## htnea2021007

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---

### Executive Summary — Introduction and key context
- Public investment is likely to be an important component of any postcrisis recovery program, including recovery from the COVID-19 pandemic.
- The pandemic is described as “the most recent and deepest shock the world economy has encountered in peacetime (IMF 2020d).”
- Countries will emerge with scarce fiscal space, elevated debt levels, and large financing needs, increasing the imperative to make every dollar count.
- A recent IMF work (Schwartz and others 2020) finds that, on average, countries lose more than one-third of the resources spent on public investment due to inefficiency.
- The IMF (2020b) argues governments must scale up public investment to ensure successful reopening, boost growth and employment, and green their economies.
- The note draws on the Public Investment Management Assessment (PIMA) framework conducted in over 60 countries and focuses on institutions regarded as vital during postcrisis recovery.

### Main advice and practical priorities
- Consolidate and accelerate existing project-planning and decision-making procedures.
- Revisit the public investment plan (PIP): accelerate some projects, defer or cancel others.
- Update project appraisals and supplement with revised criteria aligned to recovery targets.
- Define clear selection criteria based on targets for the overall recovery program.
- Reflect the postcrisis investment program in transparent medium-term budget decisions.
- Prioritize maintenance and capital repairs as productive elements of recovery.
- Accelerate procurement processes where necessary, while preserving safeguards for compliance and oversight.
- Strengthen project management to ensure delivery on timetable, budget, and expected benefits.
- Implement portfolio monitoring to assess progress and assurance of overall portfolio implementation.

### Challenges to public investment management for recovery
- Fundamental challenge: ensure policymakers select and implement the best combination of public investment projects during recovery.
- Tradeoffs between speed, due process, and accountability; risks include political interference, rent-seeking, environmental damage, and excessive maintenance burdens if processes are short-circuited.
- Capacity constraints are significant in many countries, particularly in low-income developing countries (LIDCs) and emerging market economies (EMEs); advanced economies also show notable weaknesses.

### Tiered guidance: Basic, Medium, Advanced practices
- Basic and medium practices designed for quick application within existing legal and regulatory frameworks and to contribute to longer-term institutional improvement.
- Examples of summarized recommendations by area (Basic Practice | Medium Practice | Advanced Practice):
  - Political Guidance and Institutional Arrangements
    - Basic Practice: Ad hoc review of existing project pipeline.
    - Medium Practice: Partial review of the PIP by a dedicated investment committee.
    - Advanced Practice: Full review of the PIP with endorsement by the cabinet and parliament.
  - Project Appraisal
    - Basic Practice: Multicriteria analysis (simplified).
    - Medium Practice: Cost effectiveness and multicriteria analysis.
    - Advanced Practice: Comprehensive B/C analysis.
  - Project Selection
    - Basic Practice: Limited criteria set based on multicriteria analysis.
    - Medium Practice: Selection based on cost-effectiveness and limited B/C analysis.
    - Advanced Practice: Selection based on B/C analysis and additional multicriteria analysis.
  - Maintenance Projects
    - Basic Practice: General allocations to routine maintenance.
    - Medium Practice: General allocations for routine maintenance; selective allocations for capital repairs.
    - Advanced Practice: Comprehensive program for maintenance and capital repairs based on documented needs.
  - Medium-Term Budgets
    - Basic Practice: Political commitment to medium-term PIP.
    - Medium Practice: Published medium-term budget framework incorporates medium-term PIP.
    - Advanced Practice: Medium-term appropriations to finance the PIP.
  - Public Procurement
    - Basic Practice: Good documentation of procurement tenders and contracts.
    - Medium Practice: Approval of procurement contracts within minimum time periods, high degree of transparency, and compliance with law.
    - Advanced Practice: Active pretender market engagement with advance procurement notices.
  - Project Management
    - Basic Practice: All projects in the postcrisis PIP have identified responsible project managers and clear implementation plans.
    - Medium Practice: Postcrisis public investment support unit supports project managers and helps address implementation challenges.
    - Advanced Practice: All investment projects in the recovery PIP are subject to advanced management arrangements.
  - Portfolio Oversight
    - Basic Practice: Major projects for special scrutiny and reporting by each ministry are identified.
    - Medium Practice: Central monitoring of all major projects, including public summary reports.
    - Advanced Practice: Consolidated public investment portfolio with automated monitoring and reporting.

