Improving public financial management for the green transition

active

Prospective

Serbia is an upper middle-income country with a per capita income of US$ 9,215 in 2021. The country’s economy and household incomes expanded following a significant fiscal adjustment in 2014-15, and the fiscal environment improved significantly up until 2019. In 2020, the economy contracted by 1 percent due to COVID-19, followed by a strong rebound in 2021 with growth accelerating to 7.4 percent. The proposed operation is aligned with and supports the focus areas and objectives of the Country Partnership Framework (CPF) 2022–2026.11 It provides support across High-Level Outcomes (HLOs) 1 and 2, specifically objectives 1.1 (structural reforms for greener growth), 1.2 (green investments and just transition), and 2.1 (strengthened public finance management at central and local levels). Improved performance on key PFM indicators has a direct impact on the optimal use of budget funds. In addition, enhanced fiscal transparency will increase trust in institutions. The operation’s objective of improving the quality of key areas of PFM at financial and other agencies to support green growth will directly contribute to the wider objectives of the CPF. The PforR instrument including an IPF component has been identified as best suited to incentivize change combined with providing hand-holding support for achieving the agreed results and it logically complements the Green Transition DPO series (P177410). The DPO series targets legal and regulatory changes to set the green transition in motion, while the PforR provides incentives and hand-holding support for implementation of these legal reforms; and it enables a shared monitoring of results over a four-year time horizon. The IPF/TA component builds on the lesson from the previous PforR on Public Sector Modernization (P155172) that ensuring adequate handholding directly related to achieving DLRs is essential. Responding to the challenges outlined, the project includes two proposed Results Areas:Results Area 1: Strengthen fiscal resilience, transparency, and spending effectivenessThis will include 3 DLIs (3, 6, 7) focused on further strengthening fiscal resilience, using public expenditure management to enhance efficiency and a results focus, improve fiscal transparency, and improving the preparation and vetting of public investment projects. Results Area 2: Green the expenditure cycle and monitor GHG emissions for Serbia’s green transitionThis will include 5 DLIs (1, 2, 4, 5, 8) focused on introducing and utilizing green criteria in PFM, PIM, and public procurement, and on strengthening systems for monitoring and reporting on GHG emissionsComplementing the changes incentivized by the DLIs/DLRs, the small IPF/TA component (EUR3.15m from the WB plus EUR3.15m from AFD) will provide handholding support, in line with lessons learned from the previous PforR. Direct handholding support is important to enable the achievement of results and to address bottlenecks where and when needed. Project management support is important as implementing the PforR and fulfilling monitoring, reporting, and verification requirements is time intensive and can be difficult to accomplish for existing counterpart staff without additional support that can be contracted. The IPF component will consist of TA -- including change management, training and peer learning, support for stakeholder engagement, and for managing the Program. The TA needs identified for the IPF component take into account what TA is currently programmed to be provided by other development partners; and it builds on ongoing TA provided by WB teams based on TFs in several areas (notably fiscal risk and public investment management). Each implementing institution will prepare their ToRs. DICEI will monitor TA needs and coordination with other development partner support for RA 1 and PFM related aspects of RA 2. The CFU will provide procurement support, following standard IPF rules. The Bank will review and provide non-objections to final ToRs and to the final selection of service providers. Where possible and sensible, TA delivery to civil servants will involve the National Academy of Public Administration (as the main provider or as a co-recipient of training materials etc.) to enable a wider reach/coverage of relevant public sector staff.

FY17 - Public Administration

World Bank Group

Project

Water Supply and Storage, Government