Capital expenditures and public investment management

This policy note is part of the World Bank's Programmatic Public Expenditure Review (PER) work program for FY2012-2014. The PER consists of a series of fiscal policy notes, which aim at providing the Government of Tajikistan with recommendations to strengthen budgetary processes and analysis. This policy note, the sixth in the series continues the fiscal policy dialogue conducted in the previous notes. It is structured as follows. Chapter 2 sets a macro-fiscal context for the analysis with a particular focus on fiscal policy challenges. Chapter 3 analyzes the composition and trends in capital expenditures to identify issues and offer solutions for improving efficiency of capital spending. Chapter 4 reviews a public investment management process in Tajikistan to identify weaknesses in the capital budgeting cycle (planning, budgeting, implementation, and audit), and to recommend measures and remedies to address shortcomings in these processes. Chapter 5 provides the main conclusions: 1) although Tajikistan has enjoyed high economic growth and substantial external assistance, increasing uncertainties about the global environment and the Russian growth outlook put Tajikistan's growth prospects at high risk, and the fiscal space will be very tight; 2) Tajikistan needs to address both equity and sector allocation efficiency issues to better mobilize resources in support of national priorities; 3) analysis of the public investment management system suggests that lack of a unified methodological framework, fragmentation, and poor institutional links discourage efficient use of limited domestic resources and attraction of external financing; and 4) the proposed reforms need to be sequenced to take into account implementation capacity and expected benefits. This note provides detailed recommendations to the Government regarding public investment management.