### Recommendations summarized by area — selection criteria examples (exact metrics preserved)
- Basic practice example (Table 6 basic selection framework):
  - Financial Viability: Project revenue/costs (index) 0–3 Weight 25 percent
  - Strategic Priority: Index 0–3 Weight 50 percent
  - Job Creation: Number of jobs (index) 0–3 Weight 25 percent
  - Environmental Impact: Composite index –3–3 Minimum +1
  - Social Impact: Composite index –3–3 Minimum +1
  - Project Readiness: Time to start project 1 month Maximum 3 months
- Advanced practice example (Table 7):
  - Benefit-Cost Ratio: Project benefits/costs 0 Minimum 1.5 Weight 30 percent
  - Growth Impact: Growth multiplier 0 Minimum 1 Weight 10 percent
  - Job Creation: Number of person-years 0 Minimum 1000 Weight 10 percent
  - Environmental Impact: Composite index –3–3 Minimum +1 Weight 10 percent
  - Social Impact: Composite index –3–3 Minimum +1 Weight 10 percent
  - Project Readiness: Time to start project after approval 1 month Maximum 3 months Weight 10 percent
  - Risk Rating: Risk rating index after recommended mitigation actions –3–3 Minimum +1 Weight 20 percent

### Medium-Term Investment Budgeting and Maintenance
- Anchoring the PIP in a realistic medium-term budget process increases credibility and impact.
- Budgeting practices by capacity level:
  - Basic practice: strong political commitment to medium-term PIP funding.
  - Medium practice: published MTBF that specifies allocations to key investment priorities in the medium-term PIP.
  - Advanced practice: formal medium-term budget appropriations for the PIP and transparent reporting of approved projects.
- Maintenance projects characteristics and practices:
  - Basic practice: general allocations to routine maintenance; simple per-unit allocations (for example per square meter of buildings).
  - Medium practice: augment routine maintenance funding with selective capital repairs and reinvestment projects identified as components of PIP updates.
  - Advanced practice: mechanisms for defining maintenance needs (regular surveys, agency-level maintenance models); include increased allocations based on documented needs.

### Public Procurement — principles and acceleration risks
- Procurement bottlenecks are major risks to timely implementation; inadequate project preparation and failure to apply existing procurement rules are common causes.
- Two accelerated procurement types:
  - Emergency procurement: for life/property/equipment at immediate risk; widely used early in COVID-19 pandemic.
  - Nonemergency accelerated procurement: for unforeseen circumstances requiring urgent response; should be exceptional.
- Use emergency procurement cautiously for postcrisis PIPs; document, ensure transparency, and audit such procedures.
- Procurement practices by capacity level:
  - Basic practice: ensure procurement strategies align with legislation; publish all contracts for public infrastructure projects; enable multiyear procurement consistent with law timeframes.
  - Medium practice: prepare procurement documents prior to project approval for immediate contract announcement; competitive and transparent processes.
  - Advanced practice: well-functioning e-procurement system with extensive reporting; active market engagement and advance procurement notices.
- Note: PPPs are generally not viable for early-stage postcrisis recovery unless already mature due to complexity and time required.

### Project Management and Portfolio Monitoring
- Good project management: projects should meet timetables, budgets, and deliver planned benefits; delays/overruns may require reconsideration of project inclusion.
- Essential tools and practices:
  - Project implementation plans with timetables for physical progress and financial outlays; baseline comparisons for on-track assessment.
  - Use of S-curve plotting estimated vs. actual accumulated costs and physical completion for early identification of cost overruns and delays.
- Project management practices by capacity level:
  - Basic practice: identify all PIP projects within line ministry frameworks; appoint project managers; prepare implementation plans; use project implementation units where capacity is limited.
  - Medium practice: central public investment support unit to assist project managers and address implementation challenges.
  - Advanced practice: comprehensive management arrangements across ministries with postcrisis public investment incorporated into existing frameworks.
- Portfolio monitoring and oversight practices:
  - Basic practice: line ministries monitor implementation, timetables, budgets, and expected results.
  - Medium practice: central monitoring unit compiles progress reports, identifies projects at risk, coordinates with Ministry of Finance fiscal risk unit; progress reports should be published.
  - Advanced practice: systematic monitoring, updating, and reporting of overall public investment portfolios; high-risk or off-track projects subject to heightened scrutiny by cabinet or high-level committees.
- Example: UK quarterly project delivery confidence assessments (green/red color coding) for major project monitoring.

