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Designing and Implementing Public Investment Plans
Workshop on Budget Formulation and Public Investment Management
Accra, 1-3 June, 2015
Content
Part 1: General Concepts and PIP
rationales
Part 2: The PIP Process in Ghana
revisited
2
3
1. General Concepts
and PIP Rationales
Definition
4
• A Development Policy is a policy framework that refers to activities that
aim to promote sustainable development through the management of
human and natural resources, the development of the economy, and the
promotion of public goods. Public investment is one of the instrument for
implementing Development Policies. Other instrument include structural
reforms and policy reforms.
• Public investment refers to government spending on public
infrastructure that is categorized into two types: i) economic infrastructure
such as airports, roads, railways, ports, water and sewage, power, gas,
and telecommunication; and ii) social infrastructure such as schools and
hospitals. Both economic and social infrastructure become public physical
assets once they are completed.
• A Public Investment Plan (PIP) is a comprehensive framework based
on the fiscal capacity of a country (available fiscal space) to plan
systematically its public investment to achieve the objectives of its
development strategy.
What is Public Investment Management?
• Public Investment Management involves the setting out
of a legal and regulatory framework to establish an
institutional arrangements/settings and guide formalized
procedures using computerized software/database for
efficient planning and delivery (including need
assessment, formulation, costing, appraisal, selection,
budgeting, execution, monitoring and reporting) of Public
Investment.
5
Common Issues with Development
Policies
• Issues on policy ownership and lack of consultation with the
population and sector ministries;
• Lack of proper costing;
• Financing constrains not properly assessed;
• Ambiguities in institutional setting and functional and
procedural arrangement;
• Lack of coordination among planning and implementing
agencies,
• Lack effective tools for rolling out Development Policies in
terms of planning, appraisal and monitoring; where PIP exist,
Development Policies challenges hinder their effective
implementation)
PIP in Ghana in the 80s and 90s
• PIP not realistic and over ambitious;
• Project costing not comprehensive;
• Continuous addition of new projects, irrespective of the
lack of sufficient funding for on-going projects resulting in
extra pressure on budget and accumulation of public
contract arrears;
• No ICT tool for investment planning and realistic costing;
• No computer database to monitor PIP implementation,
and paper-based reporting
• Funding limited to GoG and DP’s support, no Public-
Private partnership. 7
Practical use of Public Investment Plans
The PIP is a strategic investment planning tool
consisting of:
a) The systematic assembling of medium term (3
years) public investment projects, drawn from
the national and sector development policies
and strategies; and
b) Sequenced implementation plans to ensure
efficient delivery of public investment in order to
harness sectorial synergies for accelerating
economic growth and social development.
8
PIM Requirements (1)
• PIM should be supported by an appropriate legal and
regulatory regimes (fiscal planning reforms, budget
reforms, accounting reforms, etc.);
• An institutional arrangement supported by the regulatory
regime must be established with clear functional and
operational roles and responsibilities (Divisions in MOF,
NDPC, CAGD, core counterparts in MDAs, Cabinet,
Parliament, PPA, etc.);
• Clear processes and procedures must be established
guided by realistic delivery timelines, milestones, and
performance indicators.
9
PIM Requirements (2)
• Well defined inputs and outputs matrix for institutions /
agencies;
• Clear expected outcomes and results that can be
verified;
• An information system capable of delivering timely
information through the interface of all relevant auxiliary
systems (procurement, inventory, asset safeguarding,
project management tools, etc.).
10
PIP Objectives (1)
• To establish a framework for investment planning and a
mechanism to strengthen the project cycle (preparation,
implementation, monitoring & evaluation, and reporting);
• To present an organized and transparent public
investment programme detailing Government’s priorities,
allocations of resources, and strategies for executing
medium term national and sectorial development goals;
• To present a packaged public investment programme to
attract direct investors and development partners in the
delivery of public investment in Ghana;
11
PIP Objectives (2)
• To match coherently available resources to prioritized
projects for accelerating growth and spearheading social
development
• To link public investment programmes to
macroeconomic strategies-fiscal and monetary policies
for prudent economic management, fiscal sustainability,
and macroeconomic stability;
• To present a yardsticks for monitoring and evaluating
performance of national and sectorial development
policies.
