide the necessary detail to allow for reconciliation and elimina-
tion of internal transactions, including aggregate transactions with other government entities. For the 2016
accounts, the State Audit Office found that the accounts generally gave a fair and true value of financial trans-
actions and values. However, the audit report observed that the auditor could not confirm the recorded value
of assets in the Railway Infrastructure Company, given negative developments in the railway freight market.
This was the only main observation regarding public assets.

Table 7.15.1. Nonfinancial Assets in Estonia, 2017

(Millions of euro)
Work in
Land Buildings Defense Equipment Other Progress Total
Balance 1,277.0 8,430.1 213.3 2,495.3 159.8 1,038.8 13,614.3
Acquisition cost 1,277.0 13,302.4 597.5 4,881.7 297.0 1,038.8 21,394.4
Accumulated 0.0 4,872.3 384.2 2,386.4 137.2 0.0 7,780.1
depreciation
Average NA 3.7 7.5 5.4 5.1 NA NA
depreciation
rate (%)
Source: Estonia PIMA 2019.
Note: NA = not applicable.

Dimension 15.c: Is the depreciation DEFINITIONS OF KEY TERMS

of fixed assets captured in the Term Definition
government’s operating statements? Depreciation The systematic allocation of the
depreciable value of an asset over its
QUESTIONNAIRE useful life. Depreciation rates estab-
lished in national accounting policies
Low The depreciation of fixed assets
and standards should be used.
is not recorded in operating
Fixed asset Produced asset that is used
statements.
repeatedly or continuously in
Medium The depreciation of fixed production processes for more than
assets is recorded in operating one year (see GFSM 2014).
statements, based on statistical
Operating Statement of financial performance,
estimates.
statement as defined in GFSM 2014. “Income
High The depreciation of fixed Statement,” “Statement of Revenues
assets is recorded in operating and Expenses,” “Operating
expenditures, based on asset- Statement,” and “Profit and
specific assumptions. Loss Statement” are equivalents
under International Public Sector
Accounting Standards (IPSAS).
168 PIMA HANDBOOK

depreciate by 1–2 percent each year, while motor

Term Definition
vehicles may depreciate by 10–15 percent.
Statistical Use of statistical techniques, such
estimate as sampling, to draw conclusions
IMPORTANT DOCUMENTS
without asset-specific information.
Asset- A detailed class of assets, and the Documents Use
specific ability to assign individual assets to Legal basis for Assess legal require-
assumption that detailed class. government financial ments for inclusion
statements of depreciation in
INSTITUTIONAL DESIGN government financial
The aim of this dimension is to estimate how the statements

annual decline in the value of nonfinancial assets Accounting Assess accounting

is recorded in government financial statements. regulations, standards for assessing
This will contribute to institution 1 as discussed standards, and depreciation for
previously. Annual depreciation is also a useful guidelines different asset classes

reference when assessing the overall maintenance Government financial Assess how depreciation
budget. statements for the is disclosed in actual
• A low score indicates that there is no legal or last 3 years. financial statements
regulatory requirement for recording of depre-
ciation in government financial statements. EFFECTIVENESS
This could be because nonfinancial assets are The effectiveness assessment should include
not included in the financial statements, as analysis of whether the recorded depreciation
measured by Dimension 15.b. But there are also seems adequate in light of international practices.
many countries that include at least some nonfi- The assessment should indicate whether relevant
nancial assets in their financial statements, but accounting standards and guidelines are complied
do not record depreciation of these assets. This with. If depreciation rates are particularly low or
is particularly common in countries with cash- high, the reasons for this could be explored. In
based accounting frameworks. most cases, the problem is that depreciation rates
• A medium score indicates that there is a legal are too low, often zero. This means that the govern-
or regulatory requirement that depreciation be ment financial accounts will exaggerate the value of
recorded, based on statistical estimates. This can existing assets. Box 7.16 describes recording and
be done even if there is no comprehensive asset depreciation of fixed assets in Georgia.
register. The financial statements must include When calculating capital stock for a PIMA, the
nonfinancial assets, so that the overall value of IMF uses different depreciation rates for public and
these assets is known. But the depreciation can private assets, for different country groups, and for
be based on statistically based rules of thumb, different periods. The rates illustrate that different
for instance a flat depreciation rate applied to all types of assets are built at different stages of devel-
assets or major asset classes. opment. Basic infrastructure (roads, bridges, and
• A high score indicates that there is a legal or railroads) have long lifetimes and low depreciation,
regulatory requirement that depreciation is whereas more advanced infrastructure (telecom-
recorded, based on asset-specific assumptions. munication networks) have shorter lifetimes and
This requires that there is a comprehensive asset depreciate faster. Table 7.1 describes the deprecia-
register. There will usually be specific deprecia- tion rates that have been used in the IMF estimates
tion rates for each major asset class. Bridges may for capital stock.
7. Delivering Productive and Durable Public Assets 169

Table 7.1. Depreciation Rates for IMF Capital Stock Estimates

      1860 1960 2013

Public capital        
Low income   2.50 2.50 2.50
Middle income   2.50 2.50 3.51
High income   2.50 2.50 4.59
Private capital        
Low income   4.25 4.25 4.25
Middle income   4.25 4.25 8.10
High income   4.25 4.25 10.41
Source: IMF 2015.

Data Questions to Address

Total value of depreciation using a country’s What is the total level of depreciation in government
published depreciation rate(s) accounts?
Difference in total value of depreciation using the How does depreciation based on national practices
depreciation rate used by a country and the rate compare to international practices?
used by the IMF when calculating capital stock

Box 7.16. Recording and Depreciation of Fixed Assets in Georgia

In Georgia, the responsibility for asset record keeping is decentralized in line ministries, which follow
guidelines issued by the MoF. Assets currently are defined as any single object costing more than 500
Georgian lari and having a life greater than one year (short term) or three years (long term). Assets are
recorded at their historical cost and are not revalued. Ministries submit a list of major assets to the
MoF, which is published on July 1 annually on the Treasury Department website since 2013. The list
includes historical cost and accumulated depreciation.
Ministry-level financial statements are submitted in Excel spreadsheets to the MoF Treasury
Department, which consolidates them (unofficially, at present). Oversight by the Treasury Department
of spending unit–prepared financial statements indirectly assures a degree of quality control over
asset records. The State Audit Office audits spending units annually, and in doing so conducts spot
checks on the accuracy of asset records.
MoF reflects nonfinancial assets in the balance sheet and depreciation expense in the operating
statement. This has been done since 2010 for budgetary central government. Depreciation is calcu-
lated using straight-line methods consistent with the Government Finance Statistics Manual 2001
(IMF 2001) and IPSAS.
Source: Georgia PIMA 2018.
 8
Cross-Cutting Issues
Legal Framework The legal and regulatory framework for PIM will
While legal aspects of Public Investment often comprise three levels:
Management Assessment (PIMA) institutions are • The highest level will often be law-governing
discussed under each institution, it is also important public investment activities, particularly, in civil
to consolidate and summarize common legal law countries. Some countries have separate
themes under the cross-cutting issues section of the public investment laws, but often this area
report. This section should comment on any critical is incorporated in a broader budget system
gaps, inconsistencies, and overlapping competen- law, public financial management law, or fiscal
cies that have been identified in this area. responsibility law. The law will generally establish
Countries vary widely in how they document the legal authority for the PIM system, allocate
and give force to public investment management the key roles and responsibilities, and define
(PIM) frameworks. The types of legal instruments the most important functions and procedures
used depend on each legal system. Civil law related to public investment, including how it
countries tend to put greater weight on enacting is integrated with the budget process. Some
the PIM framework in a primary law and spelling aspects of public investment may be governed by
it out in detailed rules and regulations with legal specialized laws, for instance, on public-private
force.1 Common law countries to a greater extent partnerships, procurement, debt management,
may rely on policy documents and administrative and fiscal decentralization. In common law
guidelines. In many common law countries, such countries, this overarching law may be missing or
guidelines and policy documents will not consti- public investment may only be partially regulated
tute a law or be part of the law, but they are often through legislation.
considered to be binding on the public officials and • In all countries, there will usually be one or
practitioners. Nevertheless, such a distinction is not more regulations covering the public invest-
always clear-cut. Many common law countries have ment functions. These will define procedures
also introduced specific legislation (for example, for project identification, preparation, appraisal,
dedicated public-private partnership laws) or a and selection, as well as for project manage-
component of broader public financial manage- ment, monitoring, and evaluation. Budget
ment law for a more binding form of PIM framework. process regulations will also be important for
PIMA teams must be aware of these differences public investments, for instance, regulations on
between the legal systems. The assessments must budget planning and implementation, commit-
consider the overall legal and regulatory framework ment controls, and cash management.
for PIM, not just high-level legislation. • There will also often be technical guidelines and
methodological documents. These may cover
1  Civil law is based on Roman legal principles and was a range of different issues, including detailed
developed in continental Europe. Common law was advice on how to analyze project proposals,
developed in England during the Middle Ages; both
how to structure PPP contracts, or how to ensure
forms of law spread to other parts of the world through
colonialization and political influence. Common law efficient procurement of major investment
countries include the United Kingdom, the United States, projects. Technical standards for different types
India, Australia, Canada, South Africa, New Zealand, and
other former British colonies. Most of the other countries of assets may also be important. The guide-
follow civil law. lines will usually not be legally binding and in
171
172 PIMA HANDBOOK

most cases will not be considered under the and the attention given to technical guidelines, and
institutional design assessment. However, the several other factors.
guidelines will often impact on the effectiveness However, in some cases the effectiveness of PIM
of different institutions. may be negatively impacted by the design of a law
The key issue in the assessment of the legal and or regulation. The legal framework may include
regulatory framework is whether this supports a significant exemptions from standard process and
robust institutional design for PIM: criteria, for example, too-permissive exceptions to
• Are all the main features of the system covered mandatory public tender or significant exemptions
by legal and regulatory instruments? from the standard process and criteria for priority
• Does the legal and regulatory framework support projects or emergency projects. This will undermine
institutional arrangements, mandates, coverage, the effectiveness of the relevant institutions.
procedures, disclosure, and accountability for Where PIM legal frameworks, rules, and proce-
effective PIM? dures exist but are not followed, the effectiveness
• Are the legal provisions sufficiently clear and of PIM may require some legal adjustments.
unambiguous? Have they been updated to reflect For instance, effectiveness can be improved
recent institutional and policy developments? by addressing weaknesses in the design of the
• Is the legal framework transparent and acces- legal frameworks for sanctions and internal and
sible, and can it be understood by stakeholders external audit. In other cases, the legal and regu-
from different professional backgrounds? latory framework may be too demanding, given
• Do guidelines and methodological documents the capacity of the country. In these cases, calibra-
provide sufficient support to implement the tion of legal requirements to a more realistic level
specific legal provisions? can improve the quality of PIM. This may include
limiting the most extensive procedures to large and
IMPORTANT DOCUMENTS complex projects, with simplified procedures for
small and routine projects.
Documents Uses
The assessment of and recommendations related
Laws governing Assess overall completeness to specific legal and regulatory frameworks will
public investment and comprehensiveness of
usually be included under the relevant institutions.
the legal framework
The cross-cutting discussion should summarize
Regulations Assess the adequacy and
the relevant assessments and recommendations.
governing specific specificity of the regulation
In some cases, there could also be specific recom-
aspects of public of key functions
mendations in the cross-cutting issues section,
investment
for example, related to the consistency between
Guidelines and Assess whether the
or integration of different pieces of legislation
methodological guidelines provide sufficient
and regulations.
documents for technical guidance for
A useful part of the cross-cutting issue section
public investment project development,
functions analysis, and implementation could be a table listing for each PIMA institution
the existing legal documents and guidelines, A
The legal and regulatory framework will also second column could indicate year in which it came
impact the assessment of PIM effectiveness. The into effect. A third column may register institutional
formal requirements in laws and regulations, and coverage (central government, public corporations,
the guidance provided in guidelines and similar subnational governments) The last column could
documents, will contribute to defining the potential be used for comments by the PIMA team. The table
impact of PIM. However, the effectiveness will could be part of this section or could be presented
depend on compliance with legal requirements in an appendix.
8. Cross-Cutting Issues 173

Capacity external auditors and accountants will be critical

The cross-cutting analysis of staff capacity should to ensure accountability.
build on and summarize the assessments of different Many countries have emphasized the need to build
PIMA institutions and dimensions for which there and retain staff capacity for PIM. In the absence of
are identified capacity and skills gaps. Staff capacity competent staff, even the best designed institu-
is a critical factor in the implementation of public tions are unlikely to produce the intended results.
investment policies and has significant impact on Box 8.1 summarizes the project delivery capability
the effectiveness of public investment institutions. framework in the United Kingdom and Box 8.2
As indicated in the generic theory of change for provides a summary assessment of staff capacity for
the PIMA framework (Figure 4.1), staff capacity will public investment in Estonia.
determine whether public investment activities are Some countries establish project implementa-
carried out as envisaged in the institutional design tion units (PIUs) to manage major projects, often
and whether the planned outputs are produced. as part of agreements with international financial
The organizations responsible for PIM will institutions. These PIUs will follow the institution’s
need staff with different expertise and skills in the procedures and exhibit good practices, including
different phases: rigorous project appraisal, independent review of
• In the planning phase, there is a need for project appraisal, transparent project selection
planners, economists, engineers, social scien- criteria, systematic project monitoring, differenti-
tists, and project development specialists to help ated requirements across the project cycle by size
develop investment strategies and plans, coor- of project, and dedicated funding for capacity
dinate these plans across levels of government, building in key functions. The good practices
and appraise potential investment projects. developed in these PIUs can usefully be main-
• During the budget allocation phase, budget streamed in the regular government organizations
and finance specialists are essential to ensuring and applied also to projects financed from the
adequate and transparent budgeting for invest- national budget. PIMA evaluators could analyze
ments, but there is also a need for engineers and (and possibly recommend) how a transfer of skills
other technical staff to determine maintenance from externally financed investment projects to
needs, and for economists and social scientists regular civil service structures could be benefi-
to contribute to project selection. cial. In many countries, the dual-track nature of
• During project implementation, procure- the national PIM framework exacerbates the skills
ment specialists and contract lawyers play gap as scarce skills are often dedicated to exter-
key roles in the procurement phase; control nally financed projects. This discrepancy can be
engineers, project managers, and monitoring reduced by forming joint staffing teams, allowing
and evaluation specialists contribute to project skills transfer across externally financed projects
management and monitoring; and internal and and other government projects.