### Institutional Arrangements — key operational guidance
- Set up high-level mechanisms for reviewing existing PIPs and make changes supporting recovery: terminate, postpone, or introduce projects.
- Reevaluate pipeline projects against government criteria for feasibility studies and investment appraisals; consider supplementary criteria (for example, environmentally friendly infrastructure).
- Factor costs of changing an existing PIP (canceling/postponing projects already under implementation) into analysis; these costs can be considerable, particularly in countries with limited capacity.
- About 40 percent of countries have full or partial PIPs in place 6 (Allen and others 2020).
- Timeframe for developing the postcrisis PIP will often be short; governments may focus on a subset of projects that are larger, strategically important, or suited to the recovery phase.
- Coordination among ministry of finance, ministry responsible for economic development and national planning, and line ministries is required; in some countries these functions are combined.
- Institutional options by capacity level:
  - Basic practice: government resolution that spells out PIP objectives, decision-making organization, and a concrete timetable; establish high-level investment committees or task forces where capacity is limited.
  - Medium practice: government resolution defining parameters for the postcrisis PIP; establish high-level committee or task force to coordinate and support work.
  - Advanced practice: political priorities anchored in the legislature; task strong existing public investment planning institutions with developing the postcrisis program and accelerate/strengthen procedures as needed.
- Development partners and subnational governments may contribute financing, expertise, and institutional support, especially in low-capacity countries.

### Project Appraisal — funnel-and-gateway and capacity-differentiated elements
- Projects subject to robust and consistent appraisal to enable comparison during selection; appraisals may be adjusted for higher required rates of return and additional environmental conditions.
- Funnel-and-gateway approach: iterative review where only the most promising proposals reach full appraisal to reduce wasted preparation.
- Appraisal practices by capacity level:
  - Basic practice: financial analysis and simplified multicriteria analysis; identify direct costs and revenues; assess impact on growth, employment, environmental and social conditions using a simplified scale (positive/negative and low/medium/high); identify major project risks.
  - Medium practice: simple cost-effectiveness assessment; detailed estimates for investment and operational costs, revenues, and external factors; demonstrate why recommended option is best; identify project risks and impacts.
  - Advanced practice: comprehensive benefit/cost analysis quantifying financial and economic impacts including quantifiable externalities; supplementary multicriteria analysis for nonquantified impacts; comprehensive risk analysis and mitigation measures.
- Table 5 (Project Appraisal Elements) defines specific appraisal elements across Basic, Medium, Advanced practice (Project Rationale, Project Status and Timetable, Project Description, Cost Estimates, Revenue Estimates, Project Benefits and Impacts, Option Analysis, Risk Analysis, Implementation Plan, Procurement Strategy and Plan, Financing Plan).

### Project Selection — readiness vs. quality
- Selection via consolidated government process with clear, transparent criteria separating weighted criteria and threshold criteria.
- Project readiness should not dominate selection over quality (growth impact, benefit/cost ratio); "shovel ready" projects are rare and not necessarily most beneficial.
- Reconsider previously endorsed projects for postponement or cancellation based on revised priorities.

### Integration with other recovery measures and coordination
- Avoid disruption of ongoing public investment projects; balance acceleration with continuity.
- Coordinate investments with subnational governments to ensure alignment of priorities and implementation capacity.
- Promote and coordinate public corporation investment as part of the recovery effort.
- Stimulate private sector investment and broader economic development as complements to public investment measures.

### Examples of announced investment-led stimulus (illustrative)
- European Union: NextGenerationEU is a €750 billion temporary recovery instrument. The centerpiece, the Recovery and Resilience Facility, has €672.5 billion in loans and grants available to support reforms and investments by EU countries.
- Nepal: The Government of Nepal and Development Partners agreed on a Relief, Recovery and Resilience Plan including up to $840 million for immediate COVID-19 needs and up to $6.6 billion for supporting green recovery across multiple areas.

### Boxed examples and statistics — institutional and appraisal excerpts
- Funnel-and-gateway iterative review recommended to limit full appraisals to most promising proposals.
- Project Appraisal Elements (across Basic/Medium/Advanced): Project Rationale; Project Status and Timetable; Project Description; Cost Estimates; Revenue Estimates; Project Benefits and Impacts; Option Analysis; Risk Analysis; Implementation Plan; Procurement Strategy and Plan; Financing Plan.
- Table excerpts and selection frameworks preserved above under selection criteria examples.

