2007年-世界发展银行全球_Guinea-Bissau_-_Public_Expenditure_Review_Update___Enhancing_Growth_and_Fiscal_Adjustment_Through_Civil_Service_Reform_112页_7mb

Summary of the Public Expenditure Review (PER) Update for Guinea-Bissau

Core Content

This document presents an update to the Public Expenditure Review (PER) for Guinea-Bissau, focusing on the country's fiscal challenges, the rationale for civil service reform, and the analysis of debt sustainability. The report was prepared by the World Bank in May 2007, following a joint mission with the IMF in March 2006 to review the 2006 budget and prepare a Staff Monitored Program (SMP). It outlines the progress made in macroeconomic and fiscal management since the previous PER, highlights the need for civil service reform, and assesses the potential impact of downsizing the public sector on fiscal sustainability and poverty.

Main Views

1. Macroeconomic Management and Performance

• Fiscal Challenges: The large public sector wage bill has been a major threat to macroeconomic stability, hampering growth, limiting debt servicing capacity, and crowding out private investment.
• Civil Service Reform: In early 2006, the government initiated the retrenchment of over 2,800 civil servants and around 1,600 military personnel.
• Progress in Reforms: Since 2004, the government has made progress in implementing key reform policies, including the adoption of a Staff Monitored Program (SMP) with the IMF.
• Economic Performance: Economic performance was sluggish in 2003 but began to improve in 2004. By end-2005, real GDP growth reached 3.4%, driven largely by agriculture. Inflation remained under control at below 2% annually.
• Productivity: Total Factor Productivity (TFP) showed positive growth in 2005, marking a shift from negative growth in previous years, though growth was still primarily driven by factor accumulation rather than productivity gains.
• Fiscal Management: Fiscal policy management improved in 2004 with the introduction of a strict cash flow management system. Tax collection improved due to centralized bank accounts at BCEAO and the abolition of tax compensations. However, challenges remain, including non-established expenditures (DNT) and weak budgetary control mechanisms.

2. Fiscal Policy and Public Expenditure

• Current Spending: The public sector wage bill constitutes about 40% of current spending, with nearly half allocated to the security sector (military, gendarmes, and police).
• Sectoral Analysis: Security sector spending was 7% of GDP in 2005, compared to 4% in economic sectors and 6% in social sectors. Social sector spending was supported by external donors but lacked coordination.
• Budget Deficit Financing: The deficit was primarily financed through external borrowing and the sale of foreign exchange reserves, with a significant portion attributed to non-established expenditures (DNT).
• Fiscal Space: The government's fiscal space remains limited, necessitating further reforms in the public sector, particularly in the civil service and security sectors.

3. Civil Service Reform and Compensation Packages

• Wage Bill Trends: The public sector wage bill has increased since 1997, with more workers in the public sector than in the private formal sector. Skilled workers' wages grew faster than unskilled, increasing wage inequality.
• Compensation Packages: Three compensation packages (A, B, and C) were evaluated using the DOSE model. Package A is a lump sum, B is a multiple of salary, and C is based on months of salary per year of service.
• Cost Estimation: The average compensation per satisfied worker is estimated at CFAF1.6 to 2.4 million, with total program costs ranging from CFAF5 to 6 billion (3 to 4% of GDP).
• Fiscal Impact: The gross salary saving from downsizing is expected to be CFAF1.15 billion (0.72% of GDP). Package C is considered more equitable than A and B, even though it may be more costly.
• Poverty Impact: Retrenching low-skilled workers without severance benefits could worsen their poverty conditions, as they are generally poorer than other groups.

4. Debt Sustainability Analysis

• External Debt: As of end-2005, Guinea-Bissau had USD1 billion in external public and publicly guaranteed (PPG) debt, with USD327 million in arrears. The debt-to-GDP ratio decreased from 353% in 2000 to 332% in 2005.
• Debt Relief: The country has not benefited from most debt relief under the Poverty Reduction and Growth Facility (PRGF) since 2001, leading to accumulated arrears.
• HIPC Completion Point: The HIPC Completion Point is expected by end-2009, with total net present value debt relief of USD413 million, reducing annual debt service payments by about 7% of GDP.
• Debt Sustainability: The country is in a situation of debt distress, with risks exacerbated by less concessional borrowing, exchange rate depreciation, and lower export growth.

Key Information

• Currency: CFA Franc (CFAF), with USD1 = 525 CFAF.
• Government Fiscal Year: January 1 – December 31.
• Key Reforms: Civil service reform, tax and customs reforms, and security sector reform (SSR).
• Fiscal Challenges: High wage bill, non-established expenditures (DNT), weak budgetary control, and reliance on donor support.
• Debt Risks: Accumulation of external arrears, exchange rate volatility, and export growth concerns.
• Expected Outcomes: Improved fiscal sustainability, reduced debt service burden, and enhanced macroeconomic stability through structural reforms.

Conclusion and Way Forward

• The PER update highlights the need for continued reform in the public sector, especially the civil service and security sectors, to improve fiscal space and macroeconomic stability.
• The proposed compensation packages for retrenched workers should be negotiated with public sector trade unions, considering both cost and fairness.
• Achieving the HIPC Completion Point by 2009 requires sustained political stability, international assistance, and effective implementation of reforms.
• The document emphasizes the importance of strengthening governance, improving the business climate, and enhancing regional integration to support long-term growth and fiscal sustainability.

Recommendations

• Accelerate the implementation of the ongoing reform agenda, including civil service downsizing and tax reforms.
• Strengthen budgetary control mechanisms to reduce non-established expenditures (DNT).
• Ensure transparency and fairness in the compensation package design.
• Continue efforts to improve the financial sector and public procurement system.
• Secure international support to achieve the HIPC Completion Point and reduce external debt burden.