12
13
2. The PIP Process
in Ghana Revisited
PIP in Ghana
14
National Development Plan
GSGDA - NDPC
MDAs – Policies &
Strategies
SOEs
Investment
Plan NIP
PIP
3 Year Rolling -Public
Investment Plan
GOG –
Budget
+Dom. Debt
External –
Loans +Grants
PPP
Private
capital +
VGS
s
SOE- IGFs ,
F
S
o
u
r
c
Planning
The PIP Process
1. Fiscal planning
2. Economic planning
3. Project formulation, costing and appraisal
4. Submission to MOF
5. Budgeting and financing strategy
6. Implementation
7. Monitoring & Evaluation
15
Fiscal Planning
• The objective of fiscal planning is to determine the fiscal
envelop available for overall investment over the period
covered by the MTFF and beyond if necessary.
• Once the fiscal enveloped has been determined and it
must be spilt between PIP and non-PIP investments.
• Non-PIP investments consist of asset renewal (like
vehicles), investments bellow a certain threshold, military
investment, etc.
• One of several PIP? It is recommended to have sub-PIP
rather than several PIPs. For example: infrastructure,
energy transition, agriculture and rural development, etc.
16
Economic Planning (1)
National Development Planning
• National Development Plan - GSGDA & NIP by NDPC
set objectives and priorities
• Determines focus of PIPs.
Sectors Planning
• MDAs – Prepare sector policies and strategies from
GSGDA and NIP (with NDPC assistance). Must be
aligned with the National Development Plan
• SOEs’ Investment Plans
• MMDAs (NDPC guidance)
17
Economic Planning (2)
• PIP should be explicitly linked to the National
Development Plan through a Concept Paper that will
justify (a) the number of PIP, (b) the structure of each
PIP and explain how PIPs will contribute to meet the
objectives of the development strategy.
18
PIP Formulation and Appraisal
Project Formulation
▪ MDAs formulate projects and programmes designed to meet
the national and sector development objectives in a Project
Concept Paper;
▪ SOEs’ formulates corporate investment plans .
Project Appraisal
• MDAs prioritize and appraise projects & programmes
(appraisal includes, feasibility studies, CBA, and all
preparatory works required for effective implementation)
• Feasibility templates may be applied.
19
Feasibility Studies
• Objectives and rationales
• Concept paper
• Design and technical specification
• Human resource assessment
• Costing
• Project schedule and timeline
• Project milestones and indicators
• Financing
• Disbursement plan
Verifying that the feasibility study contains all the relevant
elements is critical and is part of MOF challenging mission.
20
Project submission
• MDAs submit prepared projects online via PIMS to
MOFEP-PID by fixed deadline. (Projects Pool)- PIP from
which capital budget is selected.
• SOEs submit investments which require Government’s
direct or indirect support through line Ministries to
MOFEP- PID.
21
Project Selection and Budgeting (1)
• The role of the Budget Division is a challenging role. BD
must verify the alignment of project with the National
Development Plan and the PIP Concept Paper.
• Project with insufficient preparation (feasibility study,
procurement readiness, etc.) must be either rejected or
delayed to avoid budgeting for projects unable to spend
their funding.
• Realism of project costing must be verified.
• A annual spending plan should be prepared for the total
duration of the project.
22
Project Selection and Budgeting (2)
➢ PID re-organizes projects into draft PIP
▪ Reviews projects and re-affirms policy alignment,
▪ Allocate to appropriate funding sources considering
the viability of the project, funding constrains (fiscal
space and borrowing capacity), by priority ranking
and the nature of the project,
▪ Sequence project execution over the medium term
based on preparedness of the project, sectorial
synergies and availability of funding,
23
Project Selection and Budgeting (3)
➢ PID arranges draft PIP for discussion by PIP – WC - (NDPC, BDU,
Budget, DMD, EER, RSD, ERFD, PID)
▪ PIP-WC reviews draft PIP,
▪ PIP projects must be attached to sector programmes
▪ Final project selection & prioritisation into Budget
(PIP Prioritisation module)
▪ Submits draft PIP to cabinet for consideration and
approval
▪ Prepare for publication and dissemination of PIP.
24
The Financing of PIP (1)
Source Type Responsibility
GoG Revenue
Borrowing
Budget Division
DMD
Development Partners Loans and grants DMD, ERM (B&M)
Public-Private
Partnership
Private resources
VGS and guarantees
PID, Budget Division
and DMD
SOEs IGFs SOEs
25
The Financing of PIP (2)
Medium Term Financing Strategies
Considering the challenges of fiscal and public debt
sustainability, a Medium term financing strategies for the
PIP should include:
• Strict adherence to budget ceiling with priority to on-going projects
and strategic consideration for pipeline projects,
• Limit on public debt growth - constrain external debt funding to the
borrowing space determined by the latest Debt Sustainability
Analysis (DSA),
• Increased use of PPPs to deliver public investment projects,
• SOEs to finance investment projects with IGFs, On-lending loans,
and restricted use of state guarantee debt (contingent liabilities),
26
Aligning PIP with the Budget
27
Period Activity Responsible Institution
1 June PID send projects submission deadline
alongside Budget guidelines
PID, Budget
2
July
PID reviews and re-organised projects
submitted by MDAs via PIMS
MOFEP-PID
3. August PIP WC meets and finalise PIP PIP WC
4. August Revised & finalise PIP PID, PIP- WC
August -
September
Meet with MDAs and other stakeholders
on revised prioritized projects- Budget
technical hearing
PID, Budget, EER, DMD –
MOFEP, NDPC
November Submit Revised PIP to Cabinet for
consideration an approval
Cabinet
5 Nov-Dec Finalize and publish PIP with Budget PID/MOFEP
Monitoring Implementation
• PIP implementation needs to be monitored at the macro
level (the overall plan) and at the micro level (the
projects).