### PIMA Effectiveness Scores (Average of 64 PIMAs) — sector observations and scores (as presented)
- Institutional Arrangements: Need to consolidate, strengthen, and accelerate project planning and decision-making for the postcrisis investment portfolio.
- Project Appraisal: Weak technical capacity for project appraisal undermines the ability to identify projects that best meet postcrisis objectives. 1.3 1.4 2.3
- Project Selection: Lack of rigorous prioritization and an incremental selection process reduce the consistency and impact of the postcrisis program. 1.2 1.3 1.6
- Budgeting: The lack of an effective MTBF undermines the credibility and impact of the postcrisis investment program. 1.5 1.4 2.1
- Maintenance Projects: Persistent underfunding and the lack of a robust and comprehensive framework for maintenance spending reduces its potential impact on postcrisis recovery. 1.3 1.6 2.0
- Procurement: Inefficient procurement practices lead to delays in implementing the postcrisis PIP. 1.6 1.7 2.6
- Project Management: Weak implementation capacity causes delays and cost overruns, increasing fiscal risk and reducing the postcrisis program’s net benefits. 1.6 1.5 2.2
- Program Monitoring: Weak consolidated monitoring capacity limits the ability to measure portfolio performance and maximize the impact of postcrisis investment. 1.6 1.6 2.1

### Project X: Financial and Physical Execution (summary elements)
- Financial execution reported in "Million USD".
- Physical execution reported as "Percentage completion".
- "Months" used as the temporal axis label for execution charts.
- Project continuity and PPP vulnerabilities:
  - PPP projects already operating may be susceptible to demand shocks that undermine revenue flow (example: reduced public transport usage during COVID-19).
  - Active project oversight and contract management are critical to identify potential solutions and avoid disruption.

### Coordinating with Subnational Governments (SNGs)
- SNGs are vital to public investment in many countries; they may be directly impacted by central government investment programs (grants for municipal maintenance, cofinancing roads).
- SNG investments are often less complex and can be implemented quickly.
- Effective coordination between central and subnational governments promotes efficiency and helps maximize infrastructure impacts across the economy.
- SNG capacity is often weaker than central government capacity; some countries may choose centralized approaches to developing postcrisis PIPs.

### Promoting Public Corporation Investment
- Public corporations play major roles in many sectors (energy, transport, communication, water).
- Relationship to central government varies: sometimes closely coordinated as part of the PIP, sometimes arm’s-length.
- Public corporations are vulnerable to corruption and fiscal risks (Allen and Alves 2016; IMF 2020c).
- Possible government actions:
  - Reinforce central oversight mechanisms for monitoring or approving company investment plans.
  - Improve quantity and quality of investments, for instance by encouraging environmentally friendly technologies.
  - Sharpen fiscal risk analysis using stress tests (IMF 2020b).
- Supporting evidence: "A World Bank study shows that 55 percent of infrastructure investment by the private and public sectors in emerging markets and LIDCs was undertaken by state-owned enterprises (World Bank 2017)."

### Stimulating Private Sector Investment and Economic Development
- Public and private infrastructure investments have strong complementarities; use public investment strategy to bolster private sector confidence and guide sectoral decision-making.
- Government leadership can trigger private engagement (example: government investment in new energy technologies).
- Government support cited as instrumental to development of electric vehicles and wind energy markets (example reference to action to "quadruple offshore wind power by 2030" cited in source).

### UK Delivery Confidence Assessments by Sector, 2020 (figure highlights)
- Figure label: "RedAmber/RedAmberAmber/GreenGreenExempt"
- Sector labels in figure: "Infrastructure and Construction", "Government Transformation and Service Delivery", "Military Capability", "ICT"
- Numeric strings as presented in the figure: "34541951", "34112119", "303419211", "272121021", "1"
- Note: "ICT = information and communication technology."

*Source: Executive Summary of htnea2021007 - Executive Summary (How to Manage Public Investment During a Postcrisis Recovery), Fiscal Affairs Department, International Monetary Fund, July 2021.*

### Executive Summary ������������������������������������������������������������������������������������������������������

### Executive Summary

### Introduction and key context
- Public investment is likely to be an important component of any postcrisis recovery program, including recovery from the COVID-19 pandemic.
- The pandemic is described as “the most recent and deepest shock the world economy has encountered in peacetime (IMF 2020d).”
- Countries will emerge with scarce fiscal space, elevated debt levels, and large financing needs, increasing the imperative to make every dollar count.
- A recent IMF work (Schwartz and others 2020) finds that, on average, countries lose more than one-third of the resources spent on public investment due to inefficiency.
- The IMF (2020b) argues governments must scale up public investment to ensure successful reopening, boost growth and employment, and green their economies.
- The note draws on the Public Investment Management Assessment (PIMA) framework conducted in over 60 countries and focuses on institutions regarded as vital during postcrisis recovery.

### Main advice and practical priorities
- Countries should consolidate and accelerate existing project-planning and decision-making procedures.
- The public investment plan (PIP) should be revisited, with possible changes to prioritization and phasing: accelerate some projects, defer or cancel others.
- Project appraisals may need updating and supplementation with revised criteria.
- The government should define clear selection criteria based on targets for the overall recovery program.
- The postcrisis investment program should be reflected in transparent medium-term budget decisions.
- Maintenance and capital repairs can be very productive and should play important roles in postcrisis recovery.
- Procurement processes may need accelerating but must include safeguards to support compliance and effective oversight.
- Strong project management is necessary to ensure projects are implemented according to planned timetable and budget and deliver expected benefits.
- Portfolio monitoring is essential for assessing progress and assuring successful implementation of the overall project portfolio in the postcrisis recovery program.

