## Public Investment in Slovenia — PIMA (tarea2024084-print-pdf)

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### Mission, participants, and timeline
- IMF Fiscal Affairs Department (FAD) mission conducted a Public Investment Management Assessment (PIMA) for Slovenia during April 11–26, 2023.
- Mission leadership and team:
  - Led by Mr. Vincent Tang (FAD).
  - Team members: Mr. Rossen Rozenov (IMF European Department), Mr. Paul Harnett, Mr. Rui Monteiro, and Mr. Willie du Preez (FAD Short Term Experts).
- Principal government counterparts and interlocutors include Minister of Finance Mr. Klemen Boštjančič and senior officials across the Ministry of Finance and other ministries and institutions (listed in source).

### Executive summary — context and headline findings
- Public capital and investment context:
  - Slovenia has a high public capital stock relative to Southeastern European peers.
  - Public investment levels have been above the EU average over the past two decades.
  - EU funds account for nearly a third of public investment in 2022.
  - In the 2014−20 programming period, Slovenia received EU investment funding of 6.2 percent of the 2022 GDP and achieved an absorption rate of 87 percent among CESEE-EU countries.
  - Over the 2021−27 programming period, a comparable amount of EU-funded investment is planned.
- Efficiency and performance:
  - The public investment efficiency gap relative to the frontier is 17 percent, broadly in line with the EU average.
  - Strong quantitative outcomes: motorway and railway density indicators are areas of good performance.
  - Perceptions of infrastructure quality deteriorated after the 2013 banking crisis, potentially linked to decline in public investment in 2014−17.
  - Closing the 17 percent gap would improve availability and quality of infrastructure per euro spent and enhance EU funds absorption.
- Institutional strengths:
  - Strengths include availability of funding for public investment; fiscal targets and rules; maintenance funding; monitoring of public assets.
  - Transparency tools: programmatic budget presentation (Načrt Razvojnih Programov) and online project visualization portal (SAPPrA).
  - Good integration of EU-funded and domestically financed projects in the budget, despite some planning/appraisal differences.
- Key institutional weaknesses and bottlenecks:
  - Project appraisal and selection: appraisal often occurs after budget inclusion; no consistent MOF review; weak risk assessment; no required project review before budget inclusion.
  - Procurement: scarce effective competition for construction contracts in major projects, raising costs and delays.
  - Portfolio management and oversight: no central monitoring of major projects; ex-post reviews generally not performed except for some EU projects.
- Execution pressures:
  - Slovenia plans ambitious increases in public investment under higher EU funds.
  - Required execution increase: raise public investment execution over the coming three years by over 25 percent relative to the average over the preceding decade.
  - Recent under-execution: general government capital budget under-executed by an average of approximately 20 percent in 2021 and 2022.
  - Near-term priorities: (i) increase project preparation and design capacity of implementing agencies; (ii) reduce delays in spatial planning and permits; (iii) address low levels of competition in procurement for construction contracts.
- Medium- and long-term implications:
  - Need for a central function to monitor physical and financial progress of major projects and associated fiscal risks.
  - As fiscal constraints tighten (binding fiscal rules, potential fall in EU funds after 2027, ageing population), stronger appraisal and selection processes are essential.

### Selected quantitative indicators and execution targets cited
- EU investment funding in 2014−20 programming period: 6.2 percent of the 2022 GDP.
- EU absorption rate in 2014−20 programming period: 87 percent.
- Public investment efficiency gap relative to frontier: 17 percent.
- Planned required increase in public investment execution over coming three years: over 25 percent relative to the average over the preceding decade.
- Recent under-execution of general government capital budget: an average of approximately 20 percent in 2021 and 2022.
- EU programming period referenced: 2021−27.

### PIMA assessment highlights (selected institutional scores and priorities)
- Strengths (HIGH institutional strength; HIGH effectiveness; Reform priority: Low):
  - Fiscal targets and rules.
  - Maintenance funding.
  - Monitoring of public assets.
  - Availability of funding.
- Areas needing high reform priority:
  - Project appraisal: MEDIUM institutional strength; LOW effectiveness; Reform priority: High.
  - Project selection: LOW institutional strength; LOW effectiveness; Reform priority: High.
  - Procurement: HIGH institutional strength; MEDIUM effectiveness (scarce competition); Reform priority: High.
  - Portfolio management and oversight: MEDIUM institutional strength; LOW effectiveness; Reform priority: High.

### Prioritized recommendations (selected, by timeframe and lead)
- Near/Medium term
  - 1. Provide explicit funding for project preparation, avoiding presentation to the Budget of insufficiently developed projects.
    - Responsibility: Line ministries.
    - Timeframe: Near/Medium term.
    - PIMA Inst.: 4, 10.
  - 5. Undertake analysis to identify reasons for scarce competition in procurement of construction contracts and produce recommendations for correction.
    - Responsibility: Ministry of Public Administration.
    - Timeframe: Near term.
    - PIMA Inst.: 11.
- Medium term
  - 2. Increase internal capacity of line ministries for development of project preparation and design.
    - Responsibility: MOF, Line ministries.
    - Timeframe: Medium term.
    - PIMA Inst.: 4, 10.
  - 3. Establish inter-ministerial Steering Committees for major projects.
    - Responsibility: MOF, Line ministries.
    - Timeframe: Medium term.
    - PIMA Inst.: 3, 4, 10.
  - 4. Establish and adhere to clear timeframes for spatial planning.
    - Responsibility: Ministry of Environment, Climate and Energy.
    - Timeframe: Medium term.
    - PIMA Inst.: 3.
- Medium/Long term
  - 7. Establish a central function for physical and financial monitoring of project progress and fiscal risks (possibly within MOF).
  - 8. Establish central monitoring of portfolio for fiscal risks (MOF).
  - 9. Clear up capital project pipeline in budget; review projects failing to implement after several years.
  - 10. Introduce central review and central selection function within the MOF (Public Finance Act, Article 23).
  - 11. Strengthen appraisal methodology to enable compilation of a single pipeline of appraised projects for selection.

### Near-term execution challenges and remedies (2021–2027)
- Planned increase in public investment to between 5-6 percent of GDP over the coming three years, underpinned by increased EU funds.
- Capital expenditure under-executed by approximately 20 percent relative to plans in 2021 and 2022.
- Identified execution bottlenecks and recommended actions:
  - Project preparation and design capacity:
    - Limited capacity in some line ministries and municipalities; recommendation: Ensure explicit funding for project preparation (Recommendation 1); bolster capacity within line ministries and municipalities (Recommendation 2).
  - Delays in final project approval:
    - Lengthy design/approval and late stakeholder consultation; recommendation: Appoint high-level project steering committees for major projects (Recommendation 3).
  - Spatial planning and permits:
    - Significant delays from spatial planning and permits; recommendation: Set and adhere to clear timeframes for spatial planning (Recommendation 4). The process normally is concluded in between 200–250 days.
  - Construction sector capacity and procurement competition:
    - Difficulty obtaining contractors and poor competition; recommendations: Analyze causes of low-competition tenders (Recommendation 5); develop market for domestic and international competition (Recommendation 6).

### Project appraisal, selection, and methodological gaps
- Appraisal practice and gaps:
  - Legislation requires rigorous analysis but does not require review process nor publication of appraisal reports.
  - Uniform Methodology exists but no government department supports entities in applying it.
  - Many projects are not appraised before inclusion in the Budget; appraisal reports are usually not forwarded to the MOF.
  - EU-funded projects produce appraisal reports for the European Commission but often after budget inclusion; some EU projects receive independent external review (e.g., Jaspers for projects above EUR 5m).
  - Risk assessment is required in theory but not systematically applied; risk management plans are not required.
- Project selection shortcomings:
  - No requirement for review prior to budget inclusion; no published prioritization criteria or pipeline of appraised projects.
  - In practice, projects are presented on project concept only; MOF focuses on ministerial ceilings rather than individual project scrutiny.
- Recommended institutional arrangements:
  - Create funding mechanism for project preparation conditional on preliminary assessment.
  - Establish independent review of appraisals and a pipeline of appraised projects.
  - Publish selection criteria and require annual selection based on those criteria.

### Procurement and market development
- Legal framework and practice:
  - Public Procurement Act (ZJN-3, 1915) aligns with European directives; e-JN procurement portal provides transparency.
  - Evidence of scarce effective competition: use of open procedures has declined; nearly one third of competitions had a single bidder in the last year.
  - Sample data:
    - Road works (Infrastructure Agency): 13 percent of tender processes had a single bidder in 2021; 14 percent in 2022.
    - Railway works (Infrastructure Agency): 67 percent single bidder in 2021; 75 percent in 2022.
- Recommendations to improve competition:
  - Include effective competition indicators (number of bidders, deserted tenders) in annual procurement reports.
  - Consult procurement teams and private contractors to propose legal and training measures.
  - Extend training to private firms; launch workshops; create inter-ministerial committee on private sector participation.

### Portfolio management, monitoring, and fiscal risk
- Current gaps:
  - No central monitoring of major projects’ cost or physical progress; monitoring fragmented across ministries and MOCRD (financial progress only for EU-funded projects).
  - Lack of central monitoring prevents identification and escalation of high-risk projects.
  - Ex-post reviews are not standard practice; Regulation on the Single Methodology requires ex-post reviews but provides no format or timing; in practice, ex-post reviews are limited to a few EU-funded major projects.
- Consequences and case studies:
  - Third Development Axis Project: cost increase from Euro 2.2 billion to Euro 4,2 billion (92 percent cost increase); delay period: 16 years.
  - Second track of the Divača–Koper Railway Line Project: Cost Euro 1,25 billion + Euro 340 million; delay period: 15 years.
  - NEK2 nuclear energy planning: 122 studies to the value of Euro 16 million; delay period: 13 years.
  - Court of Audits note: issues could have been identified early with proper portfolio management, reducing timeframes and saving costs.
- Recommended actions:
  - Recommendation 7: Establish central function for physical and financial monitoring (MOF).
  - Recommendation 8: Establish central monitoring of fiscal risks; map sources of fiscal risk and create a database with quantified impacts, probabilities, and mitigation measures; receive quarterly reports on infrastructure fiscal risks.

### Management of implementation, audits, and overruns
- Implementation arrangements:
  - Regulations require senior responsible officers for major projects, but implementation plans are not mandatory pre-approval.
  - MOI, DARS, and public corporations have established reporting and project management practices; Ministry of Infrastructure receives weekly reports and prepares monthly management reports.
- Cost adjustment and audit rules:
  - Cost adjustments above 20 percent require Government approval and must be communicated to MOF; a new investment plan is required when cost adjustments exceed 20 percent.
  - External audits and performance audits are conducted (Court of Audit); audit reports are published.
- Project overruns (examples, Table 4.1 summary):
  - POLJE IV: Percentage cost overrun 8; Percentage time overrun 55.
  - Novo Brdo: Percentage cost overrun 0.5; Percentage time overrun 0.
  - Rakova Jelša II: Percentage cost overrun 28; Percentage time overrun 44.
  - Pod pekersko gorco faza 1: Percentage cost overrun 8; Percentage time overrun 13.
  - Dolgi most: Percentage cost overrun 5; Percentage time overrun 21.
  - Pod pekersko gorco faza 2: Percentage cost overrun 23; Percentage time overrun 25.
  - Dečkovo Naselje: Percentage cost overrun 6; Percentage time overrun 0.
  - Ministry of Infrastructure note: Fifty percent of projects implemented by the Ministry of Infrastructure over a period of 9-10 years experienced cost overruns of between 6 and 20 percent. All cost increases resulted from additional work during the implementation stage.