IMPORTANT DOCUMENTS
Documents Use
Organizational charts for key ministries and Assess if overall capacity is consistent with institutional
institutions framework and workload
Overview of staff capacity and skills Identify potential gaps in the performance of specific
functions
Training programs and capacity development plans Assess plans for reducing and eliminating skills gaps
Strategies to promote and reward performance Assess existence and adequacy of performance
incentives
174 PIMA HANDBOOK

Box 8.1. Project Delivery Capability Framework in the United Kingdom

The Project Delivery Capability Framework describes the job roles, capabilities, and learning for all govern-
ment project delivery professionals across government. These professionals are responsible for delivery
of major public investments in the United Kingdom. The PDCF contains three elements: a career pathway/
common set of job roles, a set of competencies, and a signpost for development opportunities specific to job
roles. It provides a common language to describe job roles, and the knowledge, skills and abilities needed to
perform project work across all areas of government. It is a useful resource for both current project delivery
professionals and anyone interested in moving into the profession. Figure  8.1.1 lists the different job roles
covered by the Project Delivery Capability Framework.

Figure 8.1.1. UK Government Project Delivery Career Pathways

Civil Service Grades
B1 B2 A SCS
EO HEO SEO G7 G6 SCS 1 SCS 2 SCS 3
Leadership Head of Profession
SRO/Sponsor
Portfolio Manager / Director
Programme Manager / Director
Project Manager / Director
Project Delivery Career Pathways

PMO Manager / Director

Project Delivery Portfolio Analyst
Specialists Project Planner
Resource Manager
Business Case Manager
Assurance Manager
Configuration Manager
Project Support Officer
Governance & Reporting Manager
Risks & Issues Manager
Advisor
Business Analysis &
Change Specialst Stakeholder Manager
Benefits Manager
Business Change Manager
Business Analyst

Source: UK Infrastructure and Projects Authority 2018.

Any recommendations in this area should be processes often is a more appropriate response
based on a comprehensive assessment of capacity than increased staff numbers.
and skills compared with the key functions to be
performed. Recommendations based on incom- USEFUL DATA SERIES
plete information should be avoided. In some
Data Questions to Address
cases, government staff may suggest that lack
of staffing is a constraint, although overall staff Staffing levels Are approved resources
for key functions adequate to perform key
numbers may be high by international comparison.
functions?
One common challenge is that staff resources may
be spent on low-value routine reporting activities Vacancy rates Are actual resources adequate to
instead of being reassigned to more important for key functions perform key functions?
analytical tasks. Skills gaps may also be important. Functional Is the organizational design,
This implies that staff training and streamlining of reviews including incentives, adequate
to support staff performance?
8. Cross-Cutting Issues 175

Box 8.2. Staff Capacity for Public Investment Management in Estonia

The Estonian Ministry of Finance consists of about 450 staff, of which 90 percent have higher education, and
staff turnover is modest. There are currently 71 staff in the three departments of the fiscal sector that are
involved in PIM, with 48 in the State Budget Department, 4 in the Local Governments Financial Management
Department, and 19 in the Fiscal Policy Department. For recruitment to professional-level positions, a master’s
degree is generally required, and 64 percent of staff meet this requirement and a further 24 percent have
bachelor’s degrees. Staff turnover is less than 10 percent each year, and average time of service in the Ministry
of Finance is more than 10 years. Salary levels are competitive: the policy is to offer salaries equivalent to the
median of similar positions in the private sector.
Staff capacity in the Ministry of Finance is high, in terms of numbers, skills, and experience; the same
appears to be the case in other agencies involved in PIM. The Estonian Ministry of Finance has a higher staff
complement than many finance ministries in the Nordic countries, and the fiscal policy and budget functions
have staff numbers similar to these countries. Staff are highly educated, and many have long experience from
the ministry and other relevant organizations. Estonia’s highly developed and well-managed public financial
management system is also a clear indication of the high level of staff competencies.
There are no apparent capacity gaps in the Ministry of Finance that hamper efficient PIM, and the ministry
and the government’s shared service center are also providing training to other ministries and agencies. There
is a potential for improvements in public investment practices, and this will require learning and development
among the staff. Staff have in the past demonstrated a strong interest in and ability to continuously improve
practices and strengthen their capacities, and it is expected that this also will be the case in future reform
processes. The Ministry of Finance has also contributed to training staff in other ministries and organizations
in their areas of responsibility, including in procurement and performance budgeting.
Source: Estonia PIMA 2019.

Information Systems • Project management

Many public investment functions are based on • Portfolio monitoring
computerized systems, and the quality of these • Interface with asset management system
systems is essential for the public investment The assessment should provide a consolidated
process. Robust information systems support overview of the main information systems used
efficient PIM and enhance the transparency of the for PIM and the interfaces between them and with
process. PIM information systems may be inde- other information systems. The analysis should
pendent and separate, but often they will be build on the description of relevant information
partially integrated with other government financial systems under different PIMA institutions and
management information systems. The extent and dimensions. The cross-cutting assessment should
quality of this integration will often be a key feature include a brief description of the overall program
in this cross-cutting assessment. architecture and the key functions performed
The following IT functions will be particularly by the systems. Organizational responsibilities,
important for efficient PIM: including for data entry, verification, and consolida-
• Project pipeline development (identification, tion, should be described. Key interfaces with other
preparation, design, and presentation) systems, including the mechanisms for data transfer
• Project development and appraisal and reconciliation, should be outlined. Tables and
• Interface with budgeting system figures describing key aspects of the information
• Interface with procurement system system structure will be useful. Box 8.3 describes
• Interface with budget execution and accounting Ireland’s investment projects and programs tracker,
system and Box 8.4 gives an overview of Chile’s integrated
project database.
176 PIMA HANDBOOK

IMPORTANT DOCUMENTS The quality of the information system may be a

Documents Uses
key determinant in the assessment of different
PIMA institutions. Information systems design and
• Information • Assess comprehensiveness
comprehensiveness affect the institutional design of
system architecture and integration
PIMA institutions, and information system effective-
• Specifications for • Assess whether
individual IT systems systems meet functional
ness has direct results for the overall effectiveness
requirements of different of PIM.
PIMA institutions • Recommendations related to how the infor-
mation system can improve the design or
USEFUL DATA SERIES effectiveness of specific institutions should be
Data Questions to Address
discussed under that institution, with a summary
under the cross-cutting issues section.
• IT system • Is the IT system effective and
• Recommendations related to better integra-
performance data available to users who need it?
tion or coordination between systems may be
• Public investment • Do the reports meet the needs
presented in the cross-cutting issues section.
reports for effective management and
coordination?

Box 8.3. Investment Projects and Programs Tracker in Ireland

The Irish Investment Projects and Programs Tracker is an information system for monitoring of major invest-
ments through their different stages. The system is maintained by the Department of Public Expenditure and
Reform, and data are provided by relevant government departments and agencies. The system is publicly
available on the department’s website.
The tracker reflects the portfolio of projects with estimated costs above €20 million in the pipeline. This includes
projects at all stages in the project life cycle from strategic assessment through preliminary business case, final
business case, implementation, and review. Figure 8.3.1 summarizes the number of projects at each stage.

Figure 8.3.1. Number of Projects in Ireland’s Investment Projects and Programs Tracker, by Life Cycle
Stage, 2020
70

60

50

40

30

20

10

0
1. Strategic 2. Prelininary 3. Final Business 4. Implementation 5. Review
Assessment Business Case
Case
Stage of Project Life Cycle
Source: Government of Ireland 2020.
8. Cross-Cutting Issues 177

Box 8.4. Chile Integrated Projects Database

The Integrated Project Bank (BIP) is an information system for the registration of projects, programs, and basic
studies that request annual financing through a report called the Investment Initiative File. The conceptual
unit of the system is the investment initiative based on its life cycle, and it monitors the different phases of
the process during the budget year: entry of initiatives, registration of their entry in the National Investment
System (SNI), admissibility, technical-economic analysis and recommendation, creation of assignments, and
their physical-financial execution.
The main objective of the BIP is to deliver, in a permanent and dynamic way, information on the manage-
ment process of public investment as a whole, as well as each of the public institutions involved; link the
institutions that participate in the public investment process and improve, through institutional coordina-
tion, decision-making, administration tasks, and planning tasks; and provide information to improve the
formulation of investment initiatives. It also provides information of a diverse nature for operational control or
management analysis activities.
The BIP comprises the following modules:
• Consultation BIP presents in a summarized and easily accessible way, available to all users of the web,
the most relevant data of the current processes of public investment.
• Work BIP alllows public sector users, previously registered, to enter or modify information on their
investment initiatives. It also allows investment analysts from the Ministry of Social Development to issue
the Result of the Technical Economic Analysis (RATE).
• Management BIP is a set of tools to which Work BIP users have access, and its objective is to extract infor-
mation from current processes or previous processes directly from the database, in order to support the
analysis and control tasks of the process of public investment.
• Central Administrator BIP allows maintenance of the BIP system, preventive corrections, and updates to
the system information.
• BIP Regional Administration allows preventive corrections to system information, particularly to initia-
tives in the region of the country to which the administrator belongs.
Source: Government of Chile 2017.
 Appendix I
PIMA Questionnaire

Planning Sustainable Levels of Public Investment

1. FISCAL TARGETS AND RULES: Does the government have fiscal institutions to support fiscal
sustainability and to facilitate medium-term planning for public investment?
1.a. Is there a target or limit for government to ensure debt sustainability?
1.b. Is fiscal policy guided by one or more permanent fiscal rules?
1.c. Is there a medium-term fiscal framework to align budget preparation with fiscal policy?
2. NATIONAL AND SECTORAL PLANNING: Are investment allocation decisions based on
sectoral and inter-sectoral strategies?
2.a. Does the government prepare national and sectoral strategies for public investment?
2.b. Are the government’s national and sectoral strategies or plans for public investment costed?
2.c. Do sector strategies include measurable targets for the outputs and outcomes of investment
projects?
3. COORDINATION BETWEEN ENTITIES: Is there effective coordination of the investment plans
of central and other government entities?
3.a. Is capital spending by subnational governments (SNGs) coordinated with the central
government?
3.b. Does the central government have a transparent, rules-based system for making capital
transfers to SNGs and for providing timely information on such transfers?
3.c Are contingent liabilities arising from capital projects of SNGs, public corporations (PCs), and
public-private partnerships reported to the central government?
4. PROJECT APPRAISAL: Are project proposals subject to systematic project appraisal?
4.a. Are major capital projects subject to rigorous technical, economic, and financial analysis?
4.b. Is there a standard methodology and central support for the appraisal of projects?
4.c. Are risks taken into account in conducting project appraisals?
5. ALTERNATIVE INFRASTRUCTURE FINANCING: Is there a favorable climate for the private
sector, public-private partnerships, and PCs to finance infrastructure?
5.a. Does the regulatory framework support competition in contestable markets for economic
­infrastructure (for example, power, water, telecoms, and transport)?
5.b. Has the government published a strategy/policy for public-private partnerships and a legal/­
regulatory framework that guides the preparation, selection, and management of public-private
partnership projects?
5.c. Does the government oversee the investment plans of PCs and monitor their financial
performance?

179
180 PIMA HANDBOOK

Ensuring That Public Investment Is Allocated to the Right Sectors and Projects
6. MULTIYEAR BUDGETING: Does the government prepare medium-term projections of capital
spending on a full cost basis?
6.a. Is capital spending by ministry or sector forecasted over a multiyear horizon?
6.b. Are there multiyear ceilings on capital expenditure by ministry, sector, or program?
6.c. Are projections of the total construction cost of major capital projects published?
7. BUDGET COMPREHENSIVENESS AND UNITY: To what extent are capital spending and
related recurrent spending undertaken through the budget process?
7.a. Is capital spending mostly undertaken through the budget?
7.b. Are all capital projects, regardless of financing source, shown in the budget documentation?
7.c. Are capital and recurrent budgets prepared and presented together in the budget?
8. BUDGETING FOR INVESTMENT: Are investment projects protected during budget
implementation?
8.a. Are total project outlays appropriated by the legislature at the time of a project’s
commencement?
8.b. Are in-year transfers of appropriations (virement) from capital to current spending prevented?
8.c. Is the completion of ongoing projects given priority over starting new projects?
9. MAINTENANCE FUNDING: Is maintenance receiving adequate funding?
9.a. Is there a standard methodology for estimating routine maintenance needs and budget
funding?
9.b. Is there a standard methodology for determining major improvements, and are they included in
national and sectoral investment plans?
9.c. Can expenditures relating to routine maintenance and major improvements be identified in the
budget?
10. PROJECT SELECTION: Are there institutions and procedures in place to guide project
selection?
10.a. Does the government undertake a central review of major project appraisals before deciding to
include projects in the budget?
10.b. Does the government publish and adhere to standard criteria, and stipulate a required process
for project selection?
10.c. Does the government maintain a pipeline of appraised investment projects for inclusion in the
annual budget?
Appendix I 181

Delivering Productive and Durable Public Assets

11. PROCUREMENT: Is procurement based on effective competition and subject to adequate
oversight?
11.a. Is the procurement process for major capital projects open and transparent?
11.b. Is there a system in place to ensure that procurement is monitored adequately?
11.c. Is the procurement complaints review process conducted in a fair and timely manner?
12. AVAILABILITY OF FUNDING: Is financing for capital spending made available in a timely
manner?
12.a. Are ministries/agencies able to plan and commit expenditure on capital projects in advance on
the basis of reliable cash flow forecasts?
12.b. Is cash for project outlays released in a timely manner?
12.c. Is external (donor) funding of capital projects fully integrated into the main government bank
account structure?
13. PORTFOLIO MANAGEMENT AND OVERSIGHT: Is adequate oversight exercised over imple-
mentation of the entire public investment portfolio?
13.a. Are major capital projects subject to monitoring during project implementation?
13.b. Can funds be reallocated between investment projects during implementation?
13.c. Does the government adjust project implementation policies and procedures by systematically
conducting ex post reviews of projects that have completed their construction phase?
14. MANAGEMENT OF PROJECT IMPLEMENTATION: Are capital projects well managed and
controlled during the execution stage?
14.a. Do ministries/agencies have effective project management arrangements in place?
14.b. Has the government issued rules, procedures, and guidelines for project adjustments that are
applied systematically across all major projects?
14.c. Are ex post audits of capital projects routinely undertaken?
15. MONITORING OF PUBLIC ASSETS: Is the value of assets properly accounted for and reported
in financial statements?
15.a. Are asset registers updated by surveys of the stocks, values, and conditions of public assets
regularly?
15.b. Are nonfinancial asset values recorded in the government financial accounts?
15.c. Is the depreciation of fixed assets captured in the government’s operating statements?
 Appendix II
Indicative Scoring Thresholds
The scoring thresholds in Table II.1 are indicative, and PIMA assessment teams can deviate from these if
data are unavailable, inconsistent, or incomplete, or if application of the thresholds would give a misleading
assessment of the dimension in question. The effectiveness thresholds provide examples of possible quan-
titative criteria. These are not binding.

