## _090115

## Source details

**Canonical URL:** [_090115](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2015/_090115.pdf)

## Other formats

- [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2015/_090115.pdf.md)
- [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2015/_090115.pdf.json)

---

### Introduction
- Public investment supports delivery of public services, connects citizens and firms to economic opportunities, and can catalyze economic growth.
- The IMF introduces two analytical innovations used in this study:
  - A new Public Investment Efficiency Index (PIE-X).
  - A new Public Investment Management Assessment (PIMA), applied to G-20 countries.

### Trends in Public Investment and Capital Stock
- Advanced G-20 public investment trends:
  - Decreased from a high of under 5 percent of GDP in the late 1960s to a historic low of over 3 percent of GDP in 2012.
- Emerging G-20 public investment trends:
  - Peaked at over 7 percent of GDP in the early 1980s.
  - Declined to around 4 percent of GDP in the mid-2000s.
  - Recovered to 5 percent of GDP more recently.
- Public capital stock:
  - Since 1960, the real value of the public capital stock has nearly doubled on a per capita basis in G-20 economies.
  - The public capital stock has generally lagged behind rising output throughout this period.
  - In advanced G-20 countries the public capital stock has stabilized in recent years.
  - Emerging G-20 countries saw reductions in public capital/output ratios over past decades that have only begun to reverse in the past few years.

### Public vs. Private Roles and PPPs in Infrastructure
- Private sector role:
  - In advanced economies (example: United Kingdom) private companies account for almost two-thirds of investment in core economic infrastructure.
  - In emerging economies (example: India) the private sector accounts for less than a third of infrastructure investment.
- Social infrastructure:
  - The public sector accounts for more than half of total investment in education in G-20 economies; health infrastructure provision shows significant dispersion across countries.
- PPP capital stock:
  - In the G-20, the PPP capital stock averaged around 4.5 percent of GDP in 2013 (about 10 percent of the public capital stock).
  - The PPP capital stock was less than 1 percent of GDP in advanced economies (AEs) as a whole in the broader sample analyzed in IMF (2015).
  - Note: The number of G-20 AE countries in the sample is limited due to lack of consistent reporting of PPP operations.

### Composition of Public Sector Investment (Selected G-20, 2013)
- Australia (percent of GDP):
  - Central government 0.5
  - Local government 2.6
  - Public corporations and other entities 1.6
  - Public sector (consolidated) 4.7
- France (percent of GDP):
  - Central government 1.3
  - Local government 2.8
  - Public corporations and other entities 1.7
  - Public sector (consolidated) 5.8
- Mexico (percent of GDP):
  - Central government 3.4
  - Local government 0.8 (estimated from OECD National Accounts Database 2012)
  - Public corporations and other entities 2.0
  - Public sector (consolidated) 6.2
- UK (percent of GDP):
  - Central government 1.7
  - Local government 0.9
  - Public corporations and other entities 0.3
  - Public sector (consolidated) 2.9
- Note: Table is illustrative; breakdown data between central and local government investment are limited and may not be fully consistent.

### Infrastructure Coverage, Quality, and Public Investment Efficiency
- Convergence patterns:
  - Higher public investment rates in emerging G-20 countries have led to some convergence with advanced countries in social infrastructure (schools, hospitals), and to a lesser extent economic infrastructure (roads, electricity).
  - Large and persistent disparities between advanced and emerging G-20 countries remain in economic infrastructure coverage.
- Measured inefficiencies:
  - Comparing public capital expenditure (input) with infrastructure coverage and quality (output) across the G-20 reveals average inefficiencies in public investment processes of around 22 percent.
  - Inefficiencies by subgroup:
    - Advanced G-20 economies: 13 percent (relative to the best performer).
    - Emerging G-20 countries: 31 percent.
- Public Investment Efficiency Index (PIE-X):
  - Based on a sample of 114 countries, a public investment efficiency frontier is defined by countries with the highest coverage and quality of public infrastructure for a given level of public capital stock per capita.
  - Efficiency generally increases with income per capita, but with decreasing marginal returns to additional investment.
  - PIE-X scoring:
    - Countries with the highest output for given inputs form an efficiency frontier and are given a PIE-X score of 1.
    - Countries receive a PIE-X score between 0 and 1 based on vertical distance to the frontier relative to peer best performers.
    - Scores range between 0 and 1; the less efficient the country, the greater the distance from the frontier and the lower its PIE-X score.

### Efficiency gap and economic dividend
- The average efficiency gap for the G-20 is 22 percent, with some countries having much higher gaps.
- The size of the gap shrinks as income rises:
  - Emerging G-20 countries face a gap of 31 percent.
  - Advanced G-20 countries face a gap of 13 percent.
- Economic dividend from closing the efficiency gap:
  - Moving from the lowest quartile to the highest quartile in public investment efficiency could double the impact of increases of investment on growth (IMF, 2015).
- Quantitative association reported:
  - Regressions suggest an additional point in PIM overall score is statistically significantly associated with a 5 percent increase in PI efficiency.