### Maintenance, asset registers, and IT systems
- Maintenance funding:
  - Institutional Strength—High; Effectiveness—High; Reform Priority—Low.
  - Standard methodologies exist for routine and capital maintenance (road, hospital equipment, railway maintenance); 15-16 percent of realized capital expenditure in each of the last 3 years dedicated to capital maintenance.
- Monitoring of public assets:
  - Strength—High; Effectiveness—High; Reform priority—Low.
  - Fixed asset registers maintained by line ministries, municipalities and PCs; regular inspections; assets included in government financial statements and revalued annually.
  - Ministry of Health balance sheet examples (EUR) for Hospitals and Other medical centers provided for 31 December 2021 and 31 December 2022 in source.
- IT systems supporting PIM:
  - Key systems: SAAPrA and APPrA (budgeting), MFERAC (financial accounting, fixed asset management), e-JN (procurement).
  - MFERAC used by 170 organizations and more than 7000 users; e-JN contains live tenders, blacklisted suppliers, 10 years of historical tender data.

### Staff capacity and institutional implications
- Staff capacity is unevenly distributed; Ministry of Infrastructure better equipped; other ministries and municipalities constrained.
- Anticipated needs as investment increases:
  - Central monitoring and appraisal-review functions require qualified staff; wage differentials and retention pose challenges.
  - MOF, with development partners, could disseminate good practices and provide training; opportunities include secondments and IMF Centre for Excellence in Finance.
- Forthcoming public sector wage reform is an opportunity to introduce incentives for in-demand skills.

### Annex highlights: PIMA questionnaire scores and next steps
- Selected Annex 2 scores (Indicator strength, effectiveness) — examples preserved:
  - 1.a. 3, 2
  - 4.a. 2, 1
  - 10.a. 1, 1
  - 11.a. 3, 1
  - 12.b. 3, 3
  - 13.a. 1, 1
  - 15.a. 3, 3
- Annex 6 (example next steps to strengthen appraisal and selection) includes:
  - Create a taskforce to prepare regulations and revised methodology.
  - Ensure Selection Regulations require MOF review of appraisal before budget presentation and create a permanent pipeline of appraised projects.
  - Revise Standard Methodology to fund preliminary design and feasibility studies, differentiate appraisal by project size, require MOF systematic review of appraisals, and strengthen risk assessment methodology.
  - Publish Selection Regulations and updated Unified Methodology; train MOF staff; pilot with two line ministries in 2024; extend MOF support to all ministries.

*Source: IMF FAD mission PIMA for Slovenia (April 11–26, 2023), Preface and Executive Summary and chapter excerpts as presented in the provided content.*

### PREFACE _________________________________________________________________________________________ 6

### PREFACE

### Mission, participants, and timeline
- IMF Fiscal Affairs Department (FAD) mission conducted a Public Investment Management Assessment (PIMA) for Slovenia during April 11–26, 2023.
- Mission leadership and team:
  - Led by Mr. Vincent Tang (FAD).
  - Team members: Mr. Rossen Rozenov (IMF European Department), Mr. Paul Harnett, Mr. Rui Monteiro, and Mr. Willie du Preez (FAD Short Term Experts).
- Principal government counterparts and interlocutors:
  - Mr. Klemen Boštjančič, Minister of Finance.
  - Ministry of Finance: Ms. Saša Jazbec (State Secretary), Ms. Mojca Pirnat (Director General, Budget Directorate), Ms. Miranda Groff-Ferjančič (Deputy Director, Budget Directorate), Ms. Katja Lautar (Director General, Economic and Fiscal Policy Directorate), Mr. Aleksander Nagode (Director General, Public Property Directorate), and representatives from the Budget Directorate, Treasury Directorate, and Public Accounting Directorate.
  - Other institutions met: Ministry of Infrastructure; Ministry of Cohesion and Regional Development (MOCRD); Ministry of Health; Ministry of the Environment, Climate and Energy; Ministry of Public Administration; Ministry of Natural Resources and Spatial Planning; Medvode Municipality Government; Fiscal Council; Institute of Macroeconomic Analysis and Development (IMAD); Court of Audit; Slovenian Sovereign Holdings; GEN Energija; DARS.
- The assessment builds on the Fiscal Council analysis: “Public Investment in Slovenia: Trends, Structure and Challenges” (2021).

### Acknowledgements
- The mission thanks the Government of Slovenia for cooperation and participation, with specific thanks to Ms. Miranda Groff-Ferjančič and Ms. Karmen Rus for leadership and coordination.
- Interpreters thanked: Ms. Maja Viteznik, Ms. Meta Kozuh, Ms. Mojca Marija Bozic.

### Executive summary — key findings and context
- Public capital and investment context:
  - Slovenia has a high public capital stock relative to Southeastern European peers.
  - Public investment levels have been above the EU average over the past two decades.
  - EU funds account for nearly a third of public investment in 2022.
  - In the 2014−20 programming period, Slovenia received EU investment funding of 6.2 percent of the 2022 GDP and achieved an absorption rate of 87 percent among CESEE-EU countries.
  - Over the 2021−27 programming period, a comparable amount of EU-funded investment is planned.

- Efficiency and performance:
  - The public investment efficiency gap relative to the frontier is 17 percent, broadly in line with the EU average.
  - Strong quantitative outcomes: motorway and railway density indicators are areas of good performance.
  - Perceptions of infrastructure quality deteriorated after the 2013 banking crisis, potentially linked to decline in public investment in 2014−17.
  - Closing the 17 percent gap would improve availability and quality of infrastructure per euro spent and enhance EU funds absorption.

- Institutional strengths (PIMA findings):
  - Overall PIMA performance is strong relative to European peers.
  - Areas of strength: availability of funding for public investment; fiscal targets and rules; maintenance funding; monitoring of public assets.
  - Transparency: the programmatic budget presentation (Načrt Razvojnih Programov) and online project visualization portal (SAPPrA) increase public accessibility and transparency.
  - Integration: EU-funded and domestically financed projects show good integration in the budget despite some differences in planning and appraisal.

- Key institutional weaknesses and bottlenecks:
  - Appraisal and selection of projects:
    - Project appraisal is seldom done before project selection into the Budget.
    - Appraisal reports for EU-funded projects are produced and presented to the European Commission but usually after budget inclusion.
    - MOF has no consistent interaction with ministries on project appraisal; weak risk assessment and no required project review before budget inclusion.
  - Procurement:
    - Scarce effective competition for construction contracts in major projects, leading to higher costs and delays.
  - Portfolio management and oversight:
    - Major projects are not centrally monitored for physical or financial challenges.
    - Ex-post reviews are generally not performed except for some EU projects.

- Execution and short-term pressures:
  - Near-term execution challenge: Slovenia plans ambitious increases in public investment under higher EU funds.
  - Required execution increase: raise public investment execution over the coming three years by over 25 percent relative to the average over the preceding decade.
  - Recent under-execution: general government capital budget under-executed by an average of approximately 20 percent in 2021 and 2022.
  - Near-term priorities to address execution bottlenecks:
    - (i) increase project preparation and design capacity of implementing agencies;
    - (ii) reduce delays in spatial planning and obtaining permits;
    - (iii) address low levels of competition in procurement for construction contracts.

- Medium- and long-term fiscal and institutional implications:
  - Growing importance of keeping the public investment portfolio on track and managing fiscal risks as the portfolio of major projects expands through the 2021−2027 EU programming period.
  - Need for a central function to monitor physical and financial progress of major projects and associated fiscal risks to enable proactive issue identification and escalation.
  - Over the medium to longer term, tighter fiscal constraints (binding fiscal rules, potential fall in EU funds after 2027, aging population, other pressures) increase the premium on stronger appraisal and selection processes.
  - A central challenge function could ensure consistent appraisal methodology, objectivity, visibility of project pipeline, and prioritized project selection.

### PIMA assessment highlights (selected)
- Strengths:
  - Fiscal targets and rules: HIGH institutional strength; HIGH effectiveness; Reform priority: Low.
  - Maintenance funding: HIGH institutional strength; HIGH effectiveness; Reform priority: Low.
  - Monitoring of public assets: HIGH institutional strength; HIGH effectiveness; Reform priority: Low.
  - Availability of funding: HIGH institutional strength; HIGH effectiveness; Reform priority: Low.

- Areas needing high reform priority:
  - Project appraisal: MEDIUM institutional strength; LOW effectiveness; Reform priority: High.
  - Project selection: LOW institutional strength; LOW effectiveness; Reform priority: High.
  - Procurement: HIGH institutional strength; MEDIUM effectiveness (scarce competition); Reform priority: High.
  - Portfolio management and oversight: MEDIUM institutional strength; LOW effectiveness; Reform priority: High.

### Selected quantitative indicators and execution targets cited
- EU investment funding in 2014−20 programming period: 6.2 percent of the 2022 GDP.
- EU absorption rate in 2014−20 programming period: 87 percent.
- Public investment efficiency gap relative to frontier: 17 percent.
- Planned required increase in public investment execution over coming three years: over 25 percent relative to the average over the preceding decade.
- Recent under-execution of general government capital budget: an average of approximately 20 percent in 2021 and 2022.
- EU programming period referenced: 2021−27 (comparable planned EU-funded investment).

### Summary of prioritized recommendations (Table 0.2)
- Near/Medium term
  - 1. Provide explicit funding for project preparation, avoiding presentation to the Budget of insufficiently developed projects.
    - Responsibility: Line ministries.
    - Timeframe: Near/Medium term.
    - PIMA Inst.: 4, 10.
  - 5. Undertake analysis to identify reasons for scarce competition in the procurement of construction contracts and produce recommendations for correction.
    - Responsibility: Ministry of Public Administration.
    - Timeframe: Near term.
    - PIMA Inst.: 11.
- Medium term
  - 2. Increase internal capacity of line ministries for development of project preparation and design.
    - Responsibility: MOF, Line ministries.
    - Timeframe: Medium term.
    - PIMA Inst.: 4, 10.
  - 3. Establish inter-ministerial Steering Committees for major projects.
    - Responsibility: MOF, Line ministries.
    - Timeframe: Medium term.
    - PIMA Inst.: 3, 4, 10.
  - 4. Establish and adhere to clear timeframes for spatial planning.
    - Responsibility: Ministry of Environment, Climate and Energy.
    - Timeframe: Medium term.
    - PIMA Inst.: 3.

### Report structure and next sections
- Section I: historic trends and composition of public investment in Slovenia.
- Section II: efficiency of public investment in Slovenia relative to regional peers.
- Section III: summary of challenges and recommendations (near, medium, longer term).
- Section IV: full PIMA assessment, by investment cycle phase (planning, allocation, implementation) and cross-cutting issues.
- Section V: detailed recommendations.

*Source: IMF FAD mission PIMA for Slovenia (April 11–26, 2023), Preface and Executive Summary as presented in the provided content.*

### 6. Development of market for domestic and international

### 6. Development of market for domestic and international

### Key findings on public investment trends
- Total investment has declined as a percentage of GDP compared to the pre-global financial crisis (GFC) period; the last decade consistently experienced levels below the EU average.
- General government's investment has exceeded the EU average by approximately 1 percent of GDP, but with greater volatility.
- The banking crisis of 2012-13 and surge in public debt due to capital injections reduced fiscal space and prompted sustained fiscal consolidation.
- Government current expenditure declined by over 5 percent of GDP during consolidation; capital outlays fell to 3 percent of GDP in 2016-17 and recovered subsequently.
- Buildings and structures account for over half of general government spending on acquisition of fixed assets and exhibit the highest volatility.
- Investments in intellectual property products have remained relatively stable at around 0.7 percent of GDP or less than a quarter of the total for the economy.
- Slovenia has one of the highest public capital stocks in the CESEE-EU comparator group, both relative to GDP and in per capita terms, though growth of public capital stock slowed considerably after the GFC.