Table II.1. Indicative Scoring Thresholds

Effectiveness
Score Institutional Design
Low There is no target or limit to Low No target or limit, or the debt level
ensure debt sustainability. exceeds the established target
or limit and there is no significant
improvement over the past 3 years.
Medium There is at least one target or Medium The debt level exceeds the estab-
limit to ensure central govern- lished debt target or limit, but at
ment debt sustainability. least half the gap has been closed
1.a
over the past 3 years. If the debt
level fluctuates around the target,
the target should have been met at
least once in the past 3 years.
High There is at least one target or High The debt level is within the target or
limit to ensure general govern- limit.
1 ment debt sustainability.
Low There are no permanent fiscal Low No fiscal rule or budget balance
rules. outturn deviates significantly (more
than 1.0 percent of GDP) from
fiscal rule.
Medium There is at least one Medium Budget balance outturn deviates
permanent fiscal rule appli- somewhat (0.5–1.0 percent of GDP)
1.b
cable to central government. from fiscal rule.
High There is at least 1 permanent High Budget balance outturn is consistent
fiscal rule applicable to central with the fiscal rule.
government and a comparable
fiscal rule for most of general
government.

Table continues on next page

183
184 PIMA HANDBOOK

Effectiveness
Score Institutional Design
Low No medium-term fiscal Low No capital allocation in MTFF, or
framework (MTFF) is prepared approved capital budget deviates
before budget preparation. significantly (more than 20 percent)
higher or lower than the capital allo-
cation in the MTFF.
Medium An MTFF is prepared before Medium Approved capital budget deviates
budget preparation but it is somewhat from (10–20 percent
1.c
limited to fiscal aggregates. higher or lower than) the capital
allocation in the MTFF.
High An MTFF is prepared before High Approved capital budget is consis-
budget preparation, which tent with (less than 10 percent higher
distinguishes between current or lower than) the capital allocation
and capital spending and in the MTFF.
ongoing and new projects.

Low National or sectoral public Low No description of investment

investment plans are not projects in plans, budgets for
published, or major investment relevant years include few (less
projects are not described in than 25 percent) of the investment
national and sectoral plans. projects described in national or
sectoral plans, or few (less than 25
percent) of the projects described
in budgets have been described in
national or sectoral plans.
Medium Some major investment Medium Budgets for relevant years include
projects funded by the budget some (25–75 percent) of the projects
are described in published that appeared in national or sectoral
2 2.a
national and sectoral plans. strategies, or some (25–75 percent)
of the projects described in budgets
have been described in national or
sectoral plans.
High All major investment projects, High Budgets for relevant years include
regardless of financing most (more than 75 percent) of the
source, are comprehensively projects that appear in national
described in published and sectoral plans and strategies,
national and sectoral plans. or most (more than 75 percent) of
the projects described in budgets
have been described in national or
sectoral plans.

Table continues on next page

Appendix II 185

Effectiveness
Score Institutional Design
Low There is no costing of invest- Low No cost estimates in strategies, or
ment projects in national and estimates are significantly (more than
sectoral strategies or plans. 50 percent) higher than planned
capital expenditure for the same
period as the strategy.
Medium There are broad cost estimates Medium Cost estimates in strategies are
for investment projects in somewhat (10–50 percent) higher
national and sectoral plans but than planned capital expenditure for
2.b
the same period as the strategy.
High There are broad cost estimates High Cost estimates in strategies are
for investment as well as consistent with (less than 10 percent
specific cost estimates for major higher than) planned capital expen-
investment projects in national diture for the same period as the
and sectoral plans, and cost strategy.
estimates are reconciled with
available resources.
Low There are no measurable Low Performance data are used for
targets for public investment management in few (less than 25
in sectoral strategies. percent of) major projects.

Medium There are measurable output Medium Performance data are used for
targets for public investment management in some (25–75
2.c
projects in sectoral strategies. percent of) major projects.

High There are measurable output High Performance data, including output
and outcome targets for and outcome information, are used
public investment projects in for management in most (more than
sectoral strategies or plans. 75 percent of) major projects.

Low There is no legal requirement Low SNG investment plans submitted to

for systematically sharing SNG the central government account for
investment plans with central few (less than 25 percent of the total
government. value of) SNG public investments.
Medium There is a legal require- Medium SNG investment plans submitted
3.a ment for sharing subnational to the central government account
government (SNG) investment for some (25–75 percent of the total
plans with central govern- value of) SNG public investment.
ment and for publishing these
alongside central government
investments.

Table continues on next page

186 PIMA HANDBOOK

Effectiveness
Score Institutional Design
High There are legal requirements High SNG investment plans submitted
for sharing SNG investment to the central government account
plans with central government for most (more than 75 percent
and for systematic coordina- of the total value of) SNG public
tion of these between central investment.
government and SNGs.
Low There is no legal or regulatory Low No mechanism for predictable
framework that establishes transfers, or actual capital transfers
a transparent, rules-based deviate significantly from amounts
mechanism for capital transfers notified to SNGs (by more than 15
to SNGs. percent).
Medium There is a legal or regulatory Medium Actual capital transfers deviate
framework that establishes somewhat from amounts notified
a transparent, rules-based to SNGs (by 5–15 percent) or actual
mechanism for capital transfers notification is done less than 6
3.b to SNGs, with transfer amounts months before the fiscal year.
announced less than 6 months
before the fiscal year.
High There is a legal or regulatory High Actual capital transfers are consis-
framework that establishes tent with amounts notified to SNGs
3 a transparent, rules-based (deviate by less than 5 percent) and
mechanism for capital transfers actual notification is done at least 6
to SNGs, with transfer amounts months before the fiscal year.
announced at least 6 months
before the fiscal year.
Low Legal framework does not Low Few contingent liabilities (less than
require reporting of contingent 25 percent of value) are reported to
liabilities from SNG, public central government, or contingent
corporation (PC), and public- liabilities are reported for none or 1 of
private partnership projects. 3 categories.
Medium Legal framework requires Medium Some (25–75 percent of) contingent
reporting to central govern- liabilities are reported to central
ment of contingent liabilities government, or contingent liabilities
3.c
from SNG, PC, and public- are reported for 2 of 3 categories.
private partnership projects.
High Legal framework requires High Most (more than 75 percent of)
reporting and public disclo- contingent liabilities are reported to
sure of contingent liabilities central government and disclosed
from SNG, PC, and public- in budget documents, or contingent
private partnership projects in liabilities are reported and disclosed
budget documents. for 3 of 3 categories.

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Appendix II 187

Effectiveness
Score Institutional Design
Low There is no legal or regula- Low Few major investment projects
tory requirement for formal, (less than 25 percent regardless
systematic appraisal of major of funding source) are subject to
investment projects. stringent appraisal.
Medium There is a legal or regula- Medium Some major investment projects
tory requirement for formal, (25–75 percent regardless of funding
systematic appraisal of major source) are subject to stringent
4.a investment projects. appraisal.
High There is a legal or regula- High Most major investment projects
tory requirement for formal, (more than 75 percent regardless
systematic appraisal of major of funding source) are subject to
investment projects, including stringent appraisal, and many (more
for publication of appraisal than 50 percent) have published
results and/or independent summary appraisal results and/or
review. undergone independent review.
Low There is no standard meth- Low There is no standard methodology
odology or central support for analysis of investment projects,
for appraisal of investment or the methodology is fully applied
projects. for few (less than 25 percent of)
major projects.
4
Medium There is either a standard Medium The standard methodology for
4.b methodology or central analysis of investment projects is
support for appraisal of invest- fully applied for some (25–75 percent
ment projects. of) major projects.
High There is both a standard meth- High The standard methodology for
odology and central support analysis of investment projects is
for appraisal of investment fully applied for most (more than 75
projects. percent of) major projects.
Low There is no regulatory require- Low Few major investment projects (less
ment for analysis of risks related than 25 percent) include stringent
to investment projects. analysis of project risks.

Medium There is a regulatory require- Medium Some major investment projects

ment for analysis of risks (25–75 percent) include stringent
4.c related to investment projects. analysis of project risks.

High There is a regulatory require- High Most major investment projects

ment for analysis of risks (more than 75 percent) include
related to investment projects stringent analysis of project risks and
and for development of risk risk mitigation plans.
mitigation plans.

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188 PIMA HANDBOOK

Effectiveness
Score Institutional Design
Low The legal and regulatory Low Private companies have small
framework restricts the provision market shares (less than 25 percent
of economic infrastructure to in 2 major markets).
domestic monopolies or estab-
lishes few economic regulators.
Medium The legal and regulatory Medium Private companies have medium
framework supports competition in market shares (25–75 percent) in at
5.a some major infrastructure markets least 2 major markets.
and establishes some economic
regulators.
High The legal and regulatory High Private companies have high market
framework supports competi- shares (at least 75 percent) in at
tion in most major infrastructure least 2 major markets.
markets, and economic regulators
are well established.
Low There is no published strategy/ Low Few (less than 5 percent of) public
policy framework for public- investments the past 3 years have
private partnerships, and the been implemented as public-
legal and regulatory framework private partnerships and are
is weak. consistent with the public-private
5
partnership policy and legal/regu-
latory framework.
Medium A public-private partner- Medium Some (5–10 percent of) public
ship strategy/policy has been investments the past 3 years have
published, but the legal and regu- been implemented as public-
5.b latory framework is weak. private partnerships and are
consistent with the public-private
partnership policy and legal/regu-
latory framework.
High A public-private partnership High Many (more than 10 percent of)
strategy/policy has been published, public investments the past 3
and a strong legal and regulatory years have been implemented as
framework guides the preparation, public-private partnerships and are
selection, and management of consistent with the public-private
public-private partnership projects. partnership policy and legal/regu-
latory framework.
5.c Low There is no legal requirement that Low The review process covers few PC
the government systematically infrastructure investments (less
review the investment plans of than 25 percent of total value) over
PCs. the past 3 years.

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Appendix II 189

Effectiveness
Score Institutional Design
Medium There is a legal requirement Medium The review process covers at least
that the government reviews the 5 largest PCs measured by
the investment plans of PCs but assets or some (25–75 percent
not for publication of a consoli- of) PC infrastructure investments
dated report on these plans or over the past 3 years.
the financial performance of
PCs.
High There is a legal requirement High The review process covers at least
that the government reviews the 10 largest PCs measured by
the investment plans of PCs and assets or most (75 percent or
publishes a consolidated report more of) PC infrastructure invest-
on these plans and the financial ments over the past 3 years.
performance of PCs.

Low There are no published multiyear Low Medium-term capital projections

estimates for capital spending in are missing, or approved capital
budget documentation. budget allocations deviate signifi-
cantly (by more than 20 percent)
from capital spending projections
for the same years.
Medium Medium-term projections of Medium Approved capital budget alloca-
6.a aggregate capital spending tions deviate somewhat (by 10–20
are published in budget percent) from capital spending
documentation. projections for the same years.
High Medium-term projections for High Approved capital budget alloca-
capital spending by ministry or tions are consistent (deviation
sector are published in budget less than 10 percent) with capital
6
documentation. spending projections for the
same years.
Low There are no multiyear ceilings on Low No multiyear ceilings, or approved
capital expenditure by ministry, budget amounts for capital
sector, or program. spending are significantly (more
than 15 percent) higher than the
aggregate multiyear ceilings for the
6.b same years.
Medium There are indicative multiyear Medium Approved budget amounts for
ceilings on capital expenditure by capital spending are somewhat
ministry, sector, or program. (5–15 percent) higher than the
aggregate multiyear ceilings for the
same years.

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190 PIMA HANDBOOK

Effectiveness
Score Institutional Design
High There are binding multiyear High Approved budget amounts for
ceilings on capital expenditure by capital spending are consistent
ministry, sector, or program. (less than 5 percent higher) with
the multiyear ceilings for the
same years.
Low There are no published estimates Low Total construction costs for major
of total construction costs for all projects are not included in budget
major projects in. documentation, or total costs are
presented but changes in estimates
are not identified.
Medium Total construction costs for all Medium Total construction costs for
major projects are published, but major projects are published
without indication of the distribu- in budget documentation, and
6.c
tion of these costs over time. changes in estimates are recorded
and explained.
High Total construction costs for all High Total construction costs and the
major projects are published annual breakdown of costs are
with indications of the distribu- published, and changes from one
tion of these costs over a 3–5 year budget to the next are identi-
horizon. fied and explained in a published
document.

Low The legal and regulatory Low Capital spending by EBEs is signifi-
framework allows significant cant (more than 10 percent of the
capital spending by extrabud- capital spending in the central
getary entities (EBEs), and there government budget), and little
is no legal requirement for extrabudgetary capital spending
authorization or disclosure in (less than 75 percent) is authorized
budget documents. or disclosed in the budget.
7 7.a
Medium The legal and regulatory Medium Capital spending by EBEs is
framework allows significant significant (more than 10 percent
capital spending by EBEs, but of the capital spending in the
there is a legal requirement for central government budget), but
authorization or disclosure in most (more than 75 percent of) EBE
budget documents. capital spending is disclosed in the
budget.

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Appendix II 191

Effectiveness
Score Institutional Design
High The legal and regulatory High Capital spending by EBEs is insig-
framework allows little or no nificant (less than 10 percent of
capital spending by EBEs, and the capital spending in the central
any such spending should be government budget), and most of
authorized or disclosed in the this (more than 75 percent) is autho-
budget. rized or disclosed in the budget.
Low The legal and regulatory Low None of the 3 sources are disclosed
framework requires none or only in the budget, or few projects in the
1 of the 3 major financing sources listed categories are included in the
(external, public-private partner- budget (less than 50 percent of the
ships, PCs) to be disclosed in the total investment in these categories is
budget. included).
Medium The legal and regulatory Medium At least 2 categories are included
framework requires that 2 of the in the budget, containing many of
3 major financing sources are the projects in the listed categories
7.b
disclosed in the budget. (more than 75 percent of the total
investment in these categories is
included).
High The legal and regulatory High All 3 categories and most projects
framework requires that all 3 of in these categories are included in
the major financing sources listed the budget (the value of projects in
are disclosed in the budget. the budget is more than 75 percent
of the total investment in the 3
categories).
Low Capital and current budgets are Low The current cost impacts of few
prepared by separate ministries (less than 25 percent of) capital
and presented separately. projects are reviewed by the central
budget department during budget
preparation.
Medium Budget preparation and presen- Medium The current cost impacts of some
tation are consolidated, but (25–75 percent of) major capital
capital and current spending are projects are reviewed by the central
7.c
not combined under a program budget department during budget
or functional classification. preparation.
High Budget preparation and presen- High The current cost impacts of most
tation are fully integrated. (more than 75 percent of) major
Current and capital spending capital projects are reviewed by the
are presented according central budget department during
to a program or functional budget preparation.
classification.

