20240213-IMF-Armenia_Technical_Assistance_Report-Enhancement_of_Public_Investment_Management_Practices_for_Domestic_and_Externally_Financed_Projects_56页_1mb

• Enhancing Public Investment Management (PIM) in Armenia

  • Recent PFM Reforms: Armenia has implemented extensive Public Financial Management (PFM) reforms, including the introduction of a Medium-Term Expenditure Framework (MTEF) in 2003, Performance-Based Budgeting (PBB) in 2017, and a PFM Strategy for 2019-2023. A PIM decree adopted in 2021 and amended in 2023 strengthens the institutional framework but leaves capacity challenges in planning and monitoring.

  • Investment Performance:

    • Domestically Financed Projects: Steady execution but subject to inconsistencies.
    • Externally Financed Projects: Under-execution due to implementation capacity issues, as seen in projects like the North-South Highway and Yerevan Solid Waste Project.

  • Key Stakeholders:

    • Prime Minister (PM) & Office (PMO): Responsible for monitoring foreign-financed projects.
    • Ministry of Economy (MoE): Leads planning and appraisal.
    • Ministry of Finance (MoF): Manages budgeting and monitors domestically financed projects.
    • Line Ministries (LMs): Propose and manage projects, facing capacity limitations.

  • Deficiencies in PIM:

    • Lack of Capacity: Turnover in MoE staff, weak project preparation, and insufficient language skills.
    • Legal & Definitional Issues: Inconsistencies in defining public investment projects (ongoing vs. new), hindering the PIM process.
    • IT System Fragmentation: Separate systems in MoF and MoE complicate data consolidation and monitoring.
    • Budget Integration: Insufficient integration between PIM and MTEF/PBB frameworks reduces budget credibility.

  • Proposed Recommendations:
    Domestically Financed Projects:

    • (1) Align definitions of public investments across BSL and PIM decree.
    • (2) Mandate all projects > AMD 1 billion to submit PCNs for systematic budget inclusion.
    • (3) Adopt a gradual approach to PIM decree implementation to avoid a backlog.
      Externally Financed Projects:
    • (7) Pilot projects with development partners to refine processes.
    • (8) Strengthen monitoring frameworks and integrate with domestic projects.
      Cross-Cutting Solutions:
    • (4) Establish a monitoring unit at MoF to harmonize project oversight.
    • (5) Upgrade IT systems (e.g., IFMIS with PIM module) and capacity training.
    • (9) Address institutional barriers like permit delays and strengthen enabling environment.

• Key Issues & Bottlenecks:

  • Project Monitoring Deficiency: Monitoring lacks real-time problem-solving capacity and proactive risk assessment.
  • Role Ambiguity: Need for clearer delineation of MoE/P MoF responsibilities in project appraisal and execution.
  • Feasibility Study Validity: Decree requires 3-year FE validity, but delays often exceed this period.

By addressing legal, institutional, and IT constraints, Armenia can enhance PIM efficiency and alignment with international standards, ultimately improving project outcomes and fiscal sustainability.