### Composition and financing of public investment
- Central government and extra-budgetary entities undertake most public investment; local governments' share has hovered around 40 percent of general government investment and at times exceeded half.
- Significant capital expenditure is carried out by special funds and extra-budgetary units (example: entity in charge of the Divača–Koper railway second track construction 2TDK).
- Social security funds' investment is minimal.
- PPPs are much less represented in Slovenia than on average in the EU and other advanced economies.
- Public Corporations (PCs) hold state equity of about 17 percent of GDP and invest around 2 percent of GDP.
- Key categories of capital expenditure by entity:
  - Central government: national roads, rail tracks, hospitals, schools.
  - Municipalities: water, sanitation, solid waste disposal, sports facilities, kindergartens, elementary schools, municipal roads, primary healthcare facilities.
  - Extra budgetary entities: specific projects (e.g., railway).
  - Public corporations: highways, energy infrastructure, natural gas infrastructure, and power plants.
  - PPPs: international airport (Fraport), specific municipal projects (e.g., renovation of Ljubljana office buildings, Ljubljana football stadium and sports arena).
- EU funds were 31 percent of total project cost in 2022, with an additional 6 percent in co-financing.
- In the 2014-20 programming period Slovenia received about EUR 3.7 billion (6.2 percent of 2022 GDP) in payments from the European Structural and Investment Funds (ESIF).
- Slovenia had among the highest ESIF absorption rates in the CESEE-EU group.
- Estimates suggest a 1 percent of GDP shock in ESIF leads to an increase in GDP and private investment by about 1.3 percent.

### Infrastructure quality, access, and digital connectivity
- Slovenia performs well on quantitative infrastructure indicators (e.g., motorway and railway density) relative to peers.
- Perceptions of infrastructure quality have deteriorated since the banking crisis, diverging from a decade-earlier position at par with the EU average.
- Based on Logistics Performance Index scores, Slovenia falls behind the EU in most areas but fares relatively well within CESEE-EU.
- Access to education infrastructure is slightly better than the average for advanced economies but lower than the EU average.
- There is a negative gap in access to health infrastructure; recent government investment focus targets health sector improvements.
- Slovenia is among leaders in amount of spectrum assigned and ready for 5G use within the pioneer spectrum bands.
- The percentage of populated areas with 5G coverage is well-below the EU average, though similar to CESEE-EU peers.
- The percentage of households covered with very high-capacity networks (VHCN) and access to fiber optics is greater compared to peers.
- Government objective: provide all households with high-speed broadband internet connection by 2025; NRRP includes investments in VHCN for households in “white spot” areas.

### Public investment efficiency
- IMF methodology estimates an efficiency gap of 17 percent for the hybrid indicator between Slovenia and the most efficient countries with comparable per capita capital stock.
- The distance between Slovenia’s efficiency gap and that of other advanced economies and the EU is about 4 percent.
- Closing the gap relative to the most efficient economy would increase availability and quality of infrastructure per unit of investment.

### Challenges summarized
- Implementation challenges for planned investment scale-up include rising costs and labor market constraints.
- Importance of increasing investment efficiency and absorption capacity given implementation constraints.
- Need to address fiscal risks and keep the growing portfolio on track.

### Policy recommendations and institutional actions (timing and lead agencies as stated)
- Keep the growing portfolio on track and managing fiscal risks (near to medium term).
  - Responsible: Line ministries, Ministry of Public Administration.
  - Time horizon: Medium term.
  - Reference items: 11; associated text: Keep the growing portfolio on track and managing fiscal risks (near to medium term).
- Establish central function for physical and financial monitoring of project progress.
  - Responsible: MOF.
  - Time horizon: Medium term.
  - References: 13, 14.
- Establish central monitoring of portfolio for fiscal risks.
  - Responsible: MOF.
  - Time horizon: Medium term.
  - References: 13, 14.
- Clear up capital project pipeline in budget.
  - Responsible: MOF, Line ministries.
  - Time horizon: Medium/long term.
  - References: 7, 8.
- Introduce central review and central selection function.
  - Responsible: MOF.
  - Time horizon: Medium/long term.
  - References: 4, 10.
- Strengthen appraisal methodology to enable the compilation of a single pipeline of appraised projects for selection.
  - Responsible: MOF.
  - Time horizon: Medium term.
  - References: 4, 10.
- Strengthen planning and budgeting for investment as fiscal space tightens (medium to longer term).

*IMF | Technical Report — Excerpts from "Public Investment in Slovenia" chapter*

### 10.      This section summarizes the key challenges identified through the PIMA in the context of

### Key challenges identified through the PIMA in the context of Slovenian authorities' ambitions and constraints

### Near-term: execute the capital budget and optimize use of EU funds (2021–2027)
- Planned increase in public investment to between 5-6 percent of GDP over the coming three years, underpinned by increased EU funds.
- Capital expenditure under executed by approximately 20 percent relative to plans in 2021 and 2022.
- Identified execution bottlenecks and recommended actions:
  - Project preparation and design capacity
    - Limited capacity in some line ministries and municipalities for preparation and design constrains preparation of robust projects, delaying implementation readiness or reducing proposal quality.
    - Recommendations: Ensure explicit funding for project preparation (Recommendation 1); bolster capacity within line ministries and municipalities for project preparation (Recommendation 2).
  - Delays in final project approval
    - Lengthy processes for design decisions and approvals and too-late consultations with stakeholders cause delays and avoidable iterations in project design.
    - Recommendation: Appoint high-level project steering committees for major projects to improve coordination and present recommendations to government on actions and decisions needed to facilitate documentation and licenses (Recommendation 3).
  - Issues with obtaining spatial planning and permits
    - Challenges in spatial planning and permits have led to significant delays in numerous projects.
    - Recommendation: Set and adhere to clear timeframes for spatial planning to minimize the planning phase and expedite readiness of major projects (Recommendation 4).
  - Construction sector capacity and procurement competition
    - Difficulty obtaining domestic or international contractors and poor competition in procurement for construction work.
    - Recommendations: Analyze causes of low-competition tender processes (Recommendation 5); produce recommendations to support development of the market for domestic and international competition (Recommendation 6).

### Short–medium term: keep the public investment portfolio on track and manage associated fiscal risks
- As capital investment reaches high levels, priority should shift to monitoring the portfolio and managing fiscal risks from major projects.
- Noted prominence of deviations in project costs and time for major projects; weaknesses in planning phase likely primary causes.
- Identified implementation and fiscal risk issues and recommended actions:
  - Growing implementation challenges from the public investment portfolio
    - Need to monitor physical and financial progress of major projects, and to support and challenge ministries and municipalities to manage cost and time overruns.
    - Recommendation: Establish a central function to monitor both physical and financial progress and enable proactive identification and elevation of issues throughout implementation (Recommendation 7).
  - Growing potential fiscal risks from the public investment portfolio
    - Risks include calls on state budget resources from guarantees issued to implementing entities, legal risks during construction, and significant increases in expected costs that cannot be absorbed within entities’ budgets.
    - Recommendation: Central function to proactively monitor major fiscal risks from the portfolio and make recommendations to manage and mitigate them timely (Recommendation 8).

### Medium–longer term: competition for investment space and maximizing impact of investment
- Anticipated pressures:
  - Binding fiscal rules.
  - Potentially falling EU investment funds after 2027 (reflecting the convergence of Slovenia to average EU income levels).
  - Other fiscal pressures including planned increases in health spending and from an ageing population.
- Result: Increasing competition for public investment funds across government.

- Issues in appraisal, selection, and budgeting that must be addressed to maximize investment impact:
  - Immature projects entering the budget not implementation ready
    - Projects can enter the budget without substantive project appraisal, leading to significant changes in scope, reduced legislative oversight, and a ‘long and uncertain tail’ in the budget before substantive progress.
    - Recommendation: Clear the capital pipeline of line ministries or set requirements for review of projects that fail to implement after several years to free up fiscal space for priority projects (Recommendation 9).
  - Lack of external challenge or central review of appraisals and selection
    - Line ministries prepare, appraise, and select projects without external challenge to ensure consistency and rigor.
    - Recommendation: Increase MOF role in reviewing project appraisals and budget priorities; establish a central function to review line ministries’ appraisals and application of selection criteria to raise standards and strengthen MOF budget prioritization (Recommendation 10).
    - Recommendation: Strengthen appraisal methodology to enable compilation of a single pipeline of appraised projects for selection (Recommendation 11).

### Reform horizon and use of the window of opportunity
- The reforms described take years to establish and become effective.
- Slovenia should use the coming years as a window of opportunity to:
  - Strengthen central functions.
  - Integrate good practices from public investment processes of EU-funded projects.
- International examples demonstrate possible models for central public investment units providing advisory services, independent review, methodology development, demand analysis, alternative financing, and implementation monitoring.

*Source: IMF mission, Public Investment Management Assessment (PIMA) summary and recommendations contained in the provided content.*

### 2. National and Sectoral Planning (Strength— Medium; Effectiveness— Low; Reform

### 2. National and Sectoral Planning (Strength— Medium; Effectiveness— Low; Reform Priority—Medium)

### Strategic framework and scope
- Intended to determine whether an overall framework of strategic development goals and objectives guides public investment spending across all financing sources.
- Assesses whether national and sectoral strategies are published covering all public investment projects regardless of financing source.
- Emphasizes anchoring strategies in a realistic macroeconomic and fiscal environment to guide medium-term allocation of investment spending.
- Reinforces assessing nonfinancial project benefits by contribution to outputs and outcomes rather than only fiscal metrics.

### Current practice in Slovenia
- The Slovenian Development Strategy 2030, prepared in 2017, is accompanied by numerous sectoral strategies developed over recent years.
- Plans exist for most sectors with varying degrees of project identification and costing; often driven by eligibility criterion for EU funding.
- Some strategies (e.g., Transport Development Strategy, Health Sector Strategy) include comprehensive project identification and sources of financing; others are less specific and are intended for a five-year term by the National Assembly with a two-thirds majority.
- Major projects identified in strategies are often included in subsequent budgets or SOE implementation plans, although they frequently undergo significant changes before implementation.

### Costing, monitoring, and disclosure
- Some sectoral strategies provide costings for broad portfolios as required for EU funding; the Slovenian Development Strategy does not include costing.
- Sector strategies such as Water Resources and Transport provide sector costings and sometimes include financial constraints linked to EU funds rather than national fiscal envelopes.
- Detailed financial costing is included for major projects (motorways, flood defenses) with good alignment to total project cost included in the budget; other projects have seen significant increases since appraisal.
- Sector strategies include many un-appraised projects in the budget with costings estimated at identification stage, making comparison between plan estimates and budget figures difficult.
- Good practice examples exist for performance indicators: the Transport Development Strategy contains both output and outcome indicators with quantitative baseline figures, targets, verification, and monitoring frequency. Major projects on budget generally have performance data; some major projects do not disclose such information (example: Nuclear Power Plant Krško).

### Policy recommendation
- Authorities should improve development of strategic national and sectoral priorities and their translation into the budget.
- Sector Strategies should acknowledge medium-term financing constraints on investment expenditure to strengthen the link between strategic planning and the budget.

---

### 3. Coordination Between Entities (Strength—Medium; Effectiveness—Medium; Reform Priority—Medium)

### Coordination structure and practices
- Institution assesses coordination between central government and subnational administrations, transparency and rule-based capital transfers to municipalities, and reporting/disclosure of central government exposure to major fiscal risks from PCs and PPPs.
- Major municipal investment projects are coordinated with central government; formal discussions occur between municipalities and central government on investment priorities.
- Municipal strategies must comply with sectoral strategies; projects eligible for EU funds must be coordinated with the Ministry of Cohesion and Regional Development (MOCRD) and line ministries managing EU funds.
- Central government projects must be approved by municipalities where implemented, creating significant formal interaction.