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192 PIMA HANDBOOK

Effectiveness
Score Institutional Design
Low The legal and regulatory Low Budget documentation includes
framework does not require total project costs of few (less than
information on total project costs 25 percent of) major projects that
to be included in the budget are appropriated.
documentation.
Medium The legal and regulatory Medium Total project costs for some (25–75
framework requires that the percent of) major projects that
8.a
budget provides information are appropriated are disclosed in
about total project costs. budget documentation.
High The legal and regulatory framework High Total project costs and multiyear
requires that the budget also commitments for most (more than
provides information about 75 percent of) major projects that
multiyear commitments related to are appropriated are disclosed in
the projects. budget documentation.
Low There are no legal limitations on Low Virement from capital to current
in-year transfers of appropriations spending is a significant share (more
(virement) from capital to current than 15 percent) of the initial capital
spending. budget.
Medium Virement from capital to current Medium Virement from capital to current
spending requires approval by the spending is a moderate share
8.b Ministry of Finance (MoF). (between 5 and 15 percent) of the
8
initial capital budget.
High Virement from capital to current High Virement from capital to current
spending requires the approval of spending has been done with legis-
the legislature. lative approval and is a low share
(less than 5 percent) of the initial
capital budget.
Low There is no legal or regulatory Low Some (less than 75 percent of)
mechanism that protects funding ongoing projects receive funding
of ongoing projects. as needed, or there are several
examples of major projects not
receiving sufficient funding.
Medium There is a legal or regulatory Medium Most (75–90 percent of) ongoing
mechanism that protects funding projects receive funding as needed,
8.c of ongoing projects. or there are few examples of major
projects not receiving sufficient
funding.
High There is a legal or regulatory High All (over 90 percent of) ongoing
mechanism that protects funding projects receive funding as needed,
for ongoing projects in the annual or there are no examples of major
budget and over the medium term. projects not receiving sufficient
funding.

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Appendix II 193

Effectiveness
Score Institutional Design
Low There are no standard methods Low Approved budget allocations
for assessing the needs for for current maintenance funding
routine (current) maintenance for main asset classes are clearly
and its cost for main asset inadequate (less than 50 percent of
classes (for example, roads, assessed maintenance needs).
buildings). If there are no precise estimates for
maintenance needs, maintenance
funding is less than 2 percent of
estimated asset replacement values.
Medium There are standard method- Medium Approved budgets for current
ologies for assessing the needs maintenance funding for main asset
for routine maintenance and classes are somewhat inadequate
its costs for main asset classes (50–90 percent of assessed mainte-
9.a (for example, roads, buildings), nance needs).
but there is no formal require- If there are no precise estimates for
ment that the methodologies maintenance needs, maintenance
determine budget submissions funding is more than 2 percent of
for current maintenance. estimated asset replacement values.
High There are standard method- High Approved budgets for current
ologies for assessing the needs maintenance funding for main asset
for routine maintenance and classes are broadly in line with
9 its costs for main asset classes requirements (at least 90 percent of
(for example, roads, buildings), assessed maintenance needs).
and there is a formal require-
ment that the methodologies
determine budget submissions
for current maintenance.
Low There are no standard meth- Low Approved budgets for capital
odologies for determining the maintenance are clearly inadequate
needs for major improvements (lower than 50 percent of estimated
(capital maintenance). needs).
If there are no precise estimates for
capital maintenance needs, funding
is less than 2 percent of asset
replacement values.
9.b
Medium There are standard methodolo- Medium Approved budgets for capital main-
gies for determining the needs tenance are somewhat inadequate
for improvements (capital main- (between 50 and 90 percent of
tenance), but these assessments estimated needs).
are not reflected in national or If there are no precise estimates for
sectoral plans. capital maintenance needs, funding
is more than 2 percent of asset
replacement values.

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194 PIMA HANDBOOK

Effectiveness
Score Institutional Design
High There are standard methodolo- High Approved budgets for capital
gies for determining the needs maintenance are broadly in line with
for major improvements (capital requirements (at least 90 percent of
maintenance), and these needs estimated needs).
are fully reflected in national and
sectoral plans.
Low Routine and capital maintenance Low Some (less than 75 percent of)
cannot be systematically identi- estimated maintenance funding is
fied in the budget. identified in the budget.

Medium Routine and capital maintenance Medium Most (more than 75 percent of)
can be systematically identified estimated maintenance funding is
in the budget documentation identified in the budget.
using either the budget classifi-
9.c cation or analytical information
regularly provided in budget
documentation.
High Routine and capital maintenance High Most (more than 75 percent of)
can be systematically identi- estimated maintenance funding
fied and regularly reported in is identified in the budget and
budget documentation with regularly reported with aggregate
approved budget amounts and actual spending by ministry.
actual spending by ministry.

Low There is no formally required Low The number of projects rejected or

central review process for major returned for further development
capital investment projects is low (less than 5 percent of those
(including those funded by submitted).
donors or public-private part-
nerships) before consideration
of inclusion in the budget.
10 10.a
Medium There is a formally required Medium The number of projects rejected or
central review process for major returned is medium (from 5 to 10
capital investment projects percent of submitted proposals).
(including those funded by
donors or public-private part-
nerships) before consideration
of inclusion in the budget.

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Appendix II 195

Effectiveness
Score Institutional Design
High There is a formally required High The number of projects rejected
central review process for major or returned is high (more than 10
capital investment projects percent of submitted proposals),
(including those funded by and some (at least 10 percent) of the
donors or public-private partner- reviews include independent inputs.
ships) before consideration of
inclusion in the budget, and this
review includes independent
inputs.
Low There are no published, specific Low Few (Less than 50 percent of) major
criteria for project selection and projects are selected in accordance
the project selection process is with a prescribed process and
not defined in law or regulation. criteria.
Medium There are published, specific Medium Many (50–90 percent of) major
selection criteria, but the project projects are selected in accordance
10.b
selection process is not clearly with the prescribed process and
defined in law or regulation. criteria.
High There are published, specific High All (more than 90 percent of) major
selection criteria, and the project projects are selected in accordance
selection process is clearly with the prescribed process and
defined in law or regulation. criteria.
Low There is no formal requirement Low Few (less than 50 percent of) major
for a pipeline of appraised projects are selected from the
investment projects. pipeline.

Medium There is a pipeline of appraised Medium Many (50–90 percent of) major
projects, but no formal require- projects are selected from the
ment that projects be selected pipeline.
10.c only from this pipeline.
High There is a pipeline in place High All (more than 90 percent of) major
(including those funded by projects are selected from the
donors or public-private partner- pipeline.
ships) and a formal requirement
that this pipeline be used to
select projects in the annual
budget and in the medium term.

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196 PIMA HANDBOOK

Effectiveness
Score Institutional Design
Low The legal and regulatory framework Low Few (less than 50 percent
does not require competitive of) major projects are based
procurement of major projects. on effective competitive
procurement.
Medium The legal and regulatory framework Medium Many (between 50 and 90
requires competitive procurement percent of) major projects are
of major projects. based on effective competitive
11.a
procurement.
High The legal and regulatory High All (more than 90 percent of)
framework requires competitive major projects are based on
procurement of major projects and effective competitive procure-
publication of complete and timely ment, and complete and timely
procurement information. procurement information is
publicly available.
Low There is no procurement database Low There is no database with
or the information in the database complete and timely information,
is incomplete or not timely. or analytical reports are available
after more than 6 months, or not
at all.
Medium The database has reasonably Medium The database is reasonably
11 complete information, but it is comprehensive, but analytical
11.b not required to produce regular reports are not available at all or
analytical reports. after more than 6 months.
High The database has reason- High The database is used by a moni-
ably complete information and toring system that produces
produces standard analytical monthly or quarterly analytical
reports to support a formal reports drawing conclusions and
procurement monitoring system. making recommendations for
improvement.
Low The legal and regulatory framework Low No independent review body
does not require that procurement or the average time to decide
complaints be reviewed by an inde- complaints is long (more than 6
pendent body. months).
Medium The legal and regulatory framework Medium The average time to decide
requires that procurement complaints is medium (2–6
11.c
complaints be reviewed by an months).
independent body, but the recom-
mendations of this body are not
required to be produced on a
timely basis, nor published, nor
rigorously enforced.

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Appendix II 197

Effectiveness
Score Institutional Design
High The legal and regulatory High Independent reviews are
framework requires that procure- published and rigorously
ment complaints be reviewed enforced, and the average time
by an independent body whose to resolve complaints is short
recommendations are required (less than 2 months).
to be timely, published, and
rigorously enforced.

Low There is no legal or regulatory Low Cash flow forecasts are missing
framework for systematic cash flow or not documented, or actual net
forecasting. cash flows on average deviate
significantly (more than 10
percent) from forecasts.
Medium The legal or regulatory framework Medium Actual net cash flows on average
requires that cash flow forecasts deviate somewhat (by 5–10
are at least quarterly and that percent) from forecasts, and
ministries be provided commit- ministries are provided with
ment ceilings at least a quarter in commitment ceilings at least a
12.a
advance. quarter in advance. There may be
examples of commitment ceilings
not funded.
High The legal or regulatory framework High Actual net cash flows on average
requires that cash forecasts be deviate little (less than 5 percent)
12
monthly and that commitment from forecasts, and commitment
ceilings for the whole fiscal year are ceilings for the whole fiscal year
provided at the beginning of the are provided at the beginning of
year. the year. There are no examples of
commitment ceilings not funded.
Low There are no formal mechanisms Low Not all (less than 75 percent of)
to ensure timely release of project invoices for major projects are
funds when payments become due. paid on time.

12.b Medium There are formal mechanisms to Medium Most (75–90 percent of) invoices
ensure timely release of project for major projects are paid
funds, but they are not sufficiently on time.
strong to ensure that funds always
are released for payment in line
with appropriations.

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198 PIMA HANDBOOK

Effectiveness
Score Institutional Design
High There are strong mechanisms to High All (more than 90 percent of)
ensure timely release of funds invoices for major projects are
for payment, in line with the paid on time, and cash releases
annual appropriation. are in line with appropriations.
Low There is no legal or regulatory Low The MoF/treasury is informed of
requirement that external financing the cash payments (date, amount,
is at the central bank. and related project) for exter-
nally financed projects not later
than one month from the date of
payment.
Medium External financing is required to be Medium The MoF/treasury is informed of
held at the central bank but not as the cash payments (date, amount,
12.c
part of the main government bank and related project) for externally
account structure. financed projects within a week
from the date of payment.
High External financing is required to be High The MoF/treasury is informed
fully integrated in the main govern- in advance of the cash
ment bank account structure. payments (date, amount, and
related project) for externally
financed projects.

Low There is no legal or regulatory Low There are only partial data on
framework for systematic moni- portfolio delays and cost overruns
toring of major capital projects. (covering less than 50 percent
of the portfolio), or many (more
than 50 percent) of the monitored
projects (by value) are behind
schedule or over budget.
Medium There is a legal or regulatory Medium There are systematic data on
framework for monitoring annual portfolio delays and cost overruns
project costs and physical progress for many projects (more than 50
13 13.a during implementation of major percent of the portfolio), and some
projects. (25–50 percent of) major projects
are behind schedule or over
budget.
High There is a legal or regulatory High There are systematic data on
framework for central monitoring of portfolio delays and cost overruns
project costs and physical progress for many projects (more than 50
during implementation of major percent of the portfolio), and few
projects, including for in-year (less than 25 percent of) major
reports. projects are behind schedule or
over budget.

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Appendix II 199

Effectiveness
Score Institutional Design
Low The legal or regulatory framework Low There is no evidence that realloca-
does not allow reallocation of funds tion has promoted accelerated
between projects under different implementation of projects, or
appropriations. capital budget execution is low
(less than 75 percent).

Medium The legal or regulatory framework Medium There is some evidence that
allows reallocation of funds reallocation has promoted
between projects under different accelerated implementation of
13.b appropriations but does not projects, and capital budget
require that this be based on execution rate is medium (75–90
systematic monitoring and trans- percent).
parent procedures.
High The legal or regulatory framework High There is significant evidence
allows reallocation of funds that reallocation has promoted
between projects under different accelerated implementation of
appropriations and requires that projects, and capital budget
this be based on systematic moni- execution rate is high (more than
toring and transparent procedures. 90 percent).
Low There is no formal requirement for Low Government ex post reviews
ex post reviews for major projects. cover few (less than 10 percent of)
major projects.

Medium There is a formal requirement for Medium Government ex post reviews

ex post review of major projects cover some (10–25 percent of)
focusing on project costs, deliver- major projects.
13.c ables, and outputs.
High There is formal requirement for High Government ex post reviews cover
ex post review of major projects many (more than 25 percent of)
focusing on project costs, deliver- major projects and the informa-
ables, and outputs conducted by tion has been systematically used
independent parties and systemati- to adjust policies and procedures.
cally used to adjust policies and
procedures.

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200 PIMA HANDBOOK

Effectiveness
Score Institutional Design
Low There are no legal or regu- Low Not all (less than 75 percent of)
latory requirements for major projects have identified senior
either appointment of senior responsible officers or project
responsible officers or imple- implementation plans before project
mentation plans before approval.
approval of major projects.
Medium There are legal or regulatory Medium Most (more than 75 percent of)
requirements for appointment major projects have identified senior
of senior responsible officers responsible officers or project
14.a
but not for implementation implementation plans before project
plans before approval of major approval.
projects.
High There are legal or regulatory High Most (more than 75 percent of)
requirements for appointment major projects have identified senior
of senior responsible officers responsible officers and project
and for implementation plans implementation plans before project
before approval of major approval.
projects.
Low There are no standardized Low Project adjustment proposals are not
14 rules and procedures for analyzed and documented, or few
project adjustments. (less than 10 percent of) projects are
subject to formal adjustment over
the implementation period.
Medium There are standardized rules Medium Project adjustment proposals are
and procedures for project consistently analyzed and docu-
adjustments, but these do not mented, and some (more than 10
require a fundamental review percent of) projects are subject to
of the project’s rationale, formal adjustment over the imple-
14.b costs, and expected outputs mentation period.
when circumstances change
significantly.
High There are standardized rules High Some major projects are cancelled
and procedures for project or substantially redesigned following
adjustments, and these do fundamental review and some (more
require a fundamental review than 10 percent of) projects are
of the project’s rationale, subject to formal adjustment over
costs, and expected outputs the implementation period.
when circumstances change
significantly.