### Challenges to public investment management for recovery
- Fundamental challenge: ensure policymakers select and implement the best combination of public investment projects during recovery.
- Countries face tradeoffs between speed, due process, and accountability; risks include political interference, rent-seeking, environmental damage, and excessive maintenance burdens if processes are short-circuited.
- Capacity constraints are significant in many countries, particularly in low-income developing countries (LIDCs) and emerging market economies (EMEs); advanced economies also show notable weaknesses.

### How to prepare public investment management institutions for recovery
- The note offers tiered guidance: Basic, Medium, and Advanced practices to accommodate countries with varying capacities.
- Basic and medium practices are designed to be applied quickly within existing legal and regulatory frameworks and to contribute to longer-term institutional improvement.

### Recommendations summarized by area (Basic Practice | Medium Practice | Advanced Practice)
- Political Guidance and Institutional Arrangements
  - Basic Practice: Ad hoc review of existing project pipeline.
  - Medium Practice: Partial review of the PIP by a dedicated investment committee.
  - Advanced Practice: Full review of the PIP with endorsement by the cabinet and parliament.

- Project Appraisal
  - Basic Practice: Multicriteria analysis (simplified).
  - Medium Practice: Cost effectiveness and multicriteria analysis.
  - Advanced Practice: Comprehensive B/C analysis.

- Project Selection
  - Basic Practice: Limited criteria set based on multicriteria analysis.
  - Medium Practice: Selection based on cost-effectiveness and limited B/C analysis.
  - Advanced Practice: Selection based on B/C analysis and additional multicriteria analysis.

- Maintenance Projects
  - Basic Practice: General allocations to routine maintenance.
  - Medium Practice: General allocations for routine maintenance; selective allocations for capital repairs.
  - Advanced Practice: Comprehensive program for maintenance and capital repairs based on documented needs.

- Medium-Term Budgets
  - Basic Practice: Political commitment to medium-term PIP.
  - Medium Practice: Published medium-term budget framework incorporates medium-term PIP.
  - Advanced Practice: Medium-term appropriations to finance the PIP.

- Public Procurement
  - Basic Practice: Good documentation of procurement tenders and contracts.
  - Medium Practice: Approval of procurement contracts within minimum time periods, high degree of transparency, and compliance with law.
  - Advanced Practice: Active pretender market engagement with advance procurement notices.

- Project Management
  - Basic Practice: All projects in the postcrisis PIP have identified responsible project managers and clear implementation plans.
  - Medium Practice: Postcrisis public investment support unit supports project managers and helps address implementation challenges.
  - Advanced Practice: All investment projects in the recovery PIP are subject to advanced management arrangements.

- Portfolio Oversight
  - Basic Practice: Major projects for special scrutiny and reporting by each ministry are identified.
  - Medium Practice: Central monitoring of all major projects, including public summary reports.
  - Advanced Practice: Consolidated public investment portfolio with automated monitoring and reporting.

### Need for consistency with other recovery measures
- Avoid disruption of ongoing public investment projects; balance acceleration with continuity.
- Coordinate investments with subnational governments to ensure alignment of priorities and implementation capacity.
- Promote and coordinate public corporation investment as part of the recovery effort.
- Stimulate private sector investment and broader economic development as complements to public investment measures.

### Examples of announced investment-led stimulus (illustrative)
- European Union: NextGenerationEU is a €750 billion temporary recovery instrument. The centerpiece, the Recovery and Resilience Facility, has €672.5 billion in loans and grants available to support reforms and investments by EU countries.
- Nepal: The Government of Nepal and Development Partners agreed on a Relief, Recovery and Resilience Plan including up to $840 million for immediate COVID-19 needs and up to $6.6 billion for supporting green recovery across multiple areas.