### Transfers, competitions, and payment practices
- Under the Act on Municipal Finances (Act 123/06 of 30 November 2006, or ZFO), transfers to municipalities are done by open competition.
- Prior to or during the fiscal year, line ministries organize competitions for disbursement of allocated budget transfers to municipalities.
- System is highly transparent with published rules and criteria, but does not always allow significant advance notification of recipient entities, potentially affecting planning.
- In the water and wastewater sector, funds for approved municipal projects are managed by the Ministry of Natural Resources, which controls invoices and pays contractors directly.

### Contingent liabilities and fiscal risk monitoring
- Contingent liabilities from investment projects of general government are published, but those arising from major projects of Public Corporations (PCs) are not reported to the central government.
- The Budget Department monitors municipal finances and the MoF publishes general government contingent liabilities on its website.
- The PPP Law (Act 127/06, of 7 December 2006, Article 20) mandates the MOF to monitor PPP contingent liabilities; currently the central government has no significant volume of PPPs.
- No central government entity monitors contingent liabilities of PCs and their individual projects; not all line ministries monitor PCs’ contingent liabilities in their sectors.

### Policy recommendation
- The MOF should monitor contingent liabilities of municipalities and PCs, including from PPPs.
- Extend current monitoring of municipal finances by the Budget Department to include contingent liabilities (including those arising from public corporations managing infrastructure services).
- MOF should monitor contingent liabilities of PCs either within public investment implementation monitoring or fiscal risk management despite most PCs being registered under commercial law and creating implicit contingent liabilities for government.

---

### 4. Project Appraisal (Strength—Medium; Effectiveness—Low; Reform Priority—High)

### Purpose and good practice
- Good practice requires rigorous analysis before projects become eligible for financing: project concept, pre-feasibility (for large projects), feasibility, and detailed design.
- Major projects should have rigorous economic, financial, and technical analyses; summary results should be published or undergo independent external review.
- Standard appraisal methodologies enable comparison among projects; risk assessment and mitigation are essential given uncertainty in major projects.

### Current legislative and operational gaps
- Legislation requires major projects be subject to rigorous technical, economic, and financial analysis but does not require a review process nor publication of appraisal reports.
- The regulation on Uniform Methodology describes and sets requirements for project preparation and appraisal components according to project size.
- Appraisal process is not used to eliminate negative or poor-value projects before Budget approval; many projects are not appraised before inclusion in the Budget and projects are not typically eliminated or redesigned based on appraisal performance.
- Line ministries appraise their own projects except those prepared by PCs; the MOF typically receives the project concept (project fiche presented in the APPrA online budget portal) and not the appraisal studies.
- EU-funded projects produce appraisal reports for the European Commission as a condition for funding—usually only after the project is already included in the Budget; appraisal reports are usually not published.
- Only some EU-funded projects undergo independent external review (example: review of projects above EUR 5m by the Jaspers program).

### Methodology and risk assessment
- There is a standard Uniform Methodology for project appraisal, but no government department is responsible for supporting proposing entities in applying it.
- The Uniform Methodology applies to all central government investment projects and to projects requiring state guarantees; appraisal reports are not forwarded to the MOF, and the need for central support has not been assessed.
- Regulations require inclusion of risk assessment in project appraisal but do not require a risk management plan.
- Uniform Methodology requires risk analysis with sensitivity analysis for project variants and appraisal of selected project design; however, risk assessment is not systematically used in preparation and implementation.
- Challenges affecting major investment projects (licensing, geological issues) indicate insufficient initial risk assessment and poor risk management.

### Policy recommendation
- Implement systematic review of appraisal reports of major projects by the MOF to ensure development of more credible and resilient investment projects.
- Develop the standard methodology for large projects to detail appraisal requirements and require risk mitigation plans.
- Strengthen risk assessment methodology to cover a broad range of risks (geological and site risks, licensing issues, cost of materials, future operational risks) and explicitly require risk mitigation plans.

---

### 5. Alternative Infrastructure Financing (Strength—Medium; Effectiveness—Low; Reform Priority—Medium)

### Assessment dimensions
- Evaluates institutional arrangements for private sector participation, PPPs, and PCs financing economic infrastructure.
- First dimension: existence of a sound regulatory framework to promote competition in key infrastructure markets.
- Second dimension: existence of a solid policy and legal framework for PPPs.
- Third dimension: oversight of PCs’ investment activities and financial performance for coordination with national infrastructure priorities.

### Market structure and private sector engagement
- Legal and institutional framework does not create sufficient incentives for private sector engagement; provision of economic infrastructure is often restricted to domestic public-sector monopolies or competition mainly among public corporations.
- Sectors with local public monopoly norms: water and wastewater, electricity transmission.
- Sectors formally open to competition (electricity generation, gas, rail freight, telecoms) remain dominated by public corporations; private sector investment in infrastructure is scarce.
- Former telecom monopolist remains market leader in several submarkets despite gradual erosion; repeated privatization attempts have not been successful.
- Rail sector: state company is the leader; only freight subsector sees significant private participation.
- Agency for Communication Networks and Services of the Republic of Slovenia (AKOS) regulator established in 2001 regulates telecom and related markets.
- Several subsectors were successfully deregulated (example: electricity generation) but are dominated by public corporations and part of wider European markets.

### PPP framework and practice
- Government created a strong legal framework for PPPs: PPP Law (Act 127/06, of 7 December 2006, or ZJZP) clearly defines principles and procedures and includes a strong fiscal management role for the MOF.
- No PPP implementation strategy has been approved; few concessions signed with private companies (example: Ljubljana airport) and with public corporations (rail and highway networks).
- Current central government has no significant volume of PPPs.

### Oversight of Public Corporations (PCs)
- Government does not systematically review PCs’ investment plans.
- Government-appointed board members on PC boards report to the state holding SSH and not directly to government.
- No legally mandated arrangements for systematic and consistent information sharing regarding PC investment activities.
- SSH monitors SOEs' financial performance but does not publish a consolidated report on their investment plans and does not assess or oversee individual investment projects except on an ad-hoc basis.

### Constraints and sizing issues
- Size of Slovenia's economy constrains private sector investment in infrastructure; sizing of individual projects is also relevant.
- In some markets private investment exists (telecoms, freight transportation) but dominance of PCs may deter private investment in other sectors.
- No PPP strategy defining priority sectors; small project sizes may prevent scale economies and dissuade private investors.
- Municipalities have been able to sign PPPs for sports facilities and energy-efficient renewal of office buildings.

### Policy recommendation
- Develop a clear strategy on private sector participation identifying priority sectors for private investment and innovation, whether private, PPP, or concessions, and address main obstacles for private engagement.

---

### C. Investment Allocation

### 6. Multi-year Budgeting (Strength— Medium; Effectiveness— Medium; Reform Priority— Low)

### Purpose and dimensions
- Assesses transparency and predictability of investment by ministries, programs, and projects over the medium term.
- Three dimensions:
  - Multiyear overall estimates of resources available for public investment spending.
  - Existence of multiyear ceilings by ministry or sector to prioritize projects at line-ministry level.
  - Whether total construction cost for each project and required spending for each year within that total are known.

### Current framework and disclosures
- Medium term expenditure frameworks are presented by program.
- Aggregate capital expenditure ceilings are presented two years ahead as Slovenia adopts budgets for two years.
- The Načrt Razvojnih Programov (NRP) presents expenditure by project over a four-year horizon.
- All capital projects with financing from the state budget, EU funds, or state guarantees are included in budget documentation.
- Total capital expenditures by ministry are not presented directly but could be aggregated by summing capital projects in the NRP for each ministry.
- Between 2015-2020, moderate under-execution of the general government capital budget averaged 6 percent; under-execution rose in 2021 and 2022 to 25 and 18 percent respectively, coinciding with significantly increased ambitions and implementation constraints.

### Budget circulars, ceilings, and monitoring
- The budget circular issues multiyear ceilings at a ministry level.
- Line ministries are not provided with a capital ceiling and are expected to manage current and capital expenditures themselves.
- No mechanism exists to contain capital expenditure which could crowd out other recurrent spending, although the MOF monitors submissions to ensure sufficient funds for salaries are provided.
- In practice, ministries manage capital spending within appropriate levels and can leverage external funding to avoid crowding out recurrent expenditures.

### Project cost projections and reporting
- Projections of total construction cost of all capital projects are published with annual breakdown over a four-year horizon.
- The NRP details baseline cost, initial projected total cost of projects, the current estimate of total cost, the expenditure profile for the budget year and three further years, and remaining costs thereafter.
- Changes in cost estimates are explained in supplementary budget documents.

*Source: IMF mission; excerpted from Technical Report content provided.*

### 7. Budget comprehensiveness and unity (Strength—Medium; Effectiveness— Medium;

### 7. Budget comprehensiveness and unity (Strength—Medium; Effectiveness— Medium; Reform priority — Low)

### Budget comprehensiveness and unity — key findings
- All spending proposals should be evaluated together to allocate money most efficiently; this is referred to as the comprehensiveness of the budget.
- Integration of operating and capital budgets (unity of the budget process) requires capital projects and related operating activities to be viewed in the same program classification.
- There are a number of significant non-commercial extrabudgetary entities (EBEs); their expenditures are disclosed in the Budget.
- Project expenditures of large extrabudgetary funds are documented in the NRP; examples include 2TDK (established for construction of the Divača–Koper railway) and the Healthcare Capital Expenditure Fund.
- Capital expenditures from EBEs were substantial, at approximately 30 percent of general government investments in 2022.
- EBEs were established with specific Acts, as required for every EBE; there are a substantial number of other EBEs and there are no rules constraining their creation, although their expenditures are presented in the budget as far as the mission could ascertain.
- Public corporations’ investment projects are included in budget documentation only if there is counterpart funding from the budget, EU funds, or if guarantees were issued; such projects include large projects such as the Karavanke Tunnel and the Divača–Koper railway.
- Concessions are not significant and are not presented in the budget.
- All projects implemented by budget users with external funds are included in the budget.
- The budget visualization tool SAPPrA allows users to explore investment projects across the country, consistent with approved budgets.

### Program classification and integration
- Budgets are presented and prepared by program classification, which integrates recurrent and capital expenditures.
- Capital and recurrent needs are identified in a single program within each line ministry, ensuring coordination.
- Program budgets can be split by recurrent and capital components, although these splits are not shown in budget presentation.
- The Ministry of Finance (MOF) does not review the current budget implications of any capital projects to ensure that identified ongoing costs are appropriate; it is assumed that this task is carried out at Budget User level (as was the case at the Ministry of Health).

---

### 8. Budgeting for Investment (Strength— Medium; Effectiveness—Medium; Reform priority — Low)

### Risks and legal requirements
- Within the annual budget, pressure may arise to shift budget authorization to spend from capital to recurrent budgets, which would necessitate reductions in some project funding.
- Strong rules (often requiring legislative approval) are necessary to resist transfers from capital to recurrent budgets.
- Total project budget costs are required to be included in the Budget under Article 12 of the Public Finance Act, but contractual commitments are not included in the budget documentation.
- The budget is presented to the legislature which approves total project costs up front; future costs associated with the project for each of the forthcoming four years are included.
- Explicit information on contractual commitments is not included.
- The IT system prohibits line ministries from committing over 80 percent of their capital budget to contractual commitments in the forthcoming year, to support flexibility in case of changes to fiscal space (Budget Execution Act: Article 30).