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Appendix II 201

Effectiveness
Score Institutional Design
Low The legal mandate for the Low Few (less than 10 percent of) major
external auditor does not cover projects have been subjected to
ex post, external project audits external ex post audit.
or allow publication of the
audit result.
Medium The legal mandate for the Medium Some (10–25 percent of) major
external auditor covers ex projects have been subjected to
post, external project audits external ex post audit.
14.c
and allows publication of the
results of these audits.
High The legal mandate for the High Many (more than 25 percent of)
external auditor covers ex major projects have been subjected
post, external project audits, to external ex post audit.
and requires that the results be
both regularly published and
scrutinized by the legislature.

Low Fixed asset registers are not Low There is no centralized register of
required by law or regula- fixed assets, or fixed asset registers
tion to be comprehensive or maintained by respective agencies
regularly updated. have only partial coverage.
Medium Fixed asset registers are Medium The centralized fixed asset register
required by law or regulation or registers maintained by agencies
to be either comprehensive or are regularly updated, cover most
15.a regularly updated. (at least 75 percent of) govern-
ment fixed assets, and are readily
accessible.
15
High Fixed asset registers are High Fixed asset registers are maintained
required by law or regulation or consolidated centrally, are verified
to be both comprehensive and and updated at least every 2 years,
regularly updated. and cover all (at least 90 percent of)
government fixed assets.
Low There is no legal or regulatory Low Few (less than 25 percent of) govern-
requirement that government ment fixed assets are included in the
15.b financial statements provide government accounts.
systematic information about
fixed assets.

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202 PIMA HANDBOOK

Effectiveness
Score Institutional Design
Medium There is a legal or regulatory Medium Many (25–75 percent of) govern-
requirement for inclusion ment fixed assets are included in
of some fixed assets in the government accounts.
the government financial
statement, but not for revalu-
ation of these assets on a
regular basis.
High There is a legal or regu- High Most (more than 75 percent of)
latory requirement that government fixed assets are
most fixed assets be included in the government
included in the government accounts and revalued regularly.
financial statements and
revalued regularly.
Low There is no legal or regu- Low Depreciation is less than 1 percent
latory requirement for of fixed assets.
recording of depreciation
of fixed assets in govern-
ment accounts.
Medium There is a legal or regulatory Medium Depreciation is 1–2 percent of
requirement that depre- fixed assets.
ciation of fixed assets be
15.c recorded in government
accounts based on statis-
tical estimates.
High There is a legal or regulatory High Depreciation is more than 2
requirement that depre- percent of fixed assets.
ciation of fixed assets be
recorded in government
accounts based on asset-
specific assumptions.
 Appendix III
Conducting a PIMA
Conducting a PIMA involves several steps, as outlined in Figure III.1.

Figure III.1. Steps in Conducting a PIMA

   
PIMA BEFORE DURING AFTER PIMA PIMA
  REQUEST THE THE THE REPORT FOLLOW-UP  
  MISSION MISSION MISSION  
   

PIMA Request Mission preparation will usually include steps to

Public Investment Management Assessments familiarize the country with the PIMA framework and
(PIMAs) are based on requests from IMF member to have officials conduct an initial self-assessment.
countries. The requests may be a result of specific Familiarization may include a short preparatory
challenges that have emerged in the country’s public mission to conduct a workshop. (Workshops may
investment management (PIM) system or a result of also be done remotely). The new infrastructure
more general interest in continuous improvement of governance portal (https://infrastructuregovern.
management frameworks. The requests will often imf.org/) includes facilities to introduce and explain
emerge during the continuous dialog between the the PIMA framework to countries and to assist them
country and the IMF. Requests are assessed and in the self-assessment. The self-assessment is an
approved by the IMF Fiscal Affairs Department effective way for countries to explore the PIMA
(FAD) part of its annual work program, based on framework and to help them prepare for the mission.
inputs from the relevant area department. The self-assessment will also help countries identify
and engage the authorities’ PIMA counterpart. This
is important for the effectiveness of the mission.
Data requirements for the assessment are defined
Before the Mission well ahead of the mission. There are substantial
The first step in planning a PIMA mission is to amounts of relevant data in IMF databases (see
agree on the timing and scope of the mission. A Box III.1). Data for the country itself and for relevant
PIMA mission will usually require two weeks in the comparator countries are extracted from these
country. The PIMA framework itself will define the databases for use during the PIMA. There will also be
broad parameters of the mission, but countries will a need to collect additional data from the country:
often have specific issues or questions they want the üü Data needed to fill gaps in data or to explain
assessment to cover, for instance: outliers in the Investment and Capital Stock
üü How to better include public investment in Template. Additional data may be requested
national planning to develop a macro-fiscal analytical theme in
üü How to incorporate PPPs in the overall manage- the context section of the PIMA report.1
ment framework for public investments
üü How to promote more effective and timelier 1  Data may be severely lacking for some countries, in
project implementation par ticular post-conflic t countries. In such cases, the
assessment team will need to populate the relevant
databases.
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204 PIMA HANDBOOK

Box AIII.1. PIMA Tables Maintained by the IMF

Investment and Capital Stock Template —an Excel spreadsheet designed and maintained by the FAD
Expenditure Policy Division. It is the source for data and figures for use in the context section of the PIMA
report, information on comparator countries, the efficiency frontier analysis, and intermediate PIM indica-
tors such as volatility of public investment spending. It may be necessary to collect additional information to
explain any biases, outliers, or limitations in the data for the mission country and comparator countries. For
example, data may only cover central government while the counterpart country or comparator country is a
federal state, or there may be anomalies in the data. Gaps in data can be filled or unreliable data corrected, by
collecting data from the country before or during the PIMA mission.
The PIMA Scoring Template —an Excel spreadsheet designed and maintained by the FAD Public Financial
Management divisions. It contains scores of all countries that have had a PIMA. It is the source for the form
to enter dimension data and calculate institution scores, the heat map, and the spider charts for design and
effectiveness.

üü Data needed to help in scoring dimensions and The PIMA framework includes 45 dimensions, many
writing the explanatory text in the assessment of which will require separate meetings. There will
section of the PIMA report. The indications of typically be some additional meetings, including
important documents and useful data under follow-up meetings, during the second week.
each dimension in this handbook could be a A midpoint presentation or workshop to discuss
starting point for defining the needs for addi- the preliminary assessment and recommenda-
tional data for the PIMA. tions is useful. This will allow the mission team to
üü Public investment plans and programs will be verify that their preliminary assessment is based on
particularly useful to help the mission identify correct information and understanding, and that
major projects for further analysis. tentative recommendations are seen as relevant
A detailed meeting schedule will also be prepared and credible. It will allow the authorities to clarify
before the mission. The PIMA covers many topics any misconceptions and to begin thinking about
and institutions. The meetings must be planned the recommendations.
to ensure sufficient time is allocated to discussing The PIMA mission will prepare the draft report
each topic. in the field. The report will reflect the framework
described in this handbook and will be handed to
the authorities by the end of the mission.
During the Mission
The introductory meetings will provide an overview
of the PIMA framework and the plans for the assess- After the Mission
ment, as well as the initial findings from country The draft PIMA report will be reviewed by the
data in the IMF databases. The purpose is to ensure authorities. They will have the opportunity to correct
that key counterparts are fully aware of the PIMA any factual errors or misconceptions. They will also
framework and approach and that the mission be asked to provide their views on the findings and
team is familiar with the specific concerns and recommendations of the report, including the action
issues of importance to the country. The presen- plan. The authorities will be asked to provide their
tation of country-specific public investment trends comments within three weeks after the mission.
and efficiency helps put the PIMA into perspec- The draft PIMA report will also be reviewed by
tive and retain the authorities’ attention from the IMF departments. This will include review by FAD
beginning. as well as the relevant area department. One key
The topical meetings will usually occupy the purpose of FAD’s review is to ensure that the PIMA
mission team full time for at least the first week. framework is consistently applied across different
Appendix III 205

countries. The review by the area department helps structure for discussion within government, and with
ensure that the findings are based on a good under- civil society and development partners, to address
standing of the situation of the country and that PIM improvements.
recommendations support the country’s fiscal and
development priorities.
PIMA Follow-Up
The final report will reflect the comments received
The PIMA action plan will often include proposals
from the authorities and from IMF departments. The
for further technical assistance from FAD and from
target is to finalize the report within six weeks after
other institutions. This assistance will be important
the PIMA mission.
for necessary capacity building and institutional
development. The authorities are encouraged
Final PIMA Report to use the action plan to request and coordinate
The final PIMA report will be submitted to the technical assistance from the full range of develop-
country, and country authorities will be requested ment partners. IMF regional centers and in-country
to agree to publication of the report. FAD believes advisors will often be asked to contribute.
that publication will enhance the effectiveness of the Periodic assessment of progress in strengthening
PIMA assessment and the report but will only publish PIM will be useful. This will usually be a component
the PIMA with permission from the authorities. of any TA from FAD. A broader assessment could
Agreement to publish the PIMA report announces involve updating the PIMA after a few years. The
the willingness of the government to acknowledge update would usually include a PIMA self-assess-
issues uncovered in the PIMA. The report provides a ment by country authorities.
 Appendix IV
Outline of a PIMA Report
Public Investment Management Assessment (PIMA) possible—design, effectiveness, comparing design
reports are structured in several ways. Box  IV.1 with effectiveness for the country, or comparing
describes a common organization of the PIMA either design or effectiveness with comparable
report. However, there is considerable variation in country groups. The choice of spider chart should
how PIMA reports are structured in practice. This support the main message of the report.
appendix assumes that the organization in Box IV.1
is used. The recommendations must be adjusted to
Section 1. Public Investment Context
variations in the chosen structure.
This section has two major purposes. First, it provides
a macro-fiscal context within which PIM institutions
Box IV.1. Common Organization of the operate and thus highlights how macro-fiscal condi-
PIMA Mission Report tions help to shape PIM institutions. For example,
Executive Summary high debt levels in a country may limit its ability to
Section 1. Public Investment Context smooth multiyear funding for public investment,
Trends in Total Public Investment which affects the need to strengthen the medium-
Composition term fiscal framework, multiyear budgeting, and
Impact cash management institutions.
Efficiency Second, the section provides a motivation to
Section 2. Public Investment Management
change by making cross-country comparisons.
Institutions
Using comparable countries, with similar macro-
Overall Assessment
fiscal or other conditions, the relative performance
PIMA Institutional Analyses
Section 3. Cross-Cutting Issues of PIM institutions is highlighted.
Overall Assessment Certain content should be covered in this
Cross-Cross-Cutting Issues Analyses section, which is typically divided into four subsec-
Section 4. Reform Priorities and Recommendations tions. The mission has discretion in the organization
Overall Assessment of the section, while covering main elements of the
Recommendations content the following main elements of the content:
Appendix 1. Action Plan Trends in total public investment. This addresses
Appendix 2. Detailed PIMA Scores the history of public investment spending and
resulting capital stock. Standard figures are
provided by the Expenditure Policy Division, based
Executive Summary on their dataset in the Investment and Capital Stock
The executive summary should include the spider Template. Mission chiefs can be selective in what
chart, the heat map at the institution level, and figures they choose to include in the report and
a high-level table of recommendations. The how to group them, based on issues or trends to
spider chart provides a motivation for change by be highlighted or any perceived weaknesses in the
comparing the country with other countries, the data. Reference to the macroeconomic impact of
heat map explains the scoring by institution, and the public investment, available through other sources
table of recommendations puts forward actions to such as Article IV reports, is encouraged. Sources
address public investment management (PIM) weak- of funding are relevant as a measure of the sustain-
nesses. Different variations of the spider chart are ability of public investment spending (for example,
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208 PIMA HANDBOOK

government debt levels and external supplier Figures. The efficiency frontier and whisker
of capital to governments, such as international charts should be included in this section and
financial institutions or China, and the private sector). typically require explanation in the text. Missions
Association of public investment with other should be prepared to explain verbally (not
macro-fiscal variables. Chief among these are necessary in the text) that (1) the efficiency frontier
economic growth, debt, and fiscal risk (for example, figure is three dimensional; (2) the scale of public
contingent liabilities). perceptions stops at 7; (3) perceptions are provided
Certain technical issues. These include (1) defi- by the World Economic Forum—some mission
nition of capital stock—the cumulative sum of country staff contribute to the survey and may be
prior-year spending on economic infrastructure1; familiar with its methodology and weaknesses; (4)
(2) the source of the data in the expenditure policy the increase in efficiency, as shown in the whisker
dataset; (3) infusions of capital into public corpo- figure, is not based on a percentage increase in the
ration by government, which is shown as public mission country’s performance but rather is based
investment in the expenditure policy data; and (4) on moving up on a scale of 100. Special attention
explanation of data outliers. needs to be given if the comparator countries
Composition of public investment. This relates to perform significantly better than the mission
(1) the purpose of public investment (for example, country.
function, and social versus economic infrastructure) The text should analyze rather than describe the
and (2) public investment financing sources (i.e., data. The themes or issues should be identified,
central government, general government, public which should be supported by figures.
corporations, public-private partnerships, and
private sector).
Impact of public investment. This refers to
Section 2. Public Investment
the outputs and outcomes of public investment, Management Institutions
including performance measures (qualitative and An introduction to this section should be used to
quantitative). Mission chiefs may decide whether explain the questionnaire, summarize scoring, and
to focus on qualitative, quantitative, or hybrid highlight issues. It should include the following:
measures of performance. For example, some üü The purpose and structure of the section, possibly
quantitative measures may be misleading, such as including the style of text for each institution (see
writing options below);
kilometers of roads per population for a densely
üü The principal concepts and methodologies used,
populated country.
such as PIM phase, institution, and dimension
Efficiency of public investment. Thisbrings together
levels of the PIMA questionnaire (include the
capital stock and impact data to measure efficiency.
three-phase circular figure here), and scoring for
For example, outcome measures (that is, perceptions design, effectiveness, and reform priority; and
index) are related to input measures (per capita capital üü The overall scoring results, including the spider
stock) in the efficiency frontier and whisker charts. diagram and heat map. The text could summarize
Volatility and churn should also be addressed here, institutions that are particularly weak and strong,
because they directly affect the ability to translate important linkages between institutions, or
inputs into outputs and outcomes. Any distortion institutions that have received attention by the
caused by megaprojects should be noted. authorities in recent years. Connections with
themes laid out in Section 1 should be made.
The text for each institution must cover two
1 
main issues. That is, (1) the reason for scoring and
For a review of the methodology used by the IMF
Fiscal Affairs Department to calculate capital (2) practices that may be the subject of a recom-
stock, see https://infrastructuregovern.imf.org/ mendation, including material cross-cutting issues.
content/dam/PIMA/Knowledge-Hub/dataset/
WhatsNewinIMFInvestmentandCapitalStockDatabase_
The length of text for each institution should be not
May2021.pdf. more than 1–1.5 pages.
Appendix IV 209