*Source: Executive Summary of htnea2021007 - Executive Summary (How to Manage Public Investment During a Postcrisis Recovery), Fiscal Affairs Department, International Monetary Fund, July 2021.*

### Box 1. Sample Announcements of Recovery Plans

### Box 1. Sample Announcements of Recovery Plans

### Institutional Arrangements
- Governments should set up high-level mechanisms for reviewing existing PIPs and make changes that will support recovery, deciding which projects might be terminated or postponed, and which new projects should be introduced.
- Pipeline projects may need reevaluation against government criteria for feasibility studies and investment appraisals, supplemented with additional criteria (for example, environmentally friendly infrastructure).
- The costs of changing an existing PIP—for example, by canceling or postponing projects already under implementation—should be factored into analysis; these costs can be considerable, particularly in countries with limited capacity.
- About 40 percent of countries have full or partial PIPs in place
6
 (Allen and others 2020).
- The timeframe for developing the postcrisis PIP will often be short; governments may focus on a subset of projects that are larger, strategically important, or suited to the recovery phase.
- Good public investment planning requires coordination among the ministry of finance, the ministry responsible for economic development and national planning, and line ministries; in some countries these functions are combined.
- Institutional options and practices by capacity level:
  - Basic practice: government resolution that spells out PIP objectives, decision-making organization, and a concrete timetable for analyzing and approving projects; establish high-level investment committees or task forces where capacity is limited.
  - Medium practice: government resolution defining parameters for the postcrisis PIP; establish high-level committee or task force to coordinate and support work, ensure timely decision-making.
  - Advanced practice: political priorities anchored in the legislature; task strong existing public investment planning institutions with developing the postcrisis program and accelerate/strengthen procedures as needed.
- Development partners and subnational governments may contribute financing, expertise, and institutional support, especially in low-capacity countries.

### Project Appraisal
- Projects for the postcrisis PIP should be subject to robust and consistent appraisal so they can be compared during selection; appraisal may be adjusted for higher required rates of return and additional environmental conditions.
- Funnel-and-gateway approach: iterative review where only the most promising proposals reach full appraisal; reduces wasted preparation on projects unlikely to be realized.
- Appraisal practices by capacity level:
  - Basic practice: financial analysis and simplified multicriteria analysis; identify direct costs and revenues; assess impact on growth, employment, environmental and social conditions using a simplified scale (positive/negative and low/medium/high); identify major project risks.
  - Medium practice: simple cost-effectiveness assessment; detailed estimates for investment and operational costs, revenues, and external factors; demonstrate why recommended option is best; identify project risks and impacts.
  - Advanced practice: comprehensive benefit/cost analysis quantifying financial and economic impacts including quantifiable externalities; supplementary multicriteria analysis for nonquantified impacts; comprehensive risk analysis and mitigation measures.
- Table 5 (Project Appraisal Elements) defines specific appraisal elements across Basic, Medium, Advanced practice (Project Rationale, Project Status and Timetable, Project Description, Cost Estimates, Revenue Estimates, Project Benefits and Impacts, Option Analysis, Risk Analysis, Implementation Plan, Procurement Strategy and Plan, Financing Plan) with progressively more detailed requirements.

### Project Selection
- Selection should occur via a consolidated government process, with clear and transparent criteria distinguishing weighted criteria (for prioritization) and threshold criteria (must be met).
- Project readiness is important but should not dominate selection over quality (growth impact, benefit/cost ratio); "shovel ready" projects are rare and not necessarily most beneficial.
- Selection practices by capacity level:
  - Basic practice: limited criteria based on multicriteria analysis from appraisal; example basic selection framework (Table 6) uses:
    - Financial Viability: Project revenue/costs (index) 0–3 Weight 25 percent
    - Strategic Priority: Index 0–3 Weight 50 percent
    - Job Creation: Number of jobs (index) 0–3 Weight 25 percent
    - Environmental Impact: Composite index –3–3 Minimum +1
    - Social Impact: Composite index –3–3 Minimum +1
    - Project Readiness: Time to start project 1 month Maximum 3 months
  - Medium practice: more comprehensive criteria (cost-effectiveness or basic benefit indicator), supplement political priority with sector growth impact estimates.
  - Advanced practice: use B/C analysis with supplementary criteria (example Table 7):
    - Benefit-Cost Ratio: Project benefits/costs 0 Minimum 1.5 Weight 30 percent
    - Growth Impact: Growth multiplier 0 Minimum 1 Weight 10 percent
    - Job Creation: Number of person-years 0 Minimum 1000 Weight 10 percent
    - Environmental Impact: Composite index –3–3 Minimum +1 Weight 10 percent
    - Social Impact: Composite index –3–3 Minimum +1 Weight 10 percent
    - Project Readiness: Time to start project after approval 1 month Maximum 3 months Weight 10 percent
    - Risk Rating: Risk rating index after recommended mitigation actions –3–3 Minimum +1 Weight 20 percent
- The selection process should include reconsideration of previously endorsed projects for postponement or cancellation based on revised priorities.