### Rules on transfers and practical constraints
- There are no explicit rules preventing transfers from capital to current expenditure, although practice is limited by constraints on transfers between programs and sub-programs.
- Ministries can redistribute funds within their budgets up to 5 percent at program level and 10 percent at subprogram level (Budget Execution Act: Article 24).
- Further changes require a supplementary budget approval from the legislature.
- In practice, there is no evidence of significant reallocation of capital resources to current expenditure in aggregate, although quantification of total virements between capital and current expenditure could not be obtained by the mission.
- There is no legal requirement that ongoing projects are given priority in budget allocation each year, but total project costs and multi-year appropriations are included in budget approval, helping capture ongoing project funding requirements.
- The mission did not encounter instances of major projects stalled because of budget constraints.

---

### 9. Maintenance Funding (Institutional Strength—High; Effectiveness—High; Reform Priority—Low)

### Existence and application of methodologies
- Standard methodologies for current maintenance have been developed, contractually implemented, and translated into budgetary allocations.
- Examples: road maintenance through regional maintenance contracts; hospital equipment maintenance through whole-life maintenance contracts signed by the Ministry of Health and hospital management.
- Contractual terms of reference are based on standard methodologies, allowing retention of asset values and alignment of budgetary allocations with market value of maintenance needs.
- The state budget shows evidence of adequate levels of maintenance.

### Capital maintenance and budget visibility
- Identification of capital maintenance needs follows standard methodologies, and capital maintenance projects are visible in the budget and in SAPPrA.
- Methodologies for capital maintenance of roads were published in the Official Gazette 7/12; the Ministry of Health defines standards for capital maintenance of its assets.
- Slovenian Railways has a subsidiary dedicated to infrastructure maintenance, under methodology published in the Official Gazette 103/11.
- Many major and many small projects deal with renovation and rehabilitation investment, with 15-16 percent of realized capital expenditure in each of the last 3 years dedicated to capital maintenance.

### Use of maintenance information in budgeting
- Both current and capital maintenance are systematically identified in the Budget for each budget entity; most estimated maintenance funding (including for roads, railways, water, and social infrastructure) is identified in the budget.
- Budget entities are not required to provide an assessment of maintenance needs based on relevant methodologies when submitting budget proposals to the MOF, and the MOF is not expected to prioritize funding of these maintenance needs within available fiscal envelopes.
- Although budgetary information on maintenance is very rich and budgeted maintenance figures allow for reasonable maintenance of existing assets, there is scarce evidence that this information is actively used for decision-making.
- There are no reports or analyses of actual maintenance compared to budget allocations.
- Recommendation-level observation: Maintenance data could be used actively and systematically for analysis and decision-making during the budgeting process, and budget documents could provide an overview of actual maintenance spending compared with target levels and outline corrective measures if needed.

---

### 10. Project Selection (Strength—Low; Effectiveness—Low; Reform Priority—High)

### Institutional gaps in selection and appraisal
- Project selection is about identifying priority projects ready for implementation and is distinct from planning and appraisal.
- There is no requirement for a review of investment projects prior to inclusion in the Budget; project preparation and appraisal are responsibilities of proponent budget entities with no central ministry required to review them.
- Many major projects are prepared by public corporations with no appraisal review by line ministries or central ministries, except when receiving EU or budgetary funding.
- Some major projects receiving EU funding are subject to external independent review (e.g., by the Jaspers program), often by European Commission requirement, sometimes by government request.

### Absence of published criteria and pipeline
- There are no published criteria nor a required process for project selection.
- Article 23 of the Public Finance Act requires the finance minister to define the criteria for selecting projects to the budget from competing proposals, but no centrally defined prioritization criteria or required formal assessment of individual project contributions to strategic goals exist.
- In the absence of a pipeline of projects, selection is guided by availability of projects aligned with sectoral strategies and by availability of European funds, centrally negotiated by the MOCRD; the MOF focuses on ministerial ceilings and not on individual projects.
- The government does not maintain a pipeline of appraised investment projects; regulations require projects to be appraised before implementation, but neither the MOF nor line ministries are required to check effective appraisal.
- In practice, projects are presented for inclusion in the Budget without prior appraisal and are accepted based on a mere project concept; real project preparation and appraisal are often done after Budget approval using funds provided by the inclusion in the Budget.
- The MOF receives no project documentation or appraisal reports.

### Recommended institutional arrangements (policy recommendations)
- Establish a mechanism for providing funds for project preparation after a summary preliminary assessment and approval of project concepts.
- Establish a mechanism for independent review of project appraisals, creating incentives for building a pipeline of appraised projects ready for budget preparation.
- Establish a mechanism for annual selection of projects for the Budget on the basis of published prioritization criteria.

---

### 11. Procurement (Strength—High; Effectiveness—Medium; Reform Priority—High)

### Legal framework and procurement practice
- Legal and regulatory requirements exist for competitive procurement of major projects and timely publication of procurement information, but in practice effective competition is scarce for large projects.
- The Public Procurement Act (ZJN-3, 1915), aligned with European directives, requires open, transparent, and competitive procurement for major projects and the exclusion of bidders convicted of unlawful restriction of competition.
- Institutions are mandated to monitor and propose correction of noncompetitive behavior of procuring agencies and bidders.
- Procuring entities are required to prepare a detailed report of the procurement process.

### Evidence on competition
- Data show that a few major projects are subject to effective competition, but use of open procedures for procurement of construction contracts has gradually declined and last year close to one third of competitions had a single bidder.
- Of a sample of major capital projects in the last three years, the majority were concluded with single bidders.
- For road works of the Infrastructure Agency: 13 percent of the tender processes had a single bidder in 2021, and 14 percent had a single bidder in 2022.
- For railway works of the Infrastructure Agency: 67 percent of the tender processes had a single bidder in 2021, and 75 percent had a single bidder in 2022.

### Transparency, review, and enforcement
- There is a procurement database e-JN managed by the Public Procurement Directorate (PPD) in the Ministry of Public Administration, which proactively discloses complete, reliable, and timely information on all public procurement and is easy to search and navigate.
- Standard analytical reports are produced annually, but annual reports do not include data on effective competition (number of bidders) nor provide recommendations for improvement.
- Procurement complaints are reviewed by an independent body, the National Review Commission (DKOM), regulated by ZJN-3 and ZPVPJN.
- DKOM decisions are published on the website and in the public procurement portal.
- For DKOM to decide on review claims in 2021, on average, it took 16 days from receiving all documentation, and 27 days from receiving the request for review.

### Recommendations to improve competition
- Use the existing legal and institutional arrangements to identify entities or sectors with poor effective competition (deserted tenders and single bidders) through annual statistical reports.
- After consultation with procurement teams and private contractors and their business associations, present measures for improving competition via PPD and translate them into concrete legal changes and training activities.
- Extend training from public administration to private firms potentially interested in bidding for public investment, considering the relative scarcity of domestic contractors.

---

### 12. Availability of Funding (Institutional Strength—High; Effectiveness—High; Reform Priority — Low)

### Importance of cash-flow certainty
- Ministries and agencies must plan and commit expenditure on capital projects on reliable cash flow forecasts to ensure contractors can progress projects as planned.
- When project proponents lack certainty and invoice payments are delayed, consequences include delayed contract implementation, degraded project assets, government penalties, interest and arrears accumulation, and declined contractor trust in government.

_Italic: Source: Excerpt from IMF | Technical Report (chapter: 7. Budget comprehensiveness and unity — sections 7–12)_

### 72.      There is a legal requirement for cash-flow forecasts.

### There is a legal requirement for cash-flow forecasts.

### Cash-flow forecasting and cash management
- The law prescribes a quarterly forecast for the implementation of financial plans.
- The Ministry of Infrastructure has a monthly liquidity plan from which they derive the cashflow forecasts for projects under implementation. The monthly cashflow plan is shared with the Treasury.
- Cash management arrangements are adequate to ensure timely availability of funds for effective project implementation.
- The Treasury (part of the MOF) provides the resources for financing the state budget and manages cash resources so that liquidity is guaranteed.

### Legal payment rules and Treasury performance
- The Act on the Implementation of the Budgets requires timely release of cash.
- Article 4: documentation for the payment from the budget should be submitted 25 days before the date of payment to the contractor.
- The Ministry of Infrastructure requires payment certificates by the fifth day of the month, to comply with the payment period of 30 days.
- The MOF and Treasury experienced no delay in payments for Infrastructure Projects, as confirmed by the Ministry of Infrastructure.

### Integration of external financing
- External financing is fully integrated into the main government account.
- Article 81 of the Public Finance Act and Article 61 of the Act on the Implementation of the Budgets 2023 and 2024 ensure full integration of external funds in the government account.
- All external funding, inclusive of EU funding, is integrated into the government account system.

### Portfolio management and oversight (Strength—Medium; Effectiveness—Low; Reform priority—High)
- Importance:
  - Portfolio management is critical to identify high-risk projects, assess time and budget performance, and optimize fund allocation.
- Current practice and gaps:
  - Some line ministries monitor portfolios of major projects, but there is no systematic or central monitoring and no regulatory requirement for it.
  - Slovenia has no central monitoring of major projects’ cost or physical progress during implementation, either in the MOF or elsewhere.
  - Ministry of Infrastructure monitors only projects implemented within the Ministry of Infrastructure.
  - Ministry of the Environment, Climate and Energy has no oversight of the portfolio of investment projects in the energy sector.
  - SSH has no oversight of the financial and physical progress of the portfolio of major projects implemented by PCs with limited liability.
  - Ministry of Cohesion and Regional Development monitors the portfolio of EU funded projects only for financial progress and not for physical progress and possible risks.
- Consequence:
  - Lack of central portfolio management leads to inability to identify critical projects, act urgently to resolve risks, and prevent delays and additional cost.

### Re-allocation of funds and ex-post reviews
- Act on the Implementation of the Budget (Art 31) provisions:
  - Re-allocation without approval allowed with a total increase or decrease in each sub-program not exceeding 20 percent of the sub-program adopted budget.
  - Re-allocation without approval allowed with a total increase or decrease in each main program not exceeding 10 percent of the adopted budget.
  - Re-allocation of funds below the 20 percent threshold is conducted by line ministries; government approval must be sought beyond this.
- Regulation on the Single Methodology requires ex-post reviews to be conducted (Article 10 reference), but:
  - There are no guidelines indicating the format or the timing (how long after completion).
  - Slovenia does not conduct ex-post reviews as a standard; they are conducted only on a few previous major projects completed with EU funding.
- Reform priority:
  - Improvement in portfolio monitoring is a high priority reform.
  - Ex-post reviews should be considered an intrinsic part of the investment life cycle and findings used to enhance investment governance.
  - A detailed summary table of all major projects is required to enable top management to identify critical major projects effectively and act urgently to resolve risks.

### Good practice examples (Box 4 highlights)
- Infrastructure Australia: detailed post completion review requirements including forecast and outturn data on cost, schedule and benefits; interviews with delivery team; approach and timing for communicating findings and recommendations.
- UK (Green Book / IPA): requirements for ex-post evaluation covering process and impact evaluation; IPA documented lessons from close review of transport megaprojects.
- Ireland: Public Spending Code reforms informed by ex-post review of National Children’s Hospital construction problems; adjustments to project governance, risk management and cost forecasting.