• A PIP Monitoring & Reporting Framework must be put
in place. PIP monitoring must be based on indicators
such as volume of procurement, number and volume of
contracts signed, disbursements against budget
execution plan and cash plans, etc.
• Monitoring the procurement schedule and the
procurement cycle is of special importance. When
projects are late for procurement is a sign of a lack of
preparedness and disbursement plans must be revised.
28
Monitoring project life cycle
• Projects must have project plan with milestone, reports,
deliverable, performance indicators and outcome
assessment.
• The Budget Division should monitor
– Inception and mobilisation
– Detailed designed and work plan
– Procurement
– Intermediate reports
– Testing
– Reception
– Evaluation
29
PIP Evaluation (1)
o What is the total Public Investment over the past fives years?
o What is the percentage of public investment to total Public
expenditure, total budget revenue and GDP?
o What is the total investment; Infrastructure, Economic, Social Public
Safety and Administration broad sectors?
o What percentage of total public investment was financed from
Budget revenue, DP sources and private sector finance?
o Which broad sector of the economy receives the highest
allocation/investment and why?
o Which of the funding sources has been the leading contributor to
investments in Ghana over the past 3 years? Any reason(s)?
30
PIP Evaluation after completion (2)
• What is the completion percentage at the end of the
period.
• What is the real cost compared to the initial budget and
how do we justify the deviations?
• What has been the PIP overall leverage on the
economy? To the GDP ? To employment?
• How much assets have been created and what is the
maintenance cost?
• Has the PIP met the objectives defined in the Concept
Paper?
• Has the PIP contributed to poverty reduction? 31
Thank you

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Public investment plan_management

  • 1. Designing and Implementing Public Investment Plans Workshop on Budget Formulation and Public Investment Management Accra, 1-3 June, 2015
  • 2. Content Part 1: General Concepts and PIP rationales Part 2: The PIP Process in Ghana revisited 2
  • 3. 3 1. General Concepts and PIP Rationales
  • 4. Definition 4 • A Development Policy is a policy framework that refers to activities that aim to promote sustainable development through the management of human and natural resources, the development of the economy, and the promotion of public goods. Public investment is one of the instrument for implementing Development Policies. Other instrument include structural reforms and policy reforms. • Public investment refers to government spending on public infrastructure that is categorized into two types: i) economic infrastructure such as airports, roads, railways, ports, water and sewage, power, gas, and telecommunication; and ii) social infrastructure such as schools and hospitals. Both economic and social infrastructure become public physical assets once they are completed. • A Public Investment Plan (PIP) is a comprehensive framework based on the fiscal capacity of a country (available fiscal space) to plan systematically its public investment to achieve the objectives of its development strategy.