### Evaluating and Strengthening Public Investment Management (PIMA)
- The PIMA instrument:
  - The IMF’s new Public Investment Management Assessment (PIMA) evaluates the strength of 15 key institutions that shape the planning, allocation, and implementation of public investments.
  - For each of the 15 PIM institutions, three key design features are identified; each feature can be fully met, partly met, or not met.
  - Based on how many key features are in place, countries are given a PIMA score between 0 (no key features in place) and 10 (all 45 key features fully in place).
  - The PIMA assesses PIM at three stages:
    i. Planning sustainable levels of investment across the public sector;
    ii. Allocating investment to the right sectors and projects;
    iii. Implementing projects on time and on budget.
- Institutional patterns and strengths:
  - Advanced economies generally have stronger PIM institutions than emerging markets, with notable exceptions in national and sectoral planning, central-local coordination, and multi-year budgeting.
  - Institutional strength tends to increase along the investment cycle: planning institutions are the weakest on average; implementation institutions are the strongest on average.
  - Relative strengths and weaknesses:
    - Advanced G-20 countries: relatively strong in management of PPPs, regulation of infrastructure companies, and budget comprehensiveness and unity.
    - Emerging G-20 countries: perform relatively poorly in project management and monitoring of public assets.
    - Both advanced and emerging G-20 countries perform relatively poorly in fiscal rules and project appraisal.
- Potential gains from strengthening PIM:
  - Strengthening PIM institutions could improve predictability, credibility, and integrity of public investment budgets.
  - Improving PIM could close up to two-thirds of the 22 percent “efficiency gap” across the G-20.
    - On average, G-20 countries could close 67 percent of the distance from the efficiency frontier by adopting the PIM practices of the best performer.
  - Improvements in PIM would have the largest payoff in emerging markets.
  - Strong PIM institutions are associated with:
    - Higher efficiency (positive relationship between PIMA score and PIE-X).
    - Less volatile investment flows, even when corrected for income levels.
    - More credible capital budgets: both over- and underspending relative to the approved capital budget decrease with stronger institutions.
    - Higher perceived government integrity (higher ICRG Corruption Index scores), even when adjusted for income.

### Priorities for strengthening public investment management (G-20)
- Common and cross-cutting priorities:
  - Make fiscal frameworks more supportive of sustainable, stable, and adequate investment levels.
  - Improve rigor and transparency of project appraisal.
  - Enhance oversight and control over public-private partnerships (PPPs).
- Advanced G-20 country priorities:
  - Strengthen central-local coordination:
    - Improve information-sharing mechanisms during planning.
    - Link regional and national strategic planning.
    - Formalize discussion/negotiation processes.
    - Publish consolidated public investment plans of all levels of government.
  - Strengthen multi-year budgeting:
    - Multi-year budgeting increases predictability of funding, supports pipeline development, better prioritization, and disclosure of total project costs.
    - Investment spending ceilings by sector or ministry (indicative or binding) can provide discipline in planning and implementation.
  - Improve national planning and sectoral/regional guidance to ensure coherence between decentralization and national priorities.
- Emerging G-20 country priorities:
  - Establish clearer criteria and procedures for project selection:
    - Publish selection criteria to reduce political bypassing and improve use of project appraisal results.
    - Use feedback from ex post project evaluations to refine selection processes.
    - Avoid approving more projects than can realistically be financed to prevent degraded implementation performance.
  - Improve monitoring of existing stock of infrastructure assets:
    - Reliable asset registers and valuations are needed to determine maintenance and replacement needs.
    - Accounting systems often do not cover nonfinancial assets; introducing accrual accounting procedures and depreciation estimates in financial statements can proxy maintenance and capital replacement needs.

### Project management and evaluation — findings and bottlenecks
- Project management and evaluation are bottlenecks in quite a few emerging G-20 countries.
- Key findings:
  - Project management capacity is often limited, not properly assigned or not properly overseen.
  - Project implementation plans are not always developed prior to project approval, reducing continuity between project design and implementation.
  - Ex post evaluations of project management, outputs, and outcomes are often overlooked despite providing important inputs to planning, design, and appraisal of future projects.
  - Ex post financial audits of projects should be done on a risk-based manner, but emerging G-20 countries often do not have criteria on when to audit a project and do not publish the results.