### Management of project implementation (Strength—High; Effectiveness—Medium; Reform Priority—Low)
- Key dimensions assessed: project management arrangements; rules for project cost adjustment; ex-post audits of major projects.
- Regulations:
  - Require senior responsible officers for major projects, but implementation plans are not mandatory.
  - MOI has project management arrangements and an Expert Commission to oversee major projects.
  - Public corporations GEN and DARS have project management arrangements.
  - Ministry of Infrastructure receives weekly project progress reports used to prepare monthly management reports.
  - DARS receives monthly project-level progress reports and issues a monthly progress report to the Ministry of Infrastructure.
  - Implementation plans with key elements are not in place before projects are approved.
- Cost adjustments:
  - Cost adjustments above 20 percent are subject to approval by the Government and must be communicated to MOF.
  - A new investment plan must be prepared when cost adjustments exceed 20 percent to decide whether to approve the adjustment or cancel the project.
  - Cost adjustment reports are seldom conducted; Court of Audit suggests cost adjustments are seldom conducted in practice.
- External audits:
  - External audits of major projects are mandated and often conducted (Court of Audits Act references).
  - Performance audits were conducted on the Divača–Koper railway line and the Third Axis Road project; weaknesses were identified and reported.
  - Audit reports are published on the Court of Audit’s website.
  - Major projects of the Ministry of Infrastructure are audited for legal, financial and technical aspects once a year if selected. Major projects at DARS are audited annually.

### Project time and cost overruns (Table 4.1 summary)
- POLJE IV: Percentage cost overrun 8; Percentage time overrun 55.
  - Housing reasons: Redesigning of project, Construction of wastewater collection system late. Delay in release of permits. Lack of work force in construction sector. Under value in the planning phase. Rise in the cost of materials.
- Novo Brdo: Percentage cost overrun 0.5; Percentage time overrun 0.
- Rakova Jelša II: Percentage cost overrun 28; Percentage time overrun 44.
- Pod pekersko gorco faza 1: Percentage cost overrun 8; Percentage time overrun 13.
- Dolgi most: Percentage cost overrun 5; Percentage time overrun 21.
- Pod pekersko gorco faza 2: Percentage cost overrun 23; Percentage time overrun 25.
- Dečkovo Naselje: Percentage cost overrun 6; Percentage time overrun 0.
- Summary: All reasons mentioned result from poor planning and poor project development in the project appraisal stage. Project managers had to manage poorly designed and poorly planned projects.
- Ministry of Infrastructure note: Fifty percent of projects implemented by the Ministry of Infrastructure over a period of 9-10 years experienced cost overruns of between 6 and 20 percent. All cost increases resulted from additional work during the implementation stage.

### Monitoring of public assets (Strength—High; Effectiveness—High; Reform priority—Low)
- Importance:
  - Up-to-date register of non-financial assets is essential for effective public sector asset portfolio management, fiscal policy, maintenance budgeting, and financial statements.
- Current practice:
  - Asset registers are required and inspected regularly.
  - Accounting Act and the Slovenian Accounting Standards 2016 set requirements for land, property, and equipment.
  - Fixed asset registers are maintained by line ministries, municipalities and PCs.
  - Asset register inspections are conducted regularly by the Census Commission to verify number, location, values, depreciation and disposals; outcomes reported to the Directorate for Public Accounting at the MOF.
  - Fixed assets are included in government financial statements; PC fixed assets are revalued annually and contained in financial statements.
- Ministry of Health balance sheet examples (EUR):
  - Hospitals: 31 December 2021 — 1 137 565 335; 495 866 676; 857 512 460; 679 464 009
  - Hospitals: 31 December 2022 — 1 174 649 640; 522 495 985; 887 944 191; 715 084 923
  - Other medical centers: 31 December 2021 — 31 450 840; 18 873 579; 73 999 456; 59 093 685
  - Other medical centers: 31 December 2022 — 32 585 720; 19 620 273; 79 964 182; 62 640 212
- Depreciation and valuation:
  - The 2016 Slovenian Accounting System defines depreciation processes; methods must be used consistently (e.g., straight-line or diminishing balance).
  - Rules on method and rates of write-off of intangible assets, property and equipment define asset types and annual depreciation rate in percentage.
  - Accounting Act requires yearly stock taking and depreciation; revaluation at end of fiscal year and disclosure of revaluation effects are provided for.

### Legal and regulatory framework (Cross-cutting)
- Legal instruments covering PIM include (listed by name in the source):
  - Public Finance Act
  - Budget Execution Act
  - Decree on the uniform methodology for the preparation and treatment of investment documentation in the field of public finance (Uniform Methodology)
  - Decree on the methodology for the preparation and study of investment documents in the field of national roads and public railway infrastructure
  - Decree on the methodology for the elaboration and management of the investment documentation in the field of defense
  - Decree on development planning documents and procedures for the preparation of the central government budget
  - Implementation of the Republic of Slovenia’s Budget for 2022 and 2023 Act
  - Rules on the procedures for implementing the budget of the Republic of Slovenia
  - Public-private partnership Act
  - Investment Promotion Act
  - Decree on investment incentives and strategic investments
  - Financing of Municipalities Act
  - Fiscal Rule Act
  - Public Procurement Act
  - Act on Provision of Funds for Investments in Slovenian Healthcare in the Years 2021 to 2031 (secures about €2.1 Billion of healthcare investments, primarily in Infection Control)

### Information technology supporting PIM
- Government IT systems are extensive and integrated. Key systems include:
  - SAAPrA and APPrA: Budgeting — Government Agencies
  - MFERAC: Financial accounting, human resources functions, Residential loans and rents, fixed asset management and general ledgers. The system also caters for EU funded projects — Government Agencies
  - e-JN: Procurement — Government Agencies, EU, private sector
- MFERAC specifics:
  - Includes e-business and e-documents modules.
  - Used by all State direct budget users and the Municipality of Ljubljana (170 organizations and more than 7000 users).
  - Documents exchanged with outer systems and processed in MFERAC include received e-invoices and issued e-invoices; E-payment orders; E–Bank statements; E–Reports; E–Signed supply orders; E–Signed contracts.
  - The e-Business system ensures data is entered once, documents visible throughout the information system, improved audit trail, lower archiving cost, shortened processing time, and simplified operations.
- e-JN specifics:
  - Public procurement system contains all live tenders; all blacklisted suppliers; historical information on tenders for the past 10 years; signed contract documents.
  - The system is open to the public and captures all EU tenders.

*IMF | Technical Report*

### 93.      Adequate staff capacity is essential for public investment management institutions to

### Adequate staff capacity is essential for public investment management institutions to

### Staff capacity and distribution
- Adequate staff capacity is essential for public investment management (PIM) institutions to perform well; well-designed governance mechanisms cannot be implemented effectively without a sufficient number of qualified staff.  
- In Slovenia, PIM capacity is unevenly distributed across institutions, creating challenges:
  - Some line ministries managing large investment portfolios (e.g., the Ministry of Infrastructure) appear better equipped with human resources for project design and appraisal.
  - Other ministries and municipalities face significantly constrained capacity; constraints will become more acute as project volume increases.
  - The Ministry of Health may have to manage a much larger capital budget over the next ten years, which would be difficult with existing resources.
  - Design consultants, including the firm DRI (a PC), can support ministries but cannot substitute for permanent staff who need to commission and oversee this work.
  - Ensuring the right balance between salaried staff and consultants is critical.
- As public investment increases and oversight is strengthened, hiring and retaining skilled staff will become more necessary:
  - A central function to monitor implementation, assess appraisals and fiscal risks would require qualified staff.
  - For some technical skills, authorities will need to address attracting and retaining staff due to large wage differentials between the private and public sectors.
  - The MOF, with support of development partners, could disseminate good practices in project appraisal, selection and risk monitoring, and provide training.
  - Valuable experience could be gained from shadowing EU funded major project design and implementation cycles, secondments to relevant EU institutions, and availing of the IMF Centre for Excellence in Finance in Slovenia.
  - The forthcoming public sector wage reform is an opportunity to introduce appropriate incentives for those with in-demand skills to work in government.

*Issue: Need to strengthen project preparation and design capacity.*

### Near-term recommendations to accelerate capital investment execution and EU fund absorption
Recommendation 1. Provide explicit funding for project preparation, avoiding the presentation to the Budget of insufficiently developed projects.
- All line ministries should include in the Budget a line of funding for the preparation and appraisal of major projects.
- All line ministries should only propose concrete projects for the Budget after their Investment Programs are ready, allowing adequate appraisal.

Recommendation 2. Increase internal capacity of line ministries for development of project preparation and design.
- A review should be undertaken of the capacity of line ministries for the development of major projects (including preliminary design, pre-feasibility studies, detailed design, and feasibility studies).

*Issue: Delays in project design decisions and approval*

Recommendation 3. Establish inter-ministerial Steering Committees for major projects.
- For major infrastructure projects facing challenges or potential challenges, create a high-level committee, with members appointed by the finance minister, and the relevant line minister.

Box 5 – Project Steering Committees for Improved Coordination
- Major projects face significant delays until being ready for execution due to reasons including lack of resources for project concept development, lengthy spatial planning and licensing processes, and insufficient coordination between ministries.
- Create high-level committees tasked with overseeing projects and presenting recommendations to government to allow faster development of documentation, including design and full appraisal, ready for MOF review prior to Budget proposal.
- Steering Committees with a clear mandate can present recommendations to government on actions needed for faster and more robust project development.
- For particularly important projects, the committee may be tasked with reaching a project design, and corresponding fiscal costs and risks, acceptable to both the line ministry and the MOF.
- Source: IMF mission

*Issue: Issues with obtaining spatial planning and permits*

Recommendation 4. Establish and adhere to clear timeframes for spatial planning.
- Clear timeframes should be set out and adhered to for spatial planning to minimize the planning phase timeframe and to expedite readiness of major projects.
- Spatial planning processes require specific timeframes per activity. The process normally is concluded in between 200–250 days, as additional information might be required at various stages.

*Issue: Need to expand construction sector capacity*

Recommendation 5. Undertake analysis to identify reasons for scarce competition in the procurement of construction contracts and produce recommendations for correction.
- Include in the annual statistical report on public procurement a section on effective competition, looking at the number of bidders, measuring the occurrence of deserted tender processes and processes with one/ two bidders, and identify reasons for having deserted tenders and single bids.
- Initiate the publication of recommendations on public procurement including recommendations on procurement strategy (assessing the market in advance to prevent low-competition tender processes and tailor tender rules in ways that attract competition).
- Launch a series of workshops with sectoral ministries, municipalities, and other public entities, addressing the main reasons for low effective competition in their sectors, and ways for fostering competition.

Recommendation 6. Develop a market for domestic and international competition in order to facilitate investment project procurement.
- Mandate project managers (and large projects’ steering committees) to assess the ability of the domestic market to cope with additional projects being procured, and how to attract new domestic contractors or external contractors.
- Initiate contacts with business associations / confederation to assess ways for developing the contractor market and improve competition, including suggestions for simplifying procurement, and concrete training programs for private firms on public procurement.
- Create an inter-ministerial committee on private sector participation, to identify priority areas where private investment/innovation is more relevant, major constraints to private investment, and solutions.

### Near- to medium-term recommendations to keep the growing portfolio on track and manage fiscal risks
*Issue: Growing implementation challenges and fiscal risks from public investment portfolio*

Recommendation 7. Establish a central function for physical and financial monitoring of project progress and fiscal risks, possibly within the MOF.
- Entity should monitor financial progress versus physical progress of all major projects, monitoring risks, elevating projects in distress, and proposing mitigations for time and cost overruns.
- Establish a template for the information required to monitor all major projects effectively.

Recommendation 8. Establish central monitoring of portfolio for fiscal risks, possibly within the MOF.
- With support from external experts, map the sources of fiscal risk from infrastructure, and establish a database of fiscal risks identifying, for each risk, the potential impact (as quantified as possible), probability of occurrence, and mitigation measures (already implemented or requiring implementation).
- Identify the departments/units that will oversee contingent liabilities in the relevant areas: municipalities, municipally owned corporations, public corporations (including subsidiaries), PPPs, concessions, PPA and similar agreements.
- Receive quarterly reports on infrastructure fiscal risks, ensure immediate communication in case of major risk events.

