IMF国际货币组织全球-Ukraine_Technical-Assistance-Report_49页_1mb

Summary of the Ukraine Public Investment Management Assessment

Core Content

This Technical Assistance Report by the International Monetary Fund (IMF) provides an assessment of public investment management (PIM) in Ukraine, highlighting institutional weaknesses, inefficiencies, and volatility in public investment spending. The report was prepared in April 2016 and based on information available at that time. It evaluates trends in public investment, efficiency, and the institutional framework, and offers recommendations for reforming PIM practices.

Main Findings

Public Investment Trends

• Public capital stock has been declining for the past 20 years, from 99% of GDP in 1996 to 56% in 2013.
• Public investment spending has been low, averaging 1.5% of GDP since 2008.
• Investment volatility is high, with execution rates fluctuating between 53 and 87% of revised budgets.
• Per capita public capital stock is among the lowest in peer countries.
• Public investment in the social sectors (e.g., education) is lower than in the EU, while economic infrastructure (e.g., roads) is higher.
• The conflict in the East has further reduced investment in infrastructure and increased spending on defense.

Efficiency and Impact

• Public investment efficiency is below average compared to emerging markets and CIS countries.
• The efficiency gap in Ukraine is around 32%, which is higher than the 22% for emerging markets and 28% for CIS countries.
• Perceived infrastructure quality has been declining, reflecting underinvestment and inefficient spending.
• Despite the downturn, Ukraine performs better than average in physical infrastructure indicators such as public education, electricity production, and public health.

Institutional Weaknesses

• Institutional framework for PIM is weak, with seven out of 15 institutions rated low in strength and eight rated medium.
• No institution is rated strong.
• Effectiveness is also lacking, with twelve institutions rated ineffective and two as moderately effective.
• SOEs (State-Owned Enterprises) and local governments have significant roles in public investment, but their monitoring frameworks are underdeveloped.
• Fiscal risk management and project appraisal are not well established.

Key Recommendations

1. Improving Planning and Prioritization

• Establish common, concise, fully costed, and prioritized capital investment plans as part of national and sectoral strategies.
• Consolidate and make more transparent the allocation methodology for capital transfers to local governments.
• Merge the Regional Development and Socio-economic Development funds and delegate project selection to local levels.
• Strengthen the legal and institutional framework for public-private partnerships (PPPs), with a focus on fiscal risk management.

2. Improving Resource Allocation

• Implement a medium-term investment project pipeline process within a comprehensive medium-term budget framework.
• Provide a clearly defined capital budget in budget documents, using international classification standards, and have it formally approved by parliament.
• Extend the new project appraisal and selection approach to all major state investments, including externally financed projects.

3. Developing Efficient Implementation Systems

• Ensure centralized monitoring and systematic ex post financial and performance audits for public investments.
• Prohibit reallocation from capital to other expenditures and specify carryover rules with MoF approval.
• Implement previous FAD recommendations to strengthen cash management arrangements.

Key Challenges

• Budget rigidities limit the ability to increase investment levels.
• Current expenditures are protected in the Budget Code, making it difficult to prioritize investment.
• Fragmentation of resource allocation systems for local government investments leads to ad hoc decisions.
• Volatility in investment spending is higher than in peer countries, driven by political instability and sectoral reforms.
• PPPs are not transparent, and fiscal risk management is underdeveloped.
• Monitoring systems are weak, with limited oversight and focused only on financial compliance.
• Project management frameworks are inadequate, with little focus on achieving project objectives.
• Asset accounting is incomplete, with nonfinancial assets not being adequately tracked.

Conclusion

The decline in public capital stock and low investment efficiency in Ukraine are the result of institutional weaknesses, fiscal constraints, and political instability. The report emphasizes the need for concerted reform efforts to address these issues, particularly in the areas of planning, resource allocation, and implementation. The proposed reforms aim to improve transparency, efficiency, and accountability in public investment management, with the potential to reverse recent trends and enhance long-term economic growth.