The PIMA should use one of the following styles of issues are defined as enablers of the 15 institutions
writing for each institution. Whatever style is chosen, in Section 2. Weaknesses should be noted in the
it should be used consistently for all 15 institutions. Section 2 text, in particular if cross-cutting weakness
materially impedes higher scores for the design and
Option 1 effectiveness of specific dimensions.
If any cross-cutting issue is found to materially
Paragraph 1: addresses why the institution is
influence institution scores, it should be analyzed. It
important and introduces the three dimensions and
can be the subject of recommendations. The length
how they capture the essence of the institution.
of the analysis of each cross-cutting issue should
Paragraph 2: the topic sentence provides an
be comparable to the text for a typical institution in
overall assessment of the design of the institu-
Section 2. The text should generally adhere to the
tion, using criteria terms used in the questionnaire.
following structure.
Supporting sentences address the design of each of
Paragraph 1: why the issue is important and how
the three dimensions.
it influences PIM practices.
Paragraph 3: the topic sentence provides an
Paragraph 2: overall description of the current
overall assessment of the effectiveness of the insti-
situation in the country with regard to the issue.
tution, using criteria terms in the questionnaire.
Tables summarizing key cross-cutting elements
Supporting sentences address the effectiveness of
(laws, IT systems) related to different PIMA institu-
each of the three dimensions.
tions can be useful.
Paragraph 4: presents major issues and their
Multiple paragraphs: topic sentence identi-
importance, providing a basis for the assessment of
fies the institution(s) and how the issue affects it
reform priorities in Section 4 of the report.
(them).
Concluding paragraph: summary assessment of
Option 2 the problem and how remedies might improve the
Paragraph 1: the topic sentence provides an assess- scores of institutions.
ment of the design and effectiveness of the first
dimension, using criteria terms used in the question-
naire. Supporting sentences add details. Section 4. Reform Priorities
Paragraph 2: the topic sentence provides an and Recommendations
assessment of the design and effectiveness of the The overall assessment should provide a rationale
second dimension, using criteria terms used in the for why the recommendations were selected
questionnaire. Supporting sentences add details. from among all possible recommendations. This
Paragraph 3: the topic sentence provides an would involve tying together the seriousness
assessment of the design and effectiveness of the of the problem and the likelihood of successful
third dimension, using criteria terms used in the implementation. This section may also be used
questionnaire. Supporting sentences add details. to identify commitments the authorities have
Paragraph 4: selectively analyzes the major already made, such as a reform roadmap, and
strengths and weaknesses reflected in dimensions describe how the recommendations fit within
(not necessarily in each dimension) as they relate to those commitments. Recommendations are not
the aims of the institution, the weaknesses of which required for all institutions. The recommendations
provide the basis for reform priorities in Section 4 of must reflect a realistic assessment of the capacity
the report. in the country and give guidance on priority and
sequencing.
This section should be short and avoid unneces-
Section 3. Cross-Cutting Issues sary repetition from other sections. An alternative to
The overall assessment should be used to explain the a separate section on recommendations is to include
purpose and structure of the section. Cross-cutting these under the relevant parts of Section 3. This will
210 PIMA HANDBOOK

link the recommendations directly to specific insti-

tutions. Recommendations should follow a common Box IV.2. Format for Recommendations
format. Recommendations should be made in or 1. Issue or problem to be solved: short paragraph
generally follow the format shown below. 2. Recommended solution: short paragraph,
indicating intended change rather than actions
to be taken
Appendix 1. Action Plan 3. Actions to be taken: short paragraph(s) with
The PIMA report should include a detailed action plan bullets, and how they achieve the recom-
outlining the necessary steps and the timetable to mended solution (linked to action plan)
implement the recommendations. Table IV.1 provides 4. Responsible agencies: short list (if known)
an example of a PIMA action plan for Georgia. 5. Implementation risks: short paragraph with
bullets
Table IV.1. Georgia: Proposed Action Plan

Appendix IV
Action 2018 2019 2020 2021 Responsible Agency
Recommendation 1:  Improve national and sectoral planning
Update the public Obtain Design new framework Implement new Government
investment component of government framework in administration and
the national development approval for Conduct training in new (1) new national Ministry of Finance
strategy, including all modification framework development strategy; (MoF)
sources of financing, all to the planning (2) new government
levels of government, and framework platform;
all procurement options
Ensure that sectoral Obtain Design new framework Implement new Government
strategies distinguish government framework in sector administration and MoF
public investment; approval for Conduct training in new strategies
are comprehensive modification framework
in coverage; include to the planning
existing projects and framework
new initiatives; include
a clear resource
envelope and clear
definition of economic
efficiency objectives;
and are updated for new
investment plans
Ensure that the ministry Obtain Design new framework. Implement new MoF
action plans are aligned government framework in the basic
with the sectoral strategies approval for Conduct training in new data and directions
and are fully coordinated modification framework (BDD) and ministry
to avoid fragmentation of to the planning action plans
PIM framework

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211
Table IV.1 (continued)

212
Action 2018 2019 2020 2021 Responsible Agency
Recommendation 2:  Improve project appraisal processes
Implement the new PIM Review PIM Approve timeline of Review Review MoF and line ministries
methodology methodology on extending mandatory implementation implementation
basis of pilots and coverage of PIM
need to harmonize methodology
with public-private
partnership
framework
Ensure that the MoF will be Approve MoF order Provide workshops for MoF
responsible, in all projects, to allocate PIM line ministries
for providing central support responsibilities to
for line ministry project different units of the
appraisal and for developing MoF
and maintaining the project
appraisal methodology
Ensure that key economic Include in PIM Establish regular MoF
assumptions in donor-funded methodology communication
public investment projects are approved by the channels with line
consistent with the assumptions order of MoF ministries
used for projects not funded
by donors and by the MoF and
the Ministry of Economy and
Sustainable Development in
their economic forecasting and
risk assessments
Approve a discount rate Undertake Include new discount MoF
methodology and specific research (technical rate methodology and
discount rates, reflecting the assistance support new discount rates in

PIMA HANDBOOK
economy’s opportunity cost needed) draft amended decree
of capital, to be applied to all on PIM methodology
public investment
 Appendix IV
Action 2018 2019 2020 2021 Responsible Agency
Recommendation 5:  Strengthen multiyear budgeting
Introduce a rolling Develop methodology and Train MoF and Incorporate MoF
baseline in the simple model for ministries spending ministry preparation of
budget process to prepare their baselines for staff in the the baseline
each program methodology and projections
model into the budget
process
Strengthen the Design Use e-budget system As part of the MoF
credibility of reconciliation functionality to fill in training on the
outer-year capital tables to be ministries’ medium-term rolling baseline,
projections used in the capital projections as base discuss its role
BDD/budget for their preparation of BDD/ in strengthening
documents for budget submissions the credibility
capital spending of medium-term
projections over Include in budget instructions capital projections
the medium term that ministries should
provide reconciliations of
their medium-term capital
spending projections on a
rolling basis and explanations
of significant changes
Improve the Include in Include in the budget MoF
clarity and linkage Chapter VIII of the document additions to
between different budget document existing and new tables for
parts of the budget the agreed consistency and enable
documentation definitions linkages to be made between
of capital/ Chapters III, VI, and the capital
investment projects annex
and capital/
investment
projects

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213
Table IV.1 (continued)

214
Action 2018 2019 2020 2021 Responsible Agency
Recommendation 6:  Implement mechanisms to prioritize the completion of ongoing projects in the budget process
Facilitate and Specify in Use the e-budget system to E-budget system MoF
improve transparency BDD/budget pre-fill ministries’ existing to include realistic
for the prioritization instructions project commitments for total project costs,
of ongoing projects in that spending the coming budget year and disaggregated by
the budget process ministries medium-term period main category of
should costs
prioritize the Focus on status of ongoing
completion projects during budget
of ongoing negotiations with ministries;
projects over require them to provide clear
new projects justification for beginning
in their budget new projects alongside their
submissions ongoing project portfolio
Recommendation 7:  Develop standardized methodology for estimating maintenance needs
Develop a Approve timeline for Develop a Include a review of MoF
standardized developing the methodology methodology for planned maintenance
methodology for particular asset classes, particular asset expenditures in
for estimating on the basis of relevant classes, on the MoF’s templates
current and capital international experience basis of relevant for its review of
maintenance needs international ministry submissions
experience
Incorporate a review Maintenance Enable IT systems
of the adequacy of to link data on asset
planned maintenance conditions from
expenditures in asset registers
budget negotiations into planning and
budgeting systems

PIMA HANDBOOK
 Appendix IV
Action 2018 2019 2020 2021 Responsible Agency

Ensure future In line with the new PIM Training for MoF and MoF
maintenance procedures, ensure spending ministry staff
spending is that the documentation on preparing life-cycle
captured in the full required for the analyses project costs
life-cycle costing of the project includes
and analysis of new the preparation of full life-
projects cycle costs
Ensure maintenance Provide in the budget Ensure budget MoF
spending is documentation for an execution reports
explicitly budgeted annex on annual and include comparisons by
and reported for all medium-term allocations ministry of planned and
relevant assets and projections for actual maintenance
maintenance spending expenditures
Recommendation 8:  Operationalize the project selection procedures in the PIM Guidelines/Manual and incorporate in the budget process

Apply project Devise an Adopt a timeline Implementation of the Implementation of the MoF, new PIM
selection implementation for procedures plan plan coordinating body
procedures to all plan for the new to be covering all
public investment, procedures, projects regardless
regardless of the including overall the funding source
funding source timetable and
setting out
Formalize and specific activities
incorporate new and timing for
PIM procedures operation of the
in annual budget new procedures
calendar/process for each type of
stakeholder

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215
Table IV.1 (continued)

216
Action 2018 2019 2020 2021 Responsible Agency

Decide on key outstanding Decide on thresholds of MoF, new PIM

PIM procedures project to determine extent coordinating body
of project appraisal to
be undertaken;
criteria for independent
review of appraisals by MoF;
and criteria (checklist) for
government to approve
projects for inclusion in the
list of approved projects

Enforce gatekeeping role Work with the Prevent projects MoF, PIM
by MoF PIM coordinating from bypassing the coordinating body
body to ensure the procedures and being
effectiveness of the parachuted into the
gatekeeping role selection process
Set out a clear Incorporate in the Implement the MoF, new PIM
documentation trail for new procedures documentation/ coordinating body
selection decisions at the documented recording procedures
two key stages: for entry steps which will
into the approved list of be required for
projects (pipeline); and recording selection
for final inclusion in the decisions and
budget (accountability) how they will be
documented

Recommendation 9:  Strengthens procurement practices

Introduce live machine- Improve current SPA

PIMA HANDBOOK
readable data systems to introduce
live machine- readable
data
 Appendix IV
Action 2018 2019 2020 2021 Responsible Agency

Develop an application Develop the application Test and improve SPA

programming interface the application
for “receiving from/
sending data to”
the SPA’s new Open
Contracting Data
Standard portal to allow
and facilitate different
types of users to access
and analyze procurement
data
Recommendation 10:  Strengthen project implementation monitoring

Issue guidelines for Design monitoring Pilot in two ministries Revise design MoF
preparation of capital and reporting system. with significant capital on basis of pilot, Ministry of Regional
project monitoring Align with standard project implementation if needed, and Development and
reports project profile and responsibility, for example, expand to other Infrastructure
implementation plan. the Ministry of Regional implementing
Align with new FMC Development and agencies
system Infrastructure
Recommendation 11:  Strengthen project management

Issues guidelines Design project Pilot in same ministries Expand to other MoF
for preparation of project management data and as project monitoring/ implementing Ministry of Regional
implementation plans forms. Standardize to reporting system agencies in Development and
enable consolidation coordination with Infrastructure
and reporting; more new monitoring/
detail can be added for reporting system
specific project/agency
requirements. Align with
monitoring system

217
 Appendix V
Glossary
Term Definition
Assets Any economic resource controlled by an entity as a result of past transactions or events
and from which the economic owner may obtain future economic benefits over a period
of time. Assets may be financial or nonfinancial, and the latter include infrastructure assets
(see definition of infrastructure below).
Budget documents The documents that are published with the executive’s annual budget submission to the
legislature or that are related to the process of preparing the budget. In addition to the
draft appropriation bill, these documents could include a fiscal strategy statement, a
medium-term budget framework, a fiscal risk statement, and a report on the execution of
the budget for the previous year.
Budgetary central The ministries, departments, agencies, and other entities belonging to the central
government government whose spending, revenues, and borrowing activities are included in the
central government’s annual budget.
Cabinet For the purpose of the field guide, this term (sometimes called the Council of Ministers)
is used to represent the highest executive decision-making body in a country, whose
decisions are applicable, and can be enforced, across the executive. The Cabinet (or
Council of Ministers as it is sometimes called) is usually chaired by a prime minister or a
country’s president. The extent of the Cabinet’s mandate and powers varies widely from
country to country.
Capital budget As defined variously in different countries. The approved capital budget includes
appropriations that authorize spending on infrastructure assets and equipment for
specified purposes and up to a specified amount. The capital budget is assumed to be
annual, unless otherwise specified.
Capital projects Projects funded through the capital budget. Such projects normally comprise investment
in infrastructure (see definition below) and equipment.
Capital spending Spending to acquire a physical asset or to extend the usable life of a physical asset.
Capital stock Accumulated capital spending in a country. Since in many countries there are no direct
estimates of the capital stock, it is usually measured in PIMA reports as the cumulative sum
of public investment over time, adjusted for depreciation.
Central government All government entities that are included in the budgetary central government, plus
any units funded by extrabudgetary funds and nonmarket nonprofit institutions that are
controlled by the central government. Depending on legal arrangements, social security
funds are often considered part of central government.
Current budget Most countries distinguish between capital and current (or recurrent) budgets. The latter
includes spending on wages and salaries, and goods and services. Sometimes referred to
as the “operating budget.”
Development Some countries have a current (or recurrent) and development budget, rather than
budget a current and a capital budget. In such cases, the development budget may include
elements of spending that are both recurrent and capital in nature. For the purpose of
the field guide, use of the term “capital budget” in a country with a development budget
should be interpreted as meaning all spending in the development budget that is capital
in nature.

