Public Sector Management Adjustment Loan 2 (PSMAL 2)

closed

The Public Sector Management Adjustment Loan Project is one of a series of adjustment operations, aimed at improving public sector management in Macedonia. The project will pursue five major areas of reform: 1) budget formulation, to increase the usefulness of the budget as a strategic policy instrument, and ensure that the Government is capable of formulating a budget within macroeconomic constraints; 2) budget execution, to strengthen the Treasury's control over spending commitments and extra-budgetary funds; 3) audit, to establish an internal audit department in the Ministry of Finance, and units in other key Government agencies, and, strengthen the State Audit Office's ability to focus on high risk entities; 4) procurement, to support the enactment of a new procurement law, and the creation of a specialized procurement bureau in the Ministry of Finance; and, 5) civil service, to create a mechanism to enforce civil service hiring requirements, and introduce a uniform, decompressed salary structure for civil servants. In addition, the project will support specific reforms in the health sector, including improvements in the internal control system of the Health Insurance Fund, and in the procurement of pharmaceuticals. Linked donor finance will also support technical assistance, and policy studies, aimed at improving the administration and targeting of health insurance subsidies, pension contributions, social assistance, and child allowances. Political and implementation risks shall be minimized, because key reforms will be completed prior to Board presentation, and the inclusion of a second tranche release will be contingent full compliance with reform implementation.