  • 5. What is Public Investment Management? • Public Investment Management involves the setting out of a legal and regulatory framework to establish an institutional arrangements/settings and guide formalized procedures using computerized software/database for efficient planning and delivery (including need assessment, formulation, costing, appraisal, selection, budgeting, execution, monitoring and reporting) of Public Investment. 5
  • 6. Common Issues with Development Policies • Issues on policy ownership and lack of consultation with the population and sector ministries; • Lack of proper costing; • Financing constrains not properly assessed; • Ambiguities in institutional setting and functional and procedural arrangement; • Lack of coordination among planning and implementing agencies, • Lack effective tools for rolling out Development Policies in terms of planning, appraisal and monitoring; where PIP exist, Development Policies challenges hinder their effective implementation)
  • 7. PIP in Ghana in the 80s and 90s • PIP not realistic and over ambitious; • Project costing not comprehensive; • Continuous addition of new projects, irrespective of the lack of sufficient funding for on-going projects resulting in extra pressure on budget and accumulation of public contract arrears; • No ICT tool for investment planning and realistic costing; • No computer database to monitor PIP implementation, and paper-based reporting • Funding limited to GoG and DP’s support, no Public- Private partnership. 7
  • 8. Practical use of Public Investment Plans The PIP is a strategic investment planning tool consisting of: a) The systematic assembling of medium term (3 years) public investment projects, drawn from the national and sector development policies and strategies; and b) Sequenced implementation plans to ensure efficient delivery of public investment in order to harness sectorial synergies for accelerating economic growth and social development. 8
  • 9. PIM Requirements (1) • PIM should be supported by an appropriate legal and regulatory regimes (fiscal planning reforms, budget reforms, accounting reforms, etc.); • An institutional arrangement supported by the regulatory regime must be established with clear functional and operational roles and responsibilities (Divisions in MOF, NDPC, CAGD, core counterparts in MDAs, Cabinet, Parliament, PPA, etc.); • Clear processes and procedures must be established guided by realistic delivery timelines, milestones, and performance indicators. 9
  • 10. PIM Requirements (2) • Well defined inputs and outputs matrix for institutions / agencies; • Clear expected outcomes and results that can be verified; • An information system capable of delivering timely information through the interface of all relevant auxiliary systems (procurement, inventory, asset safeguarding, project management tools, etc.). 10
  • 11. PIP Objectives (1) • To establish a framework for investment planning and a mechanism to strengthen the project cycle (preparation, implementation, monitoring & evaluation, and reporting); • To present an organized and transparent public investment programme detailing Government’s priorities, allocations of resources, and strategies for executing medium term national and sectorial development goals; • To present a packaged public investment programme to attract direct investors and development partners in the delivery of public investment in Ghana; 11
  • 12. PIP Objectives (2) • To match coherently available resources to prioritized projects for accelerating growth and spearheading social development • To link public investment programmes to macroeconomic strategies-fiscal and monetary policies for prudent economic management, fiscal sustainability, and macroeconomic stability; • To present a yardsticks for monitoring and evaluating performance of national and sectorial development policies. 12
  • 13. 13 2. The PIP Process in Ghana Revisited
  • 14. PIP in Ghana 14 National Development Plan GSGDA - NDPC MDAs – Policies & Strategies SOEs Investment Plan NIP PIP 3 Year Rolling -Public Investment Plan GOG – Budget +Dom. Debt External – Loans +Grants PPP Private capital + VGS s SOE- IGFs , F S o u r c Planning
  • 15. The PIP Process 1. Fiscal planning 2. Economic planning 3. Project formulation, costing and appraisal 4. Submission to MOF 5. Budgeting and financing strategy 6. Implementation 7. Monitoring & Evaluation 15
  • 16. Fiscal Planning • The objective of fiscal planning is to determine the fiscal envelop available for overall investment over the period covered by the MTFF and beyond if necessary. • Once the fiscal enveloped has been determined and it must be spilt between PIP and non-PIP investments. • Non-PIP investments consist of asset renewal (like vehicles), investments bellow a certain threshold, military investment, etc. • One of several PIP? It is recommended to have sub-PIP rather than several PIPs. For example: infrastructure, energy transition, agriculture and rural development, etc. 16
  • 17. Economic Planning (1) National Development Planning • National Development Plan - GSGDA & NIP by NDPC set objectives and priorities • Determines focus of PIPs. Sectors Planning • MDAs – Prepare sector policies and strategies from GSGDA and NIP (with NDPC assistance). Must be aligned with the National Development Plan • SOEs’ Investment Plans • MMDAs (NDPC guidance) 17
  • 18. Economic Planning (2) • PIP should be explicitly linked to the National Development Plan through a Concept Paper that will justify (a) the number of PIP, (b) the structure of each PIP and explain how PIPs will contribute to meet the objectives of the development strategy. 18