### Fiscal framework, appraisal, PPPs — specific recommendations
- Fiscal framework recommendations:
  - All G-20 countries should make fiscal frameworks more supportive of sustainable, stable, and adequate levels of public investment.
  - Fiscal frameworks should:
    - protect investment spending against fiscal pressures in the near term—even if this is not always fully possible under tight financing constraints;
    - make investment flows less pro-cyclical and more fiscally sustainable in the longer term.
  - The use of structural balance limits or investment floors, coupled with firm ceilings on overall indebtedness, has proven helpful in some countries.
  - More predictable and stable levels of aggregate public investment support improved sectoral and major project planning, and ensure that recurrent spending shares in any consolidation efforts.
- Strengthening project appraisal and transparency:
  - Most G-20 countries could strengthen the rigor and transparency of project appraisal by:
    - adopting standard project appraisal guidelines;
    - more systematic use of cost-benefit analyses;
    - incorporating risk assessments in project evaluation.
  - Publishing project evaluations or cost-benefit analyses would:
    - provide an incentive to perform studies more thoroughly;
    - contribute to greater discipline in project selection.
  - A central review or second opinion can ensure compliance with national priorities and comparability of project analyses across sectors.
  - Feasibility studies by external experts are often warranted for large, complex, or politically sensitive projects.
- Public-Private Partnerships (PPPs):
  - Many G-20 countries are still struggling to make PPPs a cost-effective alternative to traditional budget financing of public infrastructure.
  - Successful country practices include:
    - publishing national strategies for the use of PPPs;
    - selecting PPP projects based on value-for-money reviews by a dedicated PPP unit;
    - guidance by clear criteria for choosing between PPPs and traditional financing.
  - PPP commitments should be systematically monitored, with overall limits on the accumulation of PPP liabilities, to minimize related fiscal risks.

### PIMA questionnaire and diagnostic overview
- PIMA evaluates 15 public investment management institutions across a sample of 25 countries.
- Assessment structure:
  - Each institution assessed on three indicators related to key design features, resulting in a total of 45 indicators.
  - Three possible scores were set for each indicator; criteria for each score accumulate key characteristics.
  - If an indicator was judged inapplicable, it was removed entirely from the average calculation.
  - The 45 indicator scores were aggregated using simple averaging to produce institution, phase, country, and group averages.
- Implementation of scoring:
  - Scoring was performed by Fiscal Affairs Department (FAD) staff with country knowledge; the desk economist reviewed scoring; countries were consulted on factual questions; an internal review ensured consistency.
- Comparative notes:
  - The PIMA results are highly correlated with wider measures of government integrity, such as the World Bank’s Worldwide Governance Indicators (WGI).
  - A principal component analysis confirmed the correlations between our framework and WGI, but not the PIMI.
  - Results are also correlated with the Public Investment Management Index (PIMI) developed by the IMF and the World Bank, though sample overlap is relatively low.

*Source: EXECUTIVE SUMMARY, IMPROVING PUBLIC INVESTMENT EFFICIENCY IN THE G-20, September 1, 2015.*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Introduction
- Public investment supports delivery of public services, connects citizens and firms to economic opportunities, and can catalyze economic growth.
- After three decades of steady decline as a share of GDP, the public capital stock has begun to recover in G-20 countries.
- The IMF introduces two analytical innovations used in this study:
  - A new Public Investment Efficiency Index (PIE-X).
  - A new Public Investment Management Assessment (PIMA), applied to G-20 countries.

### Trends in Public Investment and Capital Stock
- Advanced G-20 public investment trends:
  - Decreased from a high of under 5 percent of GDP in the late 1960s to a historic low of over 3 percent of GDP in 2012.
- Emerging G-20 public investment trends:
  - Peaked at over 7 percent of GDP in the early 1980s.
  - Declined to around 4 percent of GDP in the mid-2000s.
  - Recovered to 5 percent of GDP more recently.
- Public capital stock:
  - Since 1960, the real value of the public capital stock has nearly doubled on a per capita basis in G-20 economies.
  - The public capital stock has generally lagged behind rising output throughout this period.
  - In advanced G-20 countries the public capital stock has stabilized in recent years.
  - Emerging G-20 countries saw reductions in public capital/output ratios over past decades that have only begun to reverse in the past few years.

### Public vs. Private Roles and PPPs in Infrastructure
- Private sector role:
  - In advanced economies (example: United Kingdom) private companies account for almost two-thirds of investment in core economic infrastructure.
  - In emerging economies (example: India) the private sector accounts for less than a third of infrastructure investment.
- Social infrastructure:
  - The public sector accounts for more than half of total investment in education in G-20 economies; health infrastructure provision shows significant dispersion across countries.
- PPP capital stock:
  - In the G-20, the PPP capital stock averaged around 4.5 percent of GDP in 2013 (about 10 percent of the public capital stock).
  - The PPP capital stock was less than 1 percent of GDP in advanced economies (AEs) as a whole in the broader sample analyzed in IMF (2015).
  - Note: The number of G-20 AE countries in the sample is limited due to lack of consistent reporting of PPP operations.