219
220 PIMA HANDBOOK

Term Definition
Dimension The lowest level in the PIMA questionnaire. There are 45 dimensions in the PIMA
questionnaire.
External financing Financing provided by international financial institutions or bilateral development partners,
by means of grants and concessional or non-concessional loans. Sometimes it includes
project-related loans provided, in the context of a bilateral agreement, by a foreign
commercial bank to the government or a public corporation—often under the assumption
that the project will generate enough funds to repay the loan. This term does not include
funds supplied by externally-based investors in domestic securities or by the issuance of
securities in foreign capital markets.
Financing source Term used in the budget to describe a type of financing; it is not an accounting or banking
term. The term is used to describe types of financing with broadly similar conditions, such
as external financing or public-private partnerships. The term “budget funds” is commonly
used to refer to the pool of funds from tax, non-tax, and domestic borrowing over which
the government has full discretion over its use. “Financing source” should not be confused
with “financing,” or “below the line” transactions, used in the GFSM 2014 framework.
Fiscal transparency Fiscal transparency refers to the clarity, reliability, frequency, timeliness, and relevance of
public fiscal reporting and the openness of such information.
General Comprises all entities of the central, state, regional, provincial, municipal, or local
government government; all extrabudgetary entities, including social security funds, at each level of
government; and all nonmarket nonprofit institutions that are controlled and financed
mainly by government units. It does not include public corporations, even when these
companies are owned and controlled by the government
Independent Used in the PIMA questionnaire to describe external review, regulator, agency, expert,
body, and entity. Generally, it describes a party who has no direction, connection to, or
involvement in a decision-making process (for example, the selection of infrastructure
projects) or is hired to provide impartial advice on that process, and is thus more likely to
objectively apply a standard set of rules or criteria.
Infrastructure Nonfinancial fixed assets, including economic and social infrastructure. Social
infrastructure supports the provision of public services such as schools, hospitals,
and public housing. Economic infrastructure supports economic activity with
telecommunication networks, transportation assets ((for example, roads, railways, canals,
ports, and airports), water and wastewater pipes and treatment plants, and electricity
production and transmission (see https://www.imf.org/external/np/fad/publicinvestment/).
Medium-term A period usually covering the current year plus 2–3 additional years which may be applied
both to budgets and planning documents.
Ministry of Finance For this field guide, the MoF is assumed to act as the central fiscal authority and will usually
(MoF) include the central budget office. In many countries, a separate ministry or agency acts as
the principal body responsible for national development planning.
Ongoing project A project that has received at least one appropriation for its construction, regardless of
expenditures. Appropriations for project preparation (including appraisals and feasibility
studies), do not contribute to the definition of a project as ongoing, because it is not yet
decided that the project will go forward.
Operating budget See current budget.
Outlay Cash outflows relating to expenditures, transfers, and subsidies.
PIMA framework The range of issues addressed in the PIMA report, and the PIMA questionnaire.
PIMA questionnaire Comprising 15 institutions and 45 dimensions. The basis for the scoring portion of the
PIMA report. Part of the PIMA framework.
Appendix V 221

Term Definition
Public corporation A legal entity that is owned or controlled by the government and that produces goods or
(PC) services for sale in the market at economically significant prices.
Public-private Long-term contracts between a public and a private entity, whereby the private entity
partnership (PPP) acquires or builds an asset or set of assets, operates it for a period, and then usually hands
the asset over to the public entity. PIMAs treat as PPP any long-term concession for the
construction, improvement/extension, or operation of public infrastructure. (see GFSM
2014).
Published Information that is made readily accessible by the general public in a proactive and
information, or inexpensive way. Modes of communication that constitute publication include printed
publications documents prepared by the government, open-access government websites, social
media, radio, television, newspapers and magazines.
Template: An Excel spreadsheet designed and maintained by the FAD Expenditure Policy Division. It
Investment and is the source of data and figures for use in Section 1 of the PIMA report. It is the source of
Capital Stock information for comparator countries, and for the efficiency frontier figure.
Template: PIMA An Excel spreadsheet designed and maintained by the IMF’s Fiscal Affairs Department
Scoring Public Financial Management divisions. Contains scores of all countries that have had
a PIMA. It is the source of the form to enter data on the various dimensions of the PIMA
framework and calculate the respective scores, the heat map, and the design and
effectiveness spider charts.
Total project Total costs of designing, constructing, operating, and maintaining an asset over its
lifecycle costs lifetime. In some OECD countries, the term is used as synonymous with total project costs
(see definition below).
Total project costs Includes (1) the cost of feasibility studies and other preparatory work on the design of a project
that may have been funded by budget appropriations that are separate from spending on the
construction of the project itself; and (2) the sum of all the expenditures incurred on a project
from the initiation and design phases in previous years, planned spending in the current year,
and estimated spending required to complete the construction in future years. Total project
costs usually exclude the cost of operating and maintaining the asset created by the project,
but in some OECD countries it is used as synonymous with total project lifecycle costs (see
definition above).
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Index

Access to information, 126 for capital projects, 92–95

Accounting regulations, 166 with CL information, 56
Action plan, PIMA, 210 defining, 55
Advanced economies (AEs) effectiveness of, 94–95
capital maintenance costs in, 15 in institutional design, 93–94, 96–97
infrastructure governance in, 13 medium-term, 83
Aggregate investment plans, 42 national, 50
Allocation recurrent budgets in, 96–97
effectiveness in, 14–15 in Timor-Leste, 95
in institutional design, 14f Budget preparation
in public investment, 4 defining, 35
reallocation in project implementation, 147–49 effectiveness, 97
recommendations on, 16f institutional design, 96–97
staff skills for, 173 MTFF for, 35–37
Alternative infrastructure financing, 70–79 Budget system laws, 36
Analytical reports, 131, 132 Budget year, 82
Annual reports, 46 Bulgaria
Armenia fiscal rules in, 33, 34
budget documents in, 92 procurement in, 127–28
cash flow forecasts in, 139 Public Finance Act, 34
routine maintenance in, 113 public works contracts in, 130t
Assessment
basis of, 11–12, 22 Capital budgets
of effectiveness, 21–23 in budget documents, 96–97
of externally financed projects, 23–24 churn, 7
financing sources and, 24 in Philippines, 104
indicative scoring thresholds in, 24–26 volatility, 7
of institutional design, 21–23 Capital maintenance costs, in AEs, 15
legal frameworks for, 22 Capital projects
time series of, 23 budget documents for, 92–95
Asset registers cash flow forecasts for, 137–39
decentralized, 164 CLs from, 55–58
effectiveness of, 163–64 construction costs, 87–89
institutional design of, 163 ex post audits of, 158–61
regulatory framework for, 163 external financing of, 142–43
updating, 162–65 financial analysis of, 59–63
Asset-specific assumption, 168 monitoring of, 144–47
transparency of, 126–30
Bangladesh, procurement in, 133, 133t Capital spending, 82
Binding, 85 coordination of, 48–50
BIP. See Integrated Bank Project current spending distinguished from, 35
Botswana, national planning in, 40, 41 defining, 23
Bottlenecks, ix effectiveness, 49, 86–87, 92
Brazil, PCs in, 79 in Estonia, 37t
Broad estimates, defining, 42 forecasting, 82–84
Budget approval, 153 institutional design, 48–49, 82–83, 85–86, 91
Budget balance rules, 31, 32 in Jordan, 84
Budget circular, 50 in Kiribati, 89
Budget classification, 112 multiyear ceilings on, 85–87
Budget comprehensiveness, 90–97 in public investment trends, 7
Budget documents, 36, 43, 91, 99, 112 significant, 90
in Armenia, 92 of SNGs, 48–50
capital budgets in, 96–97 undertaking of, 90–92

227
228 PIMA HANDBOOK

Capital spending plans, defining, 48 review process in procurement, 134–36

Capital stock, 7 Comprehensive pipeline, 121
calculation of, 168 Consolidated funds, 95
depreciation rates for, 169t Consolidated report, 76, 77
in Georgia, 8 Contestable markets, in economic infrastructure,
Capital transfer 70–73
definitions of, 52 Contingency reserves, in Norway, 69
effectiveness of, 53–54 Contingent liabilities (CL)
institutional design for, 52–53 budget documents with information on, 56
notify about expected transfers, 52 from capital projects, 55–58
rules-based systems for, to SNGs, 52–54 defining, 55
to SNGs in Mali, 54 effectiveness and, 56
Cash flow forecasts, 137 institutional design and, 55
in Armenia, 139 reporting framework, 56
for capital projects, 137–39 samples of reports on, 56
defining, 138 in Slovak Republic, 57
effectiveness of, 138–39 from SNGs, PCs, and PPPs, 55–57
institutional design and, 138 Coordination, of capital spending, 48–50
Cash rationing, 140 Cost benefit analysis (CBA), 65
in Moldova, 141 discount rates for, 66
Cash release, 140 Country corruption index, 7
CBA. See Cost benefit analysis COVID-19
Central government, defining, 55 fiscal rules undermined by, 33
Central ministry, 114 green recovery from, 3
Central review Current spending, capital spending distinguished
effectiveness of, 116 from, 35
institutional design and, 115
in Ireland, 117 Data, availability of, 23
of major projects, 114–17 Data sources, availability of, 23
Central support Debt rule, 32
defining, 63 in Ireland, 30
for project appraisal, 63–66 Debt sustainability, 29
in Slovak Republic, 65 defining, 28
Change targets and, 28
generic theory of, 21, 21f Defense assets, 7n3
illustrative theory of, 22f Deliverables, 149
institutional design and theories of, 22 Depreciation
Chile, 50, 175 of capital stock, 169t
integrated projects database in, 177 of fixed assets, 167–69
project pipeline in, 123 total value of, 169
SNG investments in, 51 Development budgets, 23
Civil law Development partners (DPs), 23, 155
defining, 171n1 Dimensions, PIMA, ix, 25t, 26
PIM and, 171 Dimension scores, 26
CL. See Contingent liabilities Disclosure, 91
Colombia, project appraisal in, 61 Discount rates
Commercial banks, 142 for CBA, 66
Commitment ceiling, 138 in selected countries, 66t
Common law Documents, national budget, 50
defining, 171n1 Domestic monopoly, 70
PIM and, 171 DPs. See Development partners
Comparable rules, defining, 31
Competition EBEs. See Extrabudgetary entities
in economic infrastructure, 70–73 Economic growth, public infrastructure
in Ireland, 73 and, 3
Complaints Economic infrastructure
decision time on, 135 competition in, 70–73
number of, in court, 135 contestable markets in, 70–73
procurement, mechanism in Estonia, 136 Economic regulators, 70, 72
Index 229

Effectiveness routine maintenance in, 108

in allocation, 14–15 State Budget Strategy, 37
assessment of, 21–23 European Union (EU), 32
of asset registers, 163–64 Executive summary, 207
of budget documents, 94–95 Expenditure rules, 32
budget preparation, 97 Ex post audits
capital spending, 49, 86–87, 92 of capital projects, 158–61
of capital transfer, 53–54 effectiveness of, 159
of cash flow forecasts, 138–39 institutional design and, 158–59
of central review, 116 in Mongolia, 160
CL and, 56 Ex post review, 46, 149
of ex post audits, 159 annual number of, 150
of external financing, 143 in Malaysia, 151–52
of fiscal rules, 32–33 project implementation adjustment and, 149–51
in implementation, 14–15 External audits, 158
institutional design and, 5, 14–15, 14f, 21–23, External financing
83–84 of capital projects, 142–43
major improvements and, 112–13 effectiveness of, 143
major projects and, 88–89 institutional design and, 142
of MTFF, 36–37 in Mauritius, 143
of national planning, 40 Externally financed projects
of nonfinancial assets, 166 assessment of, 23–24
of ongoing projects, 102–3 PIMA scores of, 25t
for output and outcome targets, 45 public investment, 24
of PCs, 78 Extrabudgetary entities (EBEs), 90, 91–92
in planning, 14–15
PPPs and, 75 Financial Affairs Department (FAD), 203–5
of procurement, 129–30, 132, 135 Financial analysis, 59
of project adjustments, 157 of capital projects, 59–63
in project appraisal, 64–65 institutional design and, 59–60
of project implementation, 146, 148–49, 150 of major projects, 59–63
project selection and, 119, 122 Financial performance, of PCs, 76–79
in public investment costing, 43 Financing sources, 93
routine maintenance and, 112–13 Fiscal Affairs Department, IMF, 203
scores, 15f Fiscal policy
of sectoral planning, 40 fiscal rules guided by, 31–35
of standard methodology, 106–7, 110 statements, 32, 36
of targets, 29–30 strategy reports, 32
of total project outlays, 99–100 Fiscal responsibility law, 32
virement and, 101–2 Fiscal rules
Efficiency frontiers adherence to, 34f
defining, 11–12 in Bulgaria, 33, 34
Jordan, 11f for central government, 31
Efficiency gaps, Jordan, 11f comparable, 31
Electricity distribution, in Ireland, 73t correction mechanisms for, 32
11th Malaysia Plan, outcome and output targets COVID-19 undermining, 33
in, 47f effectiveness of, 32–33
Emerging market economies (EMEs) escape clauses for, 33
infrastructure governance in, 13 fiscal policy guiding, 31–35
project appraisal in, 15 with fixed targets, 31n1
Enforcement, 134 institutional design of, 31–32
Escape clauses, for fiscal rules, 33 in Ireland, 30
Estonia, 107 by legal basis, 32t
capital spending in, 37t permanent, 31
fixed assets in, 166–67 Fixed assets
MTFF in, 37 depreciation of, 167–69
nonfinancial assets in, 167t in Estonia, 166–67
PIM in, 175 in Georgia, 169
procurement complaints mechanism in, 136 in Indonesia, 164–65
230 PIMA HANDBOOK