### Medium-Term Investment Budgeting and Maintenance
- A credible postcrisis PIP provides predictability on funding and signals to industry about future activity; anchoring the PIP in a realistic medium-term budget process increases credibility and impact.
- Budgeting practices by capacity level:
  - Basic practice: strong political commitment to medium-term PIP funding; governmental or parliamentary approval can provide reasonable assurance where MTBFs are weak.
  - Medium practice: published MTBF that specifies allocations to key investment priorities in the medium-term PIP.
  - Advanced practice: formal medium-term budget appropriations for the PIP and transparent reporting of approved projects; multiyear fund allocation mechanisms practiced in many OECD countries.
- Maintenance projects often achieve high returns, are small and standardized, and can be scaled up:
  - Basic practice: general allocations to routine maintenance across government organizations; simple per-unit allocations (for example per square meter of buildings).
  - Medium practice: augment routine maintenance funding with selective capital repairs and reinvestment projects identified as components of PIP updates; delegate allocations to line ministries under general maintenance spending.
  - Advanced practice: established mechanisms for defining maintenance needs (regular surveys, agency-level maintenance models); include increased allocations to projects defined through these mechanisms and reflect maintenance in special reporting on postcrisis spending.

### Public Procurement
- Procurement bottlenecks are major risks to timely implementation; problems often stem from inadequate project preparation and failure to apply existing procurement rules.
- Two types of accelerated procurement:
  - Emergency procurement: for contexts where life, property, or equipment is immediately at risk; widely used early in the COVID-19 pandemic.
  - Nonemergency accelerated procurement: for unforeseen circumstances requiring urgent response; should be exceptional.
- Countries should be cautious using emergency procurement for postcrisis PIPs; any such procedures should be well documented, transparent,
13
 and subject to audit.
14
- Procurement practices by capacity level:
  - Basic practice: ensure procurement strategies align with legislation, project documents support efficient procurement, publish all contracts for public infrastructure projects, enable multiyear procurement for major projects consistent with law timeframes.
  - Medium practice: require procurement documents be prepared prior to project approval to allow immediate contract announcement; well-defined legal and regulatory framework for procurement; competitive and transparent processes.
  - Advanced practice: well-functioning e-procurement system with extensive reporting and analysis; active market engagement and advance procurement notices to prepare bidders.
- Note: PPPs are generally not viable for early-stage postcrisis recovery unless already mature due to complexity and time required; they may be appropriate for longer-term implementation.

### Project Management and Portfolio Monitoring
- Good project management is critical: projects should meet timetables, budgets, and guarantee planned benefits; significant delays or overruns may require reconsideration of a project’s inclusion in the PIP.
- Project implementation plans with timetables for physical progress and financial outlays are essential; baseline comparisons are needed to assess on-track performance.
- The S-curve is a common monitoring tool plotting estimated vs. actual accumulated costs and physical completion to identify cost overruns and delays early.
- Project management practices by capacity level:
  - Basic practice: identify all PIP projects within line ministry management frameworks; appoint project managers; prepare implementation plans with timetables and procurement schedules; use project implementation units where capacity is limited.
  - Medium practice: public investment support unit at center of government to assist project managers and address implementation challenges; external financial institutions or private sector resources may assist.
  - Advanced practice: comprehensive, effective management arrangements across ministries with postcrisis public investment incorporated into existing frameworks.
- Portfolio monitoring and oversight:
  - Basic practice: line ministries monitor project implementation, timetables, budgets, and expected results.
  - Medium practice: central government monitoring unit compiles progress reports, identifies projects at risk, coordinates with Ministry of Finance fiscal risk management unit; progress reports should be published.
  - Advanced practice: systematic monitoring, updating, and reporting of overall public investment portfolios; postcrisis PIPs identified within portfolios; high-risk or off-track projects subject to heightened scrutiny by cabinet or high-level committees.
- Example frameworks: UK quarterly project delivery confidence assessments (green/red color coding) for major project monitoring.

### Main Issues and Challenges (Table 2 excerpt)
- PIMA Effectiveness Scores (Average of 64 PIMAs) LIDCEMEAE
  - Institutional Arrangements: Need to consolidate, strengthen, and accelerate project planning and decision-making for the postcrisis investment portfolio.
  - Project Appraisal: Weak technical capacity for project appraisal undermines the ability to identify projects that best meet postcrisis objectives. 1.3 1.4 2.3
  - Project Selection: Lack of rigorous prioritization and an incremental selection process reduce the consistency and impact of the postcrisis program. 1.2 1.3 1.6
  - Budgeting: The lack of an effective MTBF undermines the credibility and impact of the postcrisis investment program. 1.5 1.4 2.1
  - Maintenance Projects: Persistent underfunding and the lack of a robust and comprehensive framework for maintenance spending reduces its potential impact on postcrisis recovery. 1.3 1.6 2.0
  - Procurement: Inefficient procurement practices lead to delays in implementing the postcrisis PIP. 1.6 1.7 2.6
  - Project Management: Weak implementation capacity causes delays and cost overruns, increasing fiscal risk and reducing the postcrisis program’s net benefits. 1.6 1.5 2.2
  - Program Monitoring: Weak consolidated monitoring capacity limits the ability to measure portfolio performance and maximize the impact of postcrisis investment. 1.6 1.6 2.1