### Medium- to longer-term recommendations to strengthen planning and budgeting as fiscal space tightens
*Issue: Immature projects in the budget which are not implementation ready.*

Recommendation 9. Clear up capital project pipeline in budget.
- Set requirements for an independent review of projects that fail to implement after several years to provide fiscal space for priority projects.
- Strengthen review process for project amendments to incentivize robust design and avoid cost and time overruns.

*Issue: Need for strengthened appraisal and selection*

Recommendation 10. Introduce central review and central selection function within the MOF.
- Under the mandate established by the Public Finance Act, Article 23, Item 2, the finance minister should prepare regulations on the process for the selection of investment projects to the budget, requiring full appraisal before selection, presenting criteria for selection by the line ministries, and including a final review by the MOF.

Recommendation 11. Strengthen appraisal methodology to enable the compilation of a single pipeline of appraised projects for selection.
- Under the mandate established by the Public Finance Act, Article 23, Item 2, the MOF should revise the standard methodology for investment project preparation (“Unified Methodology"), clarifying the appraisal requirements.
- Examples of possible next steps are shown in annex 6.

### Annex: PIMA Questionnaire (selected indicators)
- The PIMA questionnaire provides indicators and scoring 1 = To no or a lesser extent, 2 = To some extent, 3 = To a greater extent for areas including:
  - A. Planning Sustainable Levels of Public Investment (fiscal targets and rules; national and sectoral planning; coordination between entities; project appraisal; alternative infrastructure financing).
  - B. Ensuring Public Investment is Allocated to the Right Sectors and Projects (multi-year budgeting).
- Examples of detailed items:
  - 1.a. Is there a target or limit for government to ensure debt sustainability? (scoring options describe presence/absence of targets for central government and general government).
  - 4.a. Are major capital projects subject to rigorous technical, economic, and financial analysis? (scoring options include publication or independent external review).
  - 6.c. Are projections of the total construction cost of major capital projects published? (scoring options include publication with annual breakdown over a three-five-year horizon).

*Source: IMF mission; IMF | Technical Report*

### 7.    Budget Comprehensiveness and Unity: To what extent is capital spending, and related recurrent spending, undertaken

### 7.    Budget Comprehensiveness and Unity: To what extent is capital spending, and related recurrent spending, undertaken through the budget process?

### 7. Budget comprehensiveness and unity — key assessment dimensions
- 7.a. Is capital spending mostly undertaken through the budget?
  - Significant capital spending is undertaken by extra-budgetary entities with no legislative authorization or disclosure in the budget documentation.
  - Significant capital spending is undertaken by extra-budgetary entities, but with legislative authorization and disclosure in the budget documentation.
  - Little or no capital spending is undertaken by extra-budgetary entities.
- 7.b. Are all capital projects, regardless of financing source, shown in the budget documentation?
  - Capital projects are not comprehensively presented in the budget documentation, including PPPs, externally financed, and PCs’ projects.
  - Most capital projects are included in the budget documentation, but either PPPs, externally financed, or PCs’ projects are not shown.
  - All capital projects, regardless of financing sources, are included in the budget documentation.
- 7.c. Are capital and recurrent budgets prepared and presented together in the budget?
  - Capital and recurrent budgets are prepared by separate ministries, and/or presented in separate budget documents.
  - Capital and recurrent budgets are prepared by a single ministry and presented together in the budget documents, but without using a program or functional classification.
  - Capital and recurrent budgets are prepared by a single ministry and presented together in the budget documents, using a program or functional classification.

### 8. Budgeting for Investment — protection of investment projects in implementation
- 8.a. Are total project outlays appropriated by the legislature at the time of a project’s commencement?
  - Outlays are appropriated on an annual basis, but information on total project costs is not included in the budget documentation.
  - Outlays are appropriated on an annual basis, and information on total project costs is included in the budget documentation.
  - Outlays are appropriated on an annual basis and information on total project costs, and multiyear commitments is included in the budget documentation.
- 8.b. Are in-year transfers of appropriations (virement) from capital to current spending prevented?
  - There are no limitations on virement from capital to current spending.
  - The finance ministry may approve virement from capital to current spending.
  - Virement from capital to current spending requires the approval of the legislature.
- 8.c. Is the completion of ongoing projects given priority over starting new projects?
  - There is no mechanism in place to protect funding of ongoing projects.
  - There is a mechanism to protect funding for ongoing projects in the annual budget.
  - There is a mechanism to protect funding for ongoing projects in the annual budget and over the medium term.

### 9. Maintenance Funding — methodology and identification
- 9.a. Is there a standard methodology for estimating routine maintenance needs and budget funding?
  - There is no standard methodology for determining the needs for routine maintenance.
  - There is a standard methodology for determining the needs for routine maintenance and its cost.
  - There is a standard methodology for determining the needs for routine maintenance and its cost, and the appropriate amounts are generally allocated in the budget.
- 9.b. Is there a standard methodology for determining major improvements and are they included in national and sectoral investment plans?
  - There is no standard methodology for determining major improvements, and they are not included in national or sectoral plans.
  - There is a standard methodology for determining major improvements, but they are not included in national or sectoral plans.
  - There is a standard methodology for determining major improvements, and they are included in national or sectoral plans.
- 9.c. Can expenditures relating to routine maintenance and major improvements be identified in the budget?
  - Routine maintenance and major improvements are not systematically identified in the budget.
  - Routine maintenance and major improvements are systematically identified in the budget.
  - Routine maintenance and major improvements are systematically identified in the budget and are reported.

### 10. Project Selection — institutions and procedures
- 10.a. Does the government undertake a central review of major project appraisals prior to budget inclusion?
  - Major projects (including donor- or PPP-funded) are not reviewed by a central ministry prior to inclusion in the budget.
  - Major projects (including donor- or PPP-funded) are reviewed by a central ministry prior to inclusion in the budget.
  - All major projects (including donor- or PPP-funded) are scrutinized by a central ministry, with input from an independent agency or experts prior to inclusion in the budget.
- 10.b. Does the government publish and adhere to standard criteria and a required process for project selection?
  - There are no published criteria or a required process for project selection.
  - There are published criteria for project selection, but projects can be selected without going through the required process.
  - There are published criteria for project selection, and generally projects are selected through the required process.
- 10.c. Does the government maintain a pipeline of appraised investment projects for inclusion in the annual budget?
  - The government does not maintain a pipeline of appraised investment projects.
  - The government maintains a pipeline of appraised investment projects, but other projects may be selected for financing through the annual budget.
  - The government maintains a comprehensive pipeline of appraised investment projects, which is used for selecting projects for inclusion in the annual budget, and over the medium term.

### 11. Procurement — openness, monitoring, complaints
- 11.a. Is the procurement process for major capital projects open and transparent?
  - Few major projects are tendered in a competitive process, and the public has limited access to procurement information.
  - Many major projects are tendered in a competitive process, but the public has only limited access to procurement information.
  - Most major projects are tendered in a competitive process, and the public has access to complete, reliable and timely procurement information.
- 11.b. Is there a system in place to ensure procurement is monitored adequately?
  - There is no procurement database, or the information is incomplete or not timely for most phases of the procurement process.
  - There is a procurement database with reasonably complete information, but no standard analytical reports are produced from the database.
  - There is a procurement database with reasonably complete information, and standard analytical reports are produced to support a formal monitoring system.
- 11.c. Are procurement complaints review processes conducted in a fair and timely manner?
  - Procurement complaints are not reviewed by an independent body.
  - Procurement complaints are reviewed by an independent body, but the recommendations of this body are not produced on a timely basis, nor published, nor rigorously enforced.
  - Procurement complaints are reviewed by an independent body whose recommendations are timely, published, and rigorously enforced.

### 12. Availability of Funding — timeliness and integration
- 12.a. Are ministries/agencies able to plan and commit expenditure on capital projects in advance on the basis of reliable cash-flow forecasts?
  - Cash-flow forecasts are not prepared or updated regularly, and ministries/agencies are not provided with commitment ceilings in a timely manner.
  - Cash-flow forecasts are prepared or updated quarterly, and ministries/agencies are provided with commitment ceilings at least a quarter in advance.
  - Cash-flow forecasts are prepared or updated monthly, and ministries/agencies are provided with commitment ceilings for the full fiscal year.
- 12.b. Is cash for project outlays released in a timely manner?
  - The financing of project outlays is frequently subject to cash rationing.
  - Cash for project outlays is sometimes released with delays.
  - Cash for project outlays is normally released in a timely manner, based on the appropriation.
- 12.c. Is external (donor) funding of capital projects fully integrated into the main government bank account structure?
  - External financing is largely held in commercial bank accounts outside the central bank.
  - External financing is held at the central bank but is not part of the main government bank account structure.
  - External financing is fully integrated into the main government bank account structure.

### 13. Portfolio Management and Oversight — monitoring, reallocation, ex post review
- 13.a. Are major capital projects subject to monitoring during project implementation?
  - Most major capital projects are not monitored during project implementation.
  - For most major projects, annual project costs, as well as physical progress, are monitored during project implementation.
  - For all major projects, total project costs, as well as physical progress, are centrally monitored during project implementation.
- 13.b. Can funds be re-allocated between investment projects during implementation?
  - Funds cannot be re-allocated between projects during implementation.
  - Funds can be reallocated between projects during implementation, but not using systematic monitoring and transparent procedures.
  - Funds can be re-allocated between projects during implementation, using systematic monitoring and transparent procedures.
- 13.c. Does the government adjust project implementation policies by systematically conducting ex post reviews?
  - Ex post reviews of major projects are neither systematically required, nor frequently conducted.
  - Ex post reviews of major projects, focusing on project costs, deliverables and outputs, are sometimes conducted.
  - Ex post reviews of major projects focusing on project costs, deliverables, and outputs are conducted regularly by an independent entity or experts, and are used to adjust project implementation policies and procedures.

### 14. Management of Project Implementation — arrangements, adjustment rules, audits
- 14.a. Do ministries/agencies have effective project management arrangements in place?
  - Ministries/agencies do not systematically identify senior responsible officers for major investment projects, and implementation plans are not prepared prior to budget approval.
  - Ministries/agencies systematically identify senior responsible officers for major investment projects, but implementation plans are not prepared prior to budget approval.
  - Ministries/agencies systematically identify senior responsible officers for major investment projects, and implementation plans are prepared prior to budget approval.
- 14.b. Has the government issued rules, procedures and guidelines for project adjustments applied systematically across major projects?
  - There are no standardized rules and procedures for project adjustments.
  - For major projects, there are standardized rules and procedures for project adjustments, but do not include, if required, a fundamental review and reappraisal of a project’s rationale, costs, and expected outputs.
  - For all projects, there are standardized rules and procedures for project adjustments and, if required, include a fundamental review of the project’s rationale, costs, and expected outputs.
- 14.c. Are ex-post audits of capital projects routinely undertaken?
  - Major capital projects are usually not subject to ex-post external audits.
  - Some major capital projects are subject to ex-post external audit, information on which is published by the external auditor.
  - Most major capital projects are subject to ex post external audit information which is regularly published and scrutinized by the legislature.