  • 19. PIP Formulation and Appraisal Project Formulation ▪ MDAs formulate projects and programmes designed to meet the national and sector development objectives in a Project Concept Paper; ▪ SOEs’ formulates corporate investment plans . Project Appraisal • MDAs prioritize and appraise projects & programmes (appraisal includes, feasibility studies, CBA, and all preparatory works required for effective implementation) • Feasibility templates may be applied. 19
  • 20. Feasibility Studies • Objectives and rationales • Concept paper • Design and technical specification • Human resource assessment • Costing • Project schedule and timeline • Project milestones and indicators • Financing • Disbursement plan Verifying that the feasibility study contains all the relevant elements is critical and is part of MOF challenging mission. 20
  • 21. Project submission • MDAs submit prepared projects online via PIMS to MOFEP-PID by fixed deadline. (Projects Pool)- PIP from which capital budget is selected. • SOEs submit investments which require Government’s direct or indirect support through line Ministries to MOFEP- PID. 21
  • 22. Project Selection and Budgeting (1) • The role of the Budget Division is a challenging role. BD must verify the alignment of project with the National Development Plan and the PIP Concept Paper. • Project with insufficient preparation (feasibility study, procurement readiness, etc.) must be either rejected or delayed to avoid budgeting for projects unable to spend their funding. • Realism of project costing must be verified. • A annual spending plan should be prepared for the total duration of the project. 22
  • 23. Project Selection and Budgeting (2) ➢ PID re-organizes projects into draft PIP ▪ Reviews projects and re-affirms policy alignment, ▪ Allocate to appropriate funding sources considering the viability of the project, funding constrains (fiscal space and borrowing capacity), by priority ranking and the nature of the project, ▪ Sequence project execution over the medium term based on preparedness of the project, sectorial synergies and availability of funding, 23
  • 24. Project Selection and Budgeting (3) ➢ PID arranges draft PIP for discussion by PIP – WC - (NDPC, BDU, Budget, DMD, EER, RSD, ERFD, PID) ▪ PIP-WC reviews draft PIP, ▪ PIP projects must be attached to sector programmes ▪ Final project selection & prioritisation into Budget (PIP Prioritisation module) ▪ Submits draft PIP to cabinet for consideration and approval ▪ Prepare for publication and dissemination of PIP. 24
  • 25. The Financing of PIP (1) Source Type Responsibility GoG Revenue Borrowing Budget Division DMD Development Partners Loans and grants DMD, ERM (B&M) Public-Private Partnership Private resources VGS and guarantees PID, Budget Division and DMD SOEs IGFs SOEs 25
  • 26. The Financing of PIP (2) Medium Term Financing Strategies Considering the challenges of fiscal and public debt sustainability, a Medium term financing strategies for the PIP should include: • Strict adherence to budget ceiling with priority to on-going projects and strategic consideration for pipeline projects, • Limit on public debt growth - constrain external debt funding to the borrowing space determined by the latest Debt Sustainability Analysis (DSA), • Increased use of PPPs to deliver public investment projects, • SOEs to finance investment projects with IGFs, On-lending loans, and restricted use of state guarantee debt (contingent liabilities), 26
  • 27. Aligning PIP with the Budget 27 Period Activity Responsible Institution 1 June PID send projects submission deadline alongside Budget guidelines PID, Budget 2 July PID reviews and re-organised projects submitted by MDAs via PIMS MOFEP-PID 3. August PIP WC meets and finalise PIP PIP WC 4. August Revised & finalise PIP PID, PIP- WC August - September Meet with MDAs and other stakeholders on revised prioritized projects- Budget technical hearing PID, Budget, EER, DMD – MOFEP, NDPC November Submit Revised PIP to Cabinet for consideration an approval Cabinet 5 Nov-Dec Finalize and publish PIP with Budget PID/MOFEP
  • 28. Monitoring Implementation • PIP implementation needs to be monitored at the macro level (the overall plan) and at the micro level (the projects). • A PIP Monitoring & Reporting Framework must be put in place. PIP monitoring must be based on indicators such as volume of procurement, number and volume of contracts signed, disbursements against budget execution plan and cash plans, etc. • Monitoring the procurement schedule and the procurement cycle is of special importance. When projects are late for procurement is a sign of a lack of preparedness and disbursement plans must be revised. 28
  • 29. Monitoring project life cycle • Projects must have project plan with milestone, reports, deliverable, performance indicators and outcome assessment. • The Budget Division should monitor – Inception and mobilisation – Detailed designed and work plan – Procurement – Intermediate reports – Testing – Reception – Evaluation 29
  • 30. PIP Evaluation (1) o What is the total Public Investment over the past fives years? o What is the percentage of public investment to total Public expenditure, total budget revenue and GDP? o What is the total investment; Infrastructure, Economic, Social Public Safety and Administration broad sectors? o What percentage of total public investment was financed from Budget revenue, DP sources and private sector finance? o Which broad sector of the economy receives the highest allocation/investment and why? o Which of the funding sources has been the leading contributor to investments in Ghana over the past 3 years? Any reason(s)? 30
  • 31. PIP Evaluation after completion (2) • What is the completion percentage at the end of the period. • What is the real cost compared to the initial budget and how do we justify the deviations? • What has been the PIP overall leverage on the economy? To the GDP ? To employment? • How much assets have been created and what is the maintenance cost? • Has the PIP met the objectives defined in the Concept Paper? • Has the PIP contributed to poverty reduction? 31