### Integration with Other Postcrisis Measures
- Public investment management must be coordinated with other recovery measures to ensure mutual reinforcement and avoid undermining effectiveness.
- Avoiding disruption of ongoing projects: robust project management and portfolio oversight can identify supply delays, financial distress in construction firms, and other risks, enabling proactive government action.

*Source: Box 1. Sample Announcements of Recovery Plans, HOW TO MANAGE PUBLIC INVESTMENT DURING A POSTCRISIS RECOVERY, International Monetary Fund | July 2021.*

### 1. Project X: Financial Execution

### Project X: Financial Execution

### Financial and Physical Execution Overview
- Financial execution reported in "Million USD" (table header present in source).
- Physical execution reported as "Percentage completion" (table header present in source).
- "Months" is shown as a temporal axis label for both financial and physical execution charts.

### Project continuity and PPP vulnerabilities
- Projects procured as PPPs, and that are already operating, may be susceptible to similar disruptions.
- The crisis may lead to reduced activity levels that undermine the expected revenue flow, as was the case when the COVID-19 pandemic forced people to isolate at home, rather than travel to work on a public transport system procured as a PPP.
- Active project oversight and contract management will be critical to identifying potential solutions and avoiding disruption.

### Coordinating Investments with Subnational Governments (SNGs)
- SNGs are vital to public investment in many countries.
- SNGs may be directly impacted by or involved in central government investment programs, for instance, through grant schemes for the maintenance of municipal buildings or the cofinancing of road building programs.
- SNG investments may be less complex and can be implemented quickly.
- Effective coordination between central and subnational governments will promote efficiency and help ensure that the impacts of infrastructure projects are maximized across the economy.
- An SNG’s capacity is often weaker than the central government’s, and some countries may choose centralized approaches to developing postcrisis PIPs.

### Promoting Public Corporation Investment
- Public corporations play major roles in public investment in many countries, especially in the energy, transport, communication, and water supply sectors.
- In some cases, these investments are already closely coordinated with the central government and form part of the government’s PIP; in other cases, there is an arm’s-length relationship between the government and such companies.
- Public corporations are vulnerable to corruption and other fiscal risks (Allen and Alves 2016; IMF 2020c).
- When developing its recovery PIP, a government should consider whether it can strengthen existing mechanisms to encourage more and better public corporation investments while respecting a company board’s decision-making autonomy.
- Examples of possible actions:
  - Reinforce central oversight mechanisms for monitoring or approving company investment plans.
  - Improve both the quantity and quality of such investments, for instance by encouraging the use of environmentally friendly technologies.
  - Sharpen analysis of the fiscal risks they may create by using stress tests (IMF 2020b).
- Supporting evidence: "A World Bank study shows that 55 percent of infrastructure investment by the private and public sectors in emerging markets and LIDCs was undertaken by state-owned enterprises (World Bank 2017)."

### Stimulating Private Sector Investment and Economic Development
- Public and private infrastructure investments often share strong complementarities; these should be harnessed in a postcrisis recovery program.
- A credible public investment strategy, which is widely shared by the government, would help bolster private sector confidence and guide decision-making in specific sectors and activities.
- Government leadership is required in some areas (example: government investment in new energy technologies can trigger private companies to engage in similar projects).
- Government support of the development of electric vehicles and wind energy has had a major impact on these markets (example reference to action to "quadruple offshore wind power by 2030" cited in source).

### UK Delivery Confidence Assessments by Sector, 2020 (figure highlights)
- Figure label: "RedAmber/RedAmberAmber/GreenGreenExempt"
- Sector labels in figure: "Infrastructure and Construction", "Government Transformation and Service Delivery", "Military Capability", "ICT"
- Numeric strings as presented in the figure: "34541951", "34112119", "303419211", "272121021", "1"
- Note: "ICT = information and communication technology."

*Italic: Source: Authors; material drawn from "How to Manage Public Investment During a Postcrisis Recovery," International Monetary Fund | July 2021.*

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_Source: https://www.imf.org/-/media/files/publications/howtonotes/2021/english/htnea2021007.pdf_