### 15. Monitoring of Public Assets — registers, valuation, depreciation
- 15.a. Are asset registers updated by surveys of stocks, values, and conditions regularly?
  - Asset registers are neither comprehensive nor updated regularly.
  - Asset registers are either comprehensive or updated regularly at reasonable intervals.
  - Asset registers are comprehensive and updated regularly at reasonable intervals.
- 15.b. Are nonfinancial asset values recorded in the government financial accounts?
  - Government financial accounts do not include the value of non- financial assets.
  - Government financial accounts include the value of some non- financial assets, which are revalued irregularly.
  - Government financial accounts include the value of most nonfinancial assets, which are revalued regularly.
- 15.c. Is the depreciation of fixed assets captured in the government’s operating statements?
  - The depreciation of fixed assets is not recorded in operating statements.
  - The depreciation of fixed assets is recorded in operating statements, based on statistical estimates.
  - The depreciation of fixed assets is recorded in operating expenditures, based on asset-specific assumptions.

### Cross-cutting issues
- A. IT support: Is there a comprehensive computerized information system for public investment projects to support decision making and monitoring?
- B. Legal Framework: Is there a legal and regulatory framework that supports institutional arrangements, mandates, coverage, procedures, standards and accountability for effective PIM?
- C. Staff capacity: Does staff capacity (number of staff and/or their knowledge, skills, and experience) and clarity of roles and responsibilities support effective institutions?

### Annex 2. Detailed PIMA Scores — Indicator strength and effectiveness
- Score key: 1 = To no or a lesser extent; 2 = To some extent; 3 = To a greater extent.
- I. PLANNING / II. ALLOCATION / III. IMPLEMENTATION — Indicator scores (Strength, Effectiveness)
  - 1.a. 3, 2
  - 1.b. 3, 3
  - 1.c. 2, 3
  - 2.a. 2, 2
  - 2.b. 2, 2
  - 2.c. 2, 1
  - 3.a. 3, 3
  - 3.b. 2, 2
  - 3.c. 2, 2
  - 4.a. 2, 1
  - 4.b. 2, 1
  - 4.c. 2, 1
  - 5.a. 1, 1
  - 5.b. 3, 1
  - 5.c. 1, 1
  - 6.a. 3, 2
  - 6.b. 1, 1
  - 6.c. 3, 3
  - 7.a. 2, 2
  - 7.b. 2, 2
  - 7.c. 3, 2
  - 8.a. 2, 2
  - 8.b. 2, 2
  - 8.c. 2, 3
  - 9.a. 3, 3
  - 9.b. 3, 3
  - 9.c. 2, 2
  - 10.a. 1, 1
  - 10.b. 1, 1
  - 10.c. 1, 1
  - 11.a. 3, 1
  - 11.b. 3, 2
  - 11.c. 3, 3
  - 12.a. 3, 2
  - 12.b. 3, 3
  - 12.c. 3, 3
  - 13.a. 1, 1
  - 13.b. 3, 2
  - 13.c. 3, 1
  - 14.a. 2, 2
  - 14.b. 3, 1
  - 14.c. 3, 2
  - 15.a. 3, 3
  - 15.b. 3, 3
  - 15.c. 3, 3

### Annex 3. Example Project Selection Criteria — structure and scoring principles
- Principles and scoring for New Major Projects, New Minor Projects, Major, Minor:
  - Strategic fit (examples):
    - 1.1.1: Does the project fit with the NDS measure? [20 points]
    - 1.2.1: Does the project fit to Declaration of Priorities? [10 points]
    - 1.2.2: Does the project fit to the MTEF priorities? [10 points]
    - 1.3.1: Does the project fit to IPA II Strategy Paper for Kosovo? [10 points]
    - 1.3.2: Does the project fit to Single Project Pipeline of Infrastructural Investments? [10 points]
    - 1.3.3: Does the project fit to National Economic Reform Programme (NERP)? [10 points]
    - 1.4.1: Does the project fit to any of the sector strategies? [5 points]
    - 1.4.2: Does the project fit to any of the budget organization priorities? [5 points]
    - Aggregate example totals: 100, 100
  - Economic justification and feasibility:
    - 2.1.1: Description of current situation (including problems)? [5 points / 10 points for minor/major variants]
    - 2.1.2: Objectives and whether project could be done by a private investor? [5 points / 20 points]
    - 2.2.1: Was CBA prepared? [10 points]
    - 2.2.2: Were investment options considered and described? [10 points]
    - 2.3.1: Environmental impact description and assessment requirements? [4 points]
    - 2.3.2: Impact on public health described? [3 points]
    - 2.3.3: How project assists poverty alleviation and benefits specific communities? [3 points]
    - 2.4.1: Are recurrent costs recognized within the CBA (projects > 1 million €)? [5 points]
    - 2.4.2: Are recurrent costs recognized in PIP system? [5 points]
    - 2.5: Funding by EU / donor / or loans from IFIs? [50 points scale based on percentage funded by EU/donors/IFIs]
      - Scoring bands: between 0 and 20 -> [10 points]; between 20 and 40 -> [20 points]; between 40 and 60 -> [30 points]; between 60 and 80 -> [40 points]; between 80 and 100 -> [50 points]
  - Risk, ownership, management, scheduling, and financial plan:
    - 3.1.1: Are project risks identified? [5 points]
    - 3.1.2: Are actions to minimize risk described? [5 points]
    - 3.2.1: Ownership of asset? [5 points]
    - 3.3.1: Is project manager defined? [5 points]
    - 3.3.2: Are project management arrangements explained? [5 points]
    - 3.4.1: Start and end dates of project preparation phase set? [5 points]
    - 3.4.2: Date of planning permission approval and milestones? [20 points]
    - 3.5.1: Start and end dates of project implementation phase set? [5 points]
    - 3.5.2: Key implementation milestones set? [15 points]
    - 3.6.1: Financial plan, economic classification, other costs, sources of funds? [30 points]
  - Priority and decision gates:
    - Priority given by SPSG [100 points]
    - Priority given by NIC [200 points]
    - Priority given by SPC [400 points]
    - Combined priority examples: 100, 200, 400, 1000
  - Additional principles and thresholds:
    - 1.4: Strategic fit to budget organization priority or sector strategy [10 points]
    - 2.3: Environmental / health / social impact (For projects > 5 million € - Feasibility study necessary) [10 points]
    - 2.4.1: Are recurrent cost recognized in PIP system? [10 points]
    - 2.4: Impact on recurrent costs i.e., operational and maintenance costs [10 points]
    - Principle 2: Economic Justification; Principle 3: Maturity / Implementation Assessment; Principle 1: Strategic relevance assessment.

*IMF | Technical Report — content unit (tarea2024084-print-pdf) — section and annexes reproduced as provided*

### Annex 4. Negative Consequence of Lack of

### Annex 4. Negative Consequence of Lack of Portfolio Management

### Major project case summaries and findings
- Third Development Axis Project
  - Audit period: 1 January 2015 – 31 December 2020
  - Cost increase: Euro 2.2 billion to Euro 4,2 billion.
  - 92 percent cost increase
  - Implementing Agency: Ministry of Infrastructure
  - Delay period: 16 years
  - Critical delay causes:
    - Failed to monitor the implementation measures.
    - Failed to determine reasons for delays and to implement corrective measures.
    - Ministry of Environment and Spatial Planning failed to timely implement all general measures.

- The second track of the Dvaca – Koper Railway Line Project
  - Audit period: 1 January 2015 – 30 June 2020
  - Cost: Euro 1,25 billion + Euro 340 million
  - Implementing Agency: Government and Ministry of Infrastructure
  - Delay period: 15 years
  - Critical delay causes:
    - Gov. and Min. of Infrastructure were not efficient when establishing bases for construction and management of the second track railway line.
    - Gov. And Min. Of Infrastructure were partially efficient when exerting control over the implementation of the second railway track.
    - Decades of non-strategic decisions have resulted in rising costs and extended deadlines for construction.

- Efficiency of strategic planning of long – term use of nuclear energy in electricity generation (NEK2)
  - Audit period: 1 January 2006 – 31 December 2016
  - Studies: 122 studies on feasibility and viability of NEK2 to the value of Euro 16 million
  - Implementing Agency: Government and Ministry responsible for Energy
  - Delay period: 13 years
  - Critical delay causes:
    - The government was inefficient in the Strategic Planning.
    - Ministry responsible for Energy was partially inefficient in the Strategic Planning.

- Note from Court of Audits:
  - "The reasons for the critical delays as summarized by the Court of Audits are all elements that could have been identified at a very early stage. If there was proper portfolio management of major projects, where these issues could have been identified and escalated to a higher level of authority, time frames could have been reduced considerably, inclusive of large cost savings."
  - Source: Court of Audits, Republic of Slovenia 19 April 2023

### Court of Audit: audit activity statistics (selected)
- Number of audits conducted in 28 years. 2 300
- Audits per year in the past 10 years 60
- Regulatory audits 33
- Audits on financial statements 5 of which 4 were unqualified and 1 was qualified
- Performance audits 29
- Demands to submit response documents 20
- Audit reports without demands 38
- Discussions in the National Assembly and the National Council 11
- Source: Presentation from Court of Audits 19 April 2023

### Example minimum requirements for a monitoring template (Annex 5)
- MONITORING INFORMATION. PROJECT DESCRIPTION
- PROGRESS MONITORING REPORT NO:
  - Date:
  - PROJECT SUMMARY fields to include (as listed):
    - Employer
    - Engineer
    - Contractor
    - Contract commencement date
    - Original contract duration
    - Original contract completion date
    - Approved extension of time to the contract
    - Revised completion date
    - Original contract sum (Including contingencies & VAT)
    - Value of approved cost adjustments
    - Estimated final cost.
    - % of contract sum certified:
    - % of contract time lapsed
    - % of scheduled items certified
    - Cumulative VAT amount certified
    - Overall progress status
    - Actual progress status
    - Number of months of contract time lapsed.
    - Risks identified.
    - Mitigation steps taken to avoid risks.
    - Any other important information that might be applicable
    - Projected cash flow for the next three months

### Strengthening project appraisal and the selection process — example next steps (Annex 6)
- 1. Create a taskforce to prepare regulations and revised methodology
- 2. Ensure that the Selection Regulations include:
  - a. Requirement that presentation to the Budget should be preceded by a review of appraisal by the MOF;
  - b. Formal consideration of a permanent pipeline of well-appraised investment projects independently from the budget process, allowing for appraisal review to be done before the budget preparation process;
  - c. Annual publication of selection criteria in the budget circular launching the budget preparation process;
  - d. MoF review of project selection by line ministries, ensuring that the Capital Budget is aligned with national priorities.
- 3. Ensure that the revised Standard Methodology includes:
  - a. Requirement for the preparation of budget requests for the development of major projects, allowing for adequate funding of preliminary design, pre-feasibility studies, detailed design, and feasibility studies.
  - b. Clearer differentiation between simplified appraisal requirements for smaller projects, and more rigorous and detailed appraisal of major projects.
  - c. Requirement for systematic review of the appraisal reports of major projects by the MOF, ensuring the development of more credible and resilient investment projects.
  - d. Strengthening of risk assessment methodology, explicitly addressing a broad range of risk factors (from geological and other site risks to licensing issues, cost of materials, and even future operational risks) and requiring risk mitigation plans for large projects.
- 4. Publish the Selection Regulations and updated Unified Methodology, rrequiring implementation for the budget process
- 5. Train MOF staff on the new Uniform Methodology to support line ministries.
- 6. Identify two relevant line ministries willing to act as pilot ministries in applying the new project preparation rules already in the budget process occurring in 2024; provide MOF support to the two pilot ministries; review project appraisals presented by pilot ministries; review criteria-based project selection with pilot ministries; identify lessons from that experience and develop guidance for all line ministries.
- 7. Extend MoF project-preparation support to all ministries.
- 8. Start reviewing line ministries’ project selection.

*Source: Court of Audits, Republic of Slovenia 19 April 2023; Presentation from Court of Audits 19 April 2023; IMF mission.*

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_Source: https://www.imf.org/-/media/files/publications/tar/2024/english/tarea2024084-print-pdf.pdf_