Forecasting, capital spending, 82–84 Institutional design

See also Cash flow forecasts allocation in, 14f
Formal discussion, 48 assessment of, 21–23
Found in the budget, 39 of asset registers, 163
Found through the budget, 39 budget documents in, 93–94, 96–97
Funding availability, 137–52 budget preparation, 96–97
capital spending, 48–49, 82–83, 85–86, 91
Generic theory of change, 21, 21f for capital transfer, 52–53
Georgia cash flow forecasts and, 138
capital stock in, 8 central review and, 115
fixed assets in, 169 CL and, 55
PIMA, 7–8 effectiveness and, 5, 14–15, 14f, 21–23, 83–84
public investment in, 8, 9 ex post audits and, 158–59
GFSM, 28 external financing and, 142
Governance engagement, IMF on, 22 financial analysis and, 59–60
Government accounts, legal basis for, 166 of fiscal rules, 31–32
Government assets, 23n1 implementation in, 14f
Government financial statements, 166 major improvements and, 111–12
Green recovery, from COVID-19, 3 major projects and, 87–88
for MTFF, 35
High scores, defining, 22 national planning, 39
Honduras, monitoring in, 146–47 nonfinancial assets, 165–66
ongoing projects and, 102
IFIs. See International financial institution for output and outcome targets, 45
Illustrative theory, of change, 22f PCs and, 77
IMF. See Fiscal Affairs Department; International Mon- for PIM, 172
etary Fund planning in, 14f
Implementation PPPs and, 74–75
effectiveness in, 14–15 procurement and, 127–28, 131–32, 134
in institutional design, 14f project adjustments and, 156
of public investment, 4 in project appraisal, 63–64
recommendations on, 16f in project implementation, 145, 148, 149–50
staff skills for, 173 project management, 153–54
See also Project implementation project outlays, 140
Income groups, PIM effectiveness by, 13f project selection and, 118, 121–22
Independent regulators, 70 of public investment costing, 42
Indicative scoring thresholds risk assessment and, 67
in assessment, 24–26 routine maintenance and, 111–12
legal requirements for, 25–26 sectoral planning, 39
Indonesia for standard methodology, 105–6, 109
Fixed assets in, 164–65 targets and, 28–29
SNG investments in, 51 theories of change and, 22
Information in total project outlays, 98–99
access to, 126 virement and, 101
procurement, 126 Institutional scores, 15f
Infrastructure access, in Jordan, 10 Integrated Bank Project (BIP), 177
Infrastructure governance, 3 International financial institution (IFIs), 23–24, 155
in AEs, 13 International Monetary Fund (IMF)
defining, 3n2 Annex II, 11n4
in EMEs, 13 Article IV, 29
examples of, 17 database updates, 8–9
institutional strength of, 13–15 Financial Affairs Department, 203–5
in Ireland, 17 on governance engagement, 22
key publications on, 4t, 211t–217t PIMA tables maintained by, 204
in LIDCs, 13 Investment and Capital Stock Template, 204, 207
reforms, 17 Investment plans
Infrastructure quality, in Jordan, 10 aggregate, 42
Input, 114 defining, 42
Index 231

sectoral, 42–43 defining, 24, 42

strategic, 44 effectiveness and, 88–89
Investment stock, 7 financial analysis of, 59–63
Investment strategies, 42 institutional design and, 87–88
Ireland procurement for, 126–30
central review in, 117 project adjustments applied to, 156–58
competition in, 73 project implementation and monitoring of, 144–47
debt rule in, 30 total construction costs of, 87–89
electricity distribution in, 73t Malaysia, 46
Fiscal rules in, 30 ex post review in, 151–52
Infrastructure governance in, 17 monitoring in, 151–52
Strategic investment planning in, 44 national planning in, 47
Irish Investment Projects and Program Tracker, 176 physical projects behind schedule in, 151f
Irish National Development Plan, 43 Mali, 14
IT systems, 4–5 capital transfer to SNGs in, 54
performance data, 176 multiyear budgeting in, 85
specifications, 176 Mauritius, external financing in, 143
Measurable targets
Jordan defining, 45
capital spending in, 84 institutional design for outputs and outcomes, 45
efficiency frontier, 11f in sectoral planning, 45–46
efficiency gaps, 11f Medium-term budget documents, 83
infrastructure access in, 10 Medium-term expenditure framework (MTEF), 88
infrastructure quality in, 10 Medium-term fiscal framework (MTFF), 28, 85
virement in, 102 for budget preparation, 35–37
defining, 35
Kenya documents, 36
PIMA in, 17 effectiveness of, 36–37
public investment in, 17 in Estonia, 37
Kenyatta, Uhuru, 17 institutional design for, 35
Kiribati, capital spending in, 89 Mexico, project selection in, 119–20
Korea, Project adjustments in, 158 Ministry of Finance (MoF), 46, 115, 137
Moldova, cash rationing in, 141
Legislative authorization, 91 Mongolia
Liabilities. See Contingent liabilities ex post audits in, 160
LIDCs. See Low-income developing countries PIMA in, 17
Limits, defining, 28 public investment in, 17, 160t, 161t
Low-income developing countries (LIDCs) Monitoring
challenges faced by, 14 of capital projects, 144–47
infrastructure governance in, 13 in Honduras, 146–47
PIM in, 16n1 of major projects during project implementation,
project appraisal in, 15 144–47
in Malaysia, 151–52
Maastricht limits, 30 procurement, 131–33
Macro-fiscal variables, 208 public assets, 15
Main government bank account structure, 142–43 S-curve project, 145
Maintenance. See Major improvements; Routine main- Monopoly, domestic, 70
tenance MTEF. See Medium-term expenditure framework
Major additional components, 31 MTFF. See Medium-term fiscal framework
Major economic infrastructure markets, 70 Multiyear budgeting, 82–89
Major improvements in Mali, 85
effectiveness and, 112–13 OECD, 100
identification of expenditures in budget, 111–13 Multiyear ceilings, on capital spending, 85–87
institutional design and, 111–12 Multiyear commitment, 98
standard methodology for, 109–11
Major projects, 22, 42 National budget documents, 50
central review of, 114–17 National Development Plan, Botswana (NDP), 41
costs of, 24, 43 allocations, 41t
232 PIMA HANDBOOK

National Development Plan 2018-2027, Ireland, PIUs. See Project implementation units
17, 44t Plans and planning, 43
National planning aggregate investment, 42
in Botswana, 40, 41 capital spending, 48
consistency of, 40 defining, 39
defining, 38 effectiveness in, 14–15
documents, 40, 43, 46 in institutional design, 14f
effectiveness of, 40 investment, 42–43
institutional design, 39 phases of, 38
in Malaysia, 47 project implementation, 153, 155
for public investment, 38–42 public investment, 4, 43
public investment costing of, 42–43 recommendations on, 16f
strategy, 39 sectoral investment, 42–43
NDP. See National Development Plan, Botswana staff skills for, 173
New projects, defining, 35 strategic investment, 44
Nonfinancial assets See also National planning; Sectoral planning
defining, 7n2 Potential risks, 67
effectiveness of, 166 PPPs. See Public-private partnerships
in Estonia, 167t Preparation, 138
institutional design, 165–66 Present in full, defining, 55
value recording, 165–67 Procedural rules, 31
Nonfinancial projects, 38 Procurement
Norway in Bangladesh, 133, 133t
contingency reserves in, 69 in Bulgaria, 127–28
project risks in, 69 complaints mechanism in Estonia, 136
Not-for-profit institutions, 28–29 complaints review process, 134–36
Numerical rules, 31 database, 131
effectiveness of, 129–30, 132, 135
OECD. See Organisation for Economic Co-Operation information, 126
and Development institutional design and, 127–28, 131–32, 134
Ongoing projects for major projects, 126–30
completion of, 102 monitoring, 131–33
defining, 35 phases of, 131
effectiveness of, 102–3 transparency of, 126–30
institutional design and, 102 World Bank on, 129
Operating statements, 167 Project adjustments
Organisation for Economic Co-Operation and Devel- effectiveness of, 157
opment (OECD), multiyear budgeting of, 100 institutional design and, 156
Outcomes, 10–12 in Korea, 158
defining, 45 of major projects, 156–58
in 11th Malaysia Plan, 47f Project appraisal
institutional design in targets for, 45 central support for, 63–66
in sectoral planning, 45–46 in Colombia, 61
Outputs, 10–12 effectiveness in, 64–65
defining, 45 in EMEs, 15
in 11th Malaysia Plan, 47f institutional design in, 63–64
institutional design in targets for, 45 key elements of, 59
in sectoral planning, 45–46 in LIDCs, 15
Overall financial constraints, defining, 42 methodologies, 58
phases, 58f
PCs. See Public corporations risks in, 67–69
PDCF. See Project Delivery Capability Framework in Slovak Republic, 65
Permanent fiscal rule, defining, 31 standard methodology of, 63–66
PFM. See Public financial management institutions in Timor-Leste, 62
Philippines, capital budgeting in, 104 Project Delivery Capability Framework (PDCF), 174
Physical progress, 144 Project implementation
PIM. See Public investment management effectiveness of, 146, 148–49, 150
PIMA. See Public Investment Management Assessment ex post review and adjustment of, 149–51
PIP. See Public investment programs institutional design in, 145, 148, 149–50
Index 233

major project monitoring during, 144–47 stages of, 4–5

plan, 153, 155 trends, ix, 7–11
reallocation in, 147–49 Public investment costing
regulatory framework, 154 effectiveness in, 43
Project implementation units (PIUs), 173 institutional design of, 42
Projections, 82 of national planning, 42–43
Project management of sectoral planning, 42–43
arrangements, 153–55 Public investment management (PIM), 3–4
institutional design, 153–54 bottlenecks in, ix
Project outlays in civil law countries, 171
cash released for, 140–41 in common law countries, 171
institutional design, 140 effectiveness of, by income group, 13f
Project pipeline in Estonia, 175
in Chile, 123 frameworks, 171
project selection and, 121–23 institutional design for, 172
Project review legal and regulatory framework, 171–72
documents, 115, 118 in LIDCs, 16n1
guidelines, 115 strengthening, 5
Project selection, 15, 114–23 Public Investment Management Assessment (PIMA), 3–4
effectiveness and, 119, 122 action plan, 210
institutional design and, 118, 121–22 capacity of, 173–74
in Mexico, 119–20 conducting of, 203–5
pipeline, 121–23 cross-cutting issues, 209
regulations, 115, 118 data requirements for, 203–4
required process for, 118–20 defining, ix
Public assets, monitoring, 15 dimensions, ix, 25t, 26
Public corporations (PCs), 15, 26, 39, 91 establishment of, 5–6
in Brazil, 79 evaluation by, 4
contingent liabilities from, 55–57 externally financed project scores, 25t
effectiveness of, 78 final report, 205
financial performance of, 76–79 follow-up, 205
institutional design and, 77 institutions, 208–9
Public Expenditure and Financial Accountability international recognition of, 6
Framework, 6 Investment and Capital Stock Template, 204, 207
Public Finance Act, Bulgaria, 34 in Kenya, 17
Public financial management institutions (PFM), 13 legal framework, 171–72
Public infrastructure mid-mission, 204
challenges in creation of, 3 in Mongolia, 17
deterioration of, 3 overview of, 5f
economic growth and, 3 post-mission, 204–5
in South Africa, 110 preparation for, 203–4
Public investment public investment context, 207
allocation in, 4 quantitative thresholds, 159n1
capital spending trends in, 7 questionnaire, 22
composition of, 9f, 208 reform priorities, 209–10
database, 7 report outline, 207–10
efficiency, ix, 10–12, 208 requests, 203
external financing in, 24 role of, ix
by function, 9f scope of, 6
in Georgia, 8, 9 Scoring Template, 204
impact of, 208 tables maintained by IMF, 204
implementation of, 4 use of, 15–16
in Kenya, 17 See also Assessment
losses and waste in, 3 Public investment programs (PIP), 88, 99
in Mongolia, 17, 160t, 161t Public-private partnerships (PPPs), 7, 15, 91, 126
national planning for, 38–42 contingent liabilities from, 55–57
planning, 4 effectiveness and, 75
by sector, 9f institutional design and, 74–75
sectoral planning for, 38–42 legal regulatory framework for, 74–75
234 PIMA HANDBOOK

Public works contracts, in Bulgaria, 130t Standard methodology

Published alongside, 48 defining, 63
effectiveness of, 106–7, 110
Quantitative thresholds, 159n1 institutional design for, 105–6, 109
Questionnaire, PIMA, 22 for major improvements, 109–11
of project appraisal, 63–66
Reallocation, in project implementation, 147–49 for routine maintenance, 105–8
Recurrent budgets, in budget documents, 96–97 State-owned enterprise (SOE), 76, 77, 91
Required process, for project selection, 118–20 Statistical estimates, 168
Risk assessment Strategic investment planning, in Ireland, 44
defining, 67 Strategy
institutional design and, 67 defining, 39
Risks investment, 42
common, 67t national and sectoral planning, 39
mitigation of, 67 Subject to analysis, 59
in Norway, 69 Subnational governments (SNGs), 28–29, 32
potential, 67 capital spending of, 48–50
in project appraisal, 67–69 capital transfer to, in Mali, 54
Routine maintenance contingent liabilities from, 55–57
in Armenia, 113 funding arrangements for projects involving, 49t
effectiveness and, 112–13 investments in Chile, 51
in Estonia, 108 investments in Indonesia, 51
identification of expenditures in budget, 111–13 legislation and regulations regarding transfers
institutional design and, 111–12 to, 53
of roads, 107t rules-based systems for capital transfers to, 52–54
in South Africa, 110t Systematic, 149
standard methodology for, 105–8
Rules-based systems Targets, 29–30
for capital transfers to SNGs, 52–54 debt sustainability and, 28
definitions of, 52 in 11th Malaysia Plan, 47f
fiscal rules with fixed, 31n1
Scoring Template, PIMA, 204 institutional design and, 28
Scrutinization, 114 measurable, 45–46
S-curve project monitoring, 145 in sectoral planning, 45–46
Sectoral investment plans, 42 Tender, 126, 134
documents, 43 Timor-Leste
Sectoral planning budget documents in, 95
consistency of, 40 project appraisal in, 62
defining, 38 Total project outlays
documents, 40, 46 effectiveness of, 99–100
effectiveness of, 40 institutional design in, 98–99
institutional design, 39 Training sessions, 65
measurable targets in, 45–46 Transparency
outcomes in, 45–46 of capital projects, 126–30
outputs in, 45–46 of procurement, 126–30
for public investment, 38–42 Transparency International, 7
public investment costing of, 42–43
strategy, 39 Uncertainty reserves, 69
Senior responsible officer, 153 United Kingdom, Project Delivery Capability
Slovak Republic Framework, 174
central support in, 65
CL in, 57 Virement, 101
project appraisal in, 65 effectiveness and, 101–2
SNGs. See Subnational governments institutional design and, 101
Social security funds, 28–29 in Jordan, 102
SOE. See State-owned enterprise
South Africa Well established, 70
public infrastructure in, 110 World Bank, on procurement, 129
routine maintenance in, 110t World Economic Forum, 208
The Public Investment Management Assessment (PIMA) Handbook gives a concise overview of
the framework used to identify key bottlenecks in public investment management and develop an
action plan for reform.

This handbook is aimed at all stakeholders who are involved in PIMA or have a practical interest
in public investment management. The PIMA is a comprehensive and standardized framework to
assess public investment management for countries at all levels of economic development. PIMAs
evaluate 15 institutions, or practices, involved in the three key stages of the public investment
cycle: planning, allocation and implementation; it also assesses three cross-cutting institutions:
the legal framework, IT systems, and staff capacity. The PIMA assesses both institutional design
(“what is on paper”) and effectiveness (“what is in practice”).

This handbook provides a detailed practitioner’s guide to applying the PIMA framework, including
by describing the key issues and challenges identified in PIMAs, providing ample examples
from country practices, as well as discussing the main recommendations to improve public
investment management.

PIMA Handbook
1st Edition