### Composition of Public Sector Investment (Selected G-20, 2013)
- Australia (percent of GDP):
  - Central government 0.5
  - Local government 2.6
  - Public corporations and other entities 1.6
  - Public sector (consolidated) 4.7
- France (percent of GDP):
  - Central government 1.3
  - Local government 2.8
  - Public corporations and other entities 1.7
  - Public sector (consolidated) 5.8
- Mexico (percent of GDP):
  - Central government 3.4
  - Local government 0.8 (estimated from OECD National Accounts Database 2012)
  - Public corporations and other entities 2.0
  - Public sector (consolidated) 6.2
- UK (percent of GDP):
  - Central government 1.7
  - Local government 0.9
  - Public corporations and other entities 0.3
  - Public sector (consolidated) 2.9
- Note: Table is illustrative; breakdown data between central and local government investment are limited and may not be fully consistent.

### Infrastructure Coverage, Quality, and Public Investment Efficiency
- Convergence patterns:
  - Higher public investment rates in emerging G-20 countries have led to some convergence with advanced countries in social infrastructure (schools, hospitals), and to a lesser extent economic infrastructure (roads, electricity).
  - Large and persistent disparities between advanced and emerging G-20 countries remain in economic infrastructure coverage.
- Measured inefficiencies:
  - Comparing public capital expenditure (input) with infrastructure coverage and quality (output) across the G-20 reveals average inefficiencies in public investment processes of around 22 percent.
  - Inefficiencies by subgroup:
    - Advanced G-20 economies: 13 percent (relative to the best performer).
    - Emerging G-20 countries: 31 percent.
- Public Investment Efficiency Index (PIE-X):
  - Based on a sample of 114 countries, a public investment efficiency frontier is defined by countries with the highest coverage and quality of public infrastructure for a given level of public capital stock per capita.
  - Efficiency generally increases with income per capita, but with decreasing marginal returns to additional investment.

### Evaluating and Strengthening Public Investment Management (PIM)
- The PIMA instrument:
  - The IMF’s new Public Investment Management Assessment (PIMA) evaluates the strength of 15 key institutions that shape the planning, allocation, and implementation of public investments.
  - Strengthening PIM institutions could improve predictability, credibility, and integrity of public investment budgets.
  - Strengthening PIM could close up to two-thirds of the 22 percent “efficiency gap” across the G-20.
- Economic growth dividend:
  - The most efficient public investors would get twice the growth “bang” for their public investment “buck” than the least efficient.
- Priorities differ by subgroup:
  - Advanced G-20 countries:
    - Strengthen central-local coordination.
    - Enhance medium-term budget frameworks and integrate them with national and sectoral strategic planning.
  - Emerging G-20 countries:
    - Make project selection processes more transparent.
    - Strengthen project management.
    - Improve monitoring of and accounting for infrastructure assets.
  - All G-20 countries:
    - Make fiscal frameworks more supportive of sustainable, stable and adequate investment levels.
    - Improve rigor and transparency of project appraisal.
    - Enhance oversight and control over public-private partnerships (PPPs).

### Administrative and Publication Details
- Date: September 1, 2015
- Approved By: Vitor Gaspar
- Prepared by a Fiscal Affairs Department staff team including Marco Cangiano, Richard Hughes, Holger van Eden, Torben Hansen, Mario Pessoa, Geneviève Verdier, Benoit Chevauchez, Teresa Curristine, Renaud Duplay, Israel Fainboim, Almudena Fernandez, Lesley Fisher, David Gentry, Jason Harris, Tim Irwin, Javier Kapsoli, Samah Mazraani, Maximilien Queyranne, Isabel Rial, Maura Francese, Sandeep Saxena, Johann Seiwald, Tom Josephs, Yasemin Hurcan, and Ha Vu. Amyra Asamoah, Kaitlyn Douglass, and Ryan Espiritu provided research assistance; Molly Abraham provided production assistance.

*Source: EXECUTIVE SUMMARY, IMPROVING PUBLIC INVESTMENT EFFICIENCY IN THE G-20, September 1, 2015.*

### 12.      The average efficiency gap for the G-20 is 22 percent, with some countries having

### 12.      The average efficiency gap for the G-20 is 22 percent, with some countries having

### Efficiency gap and PIE-X indicator
- The average efficiency gap for the G-20 is 22 percent, with some countries having much higher gaps.
- The size of the gap shrinks as income rises:
  - Emerging G-20 countries face a gap of 31 percent.
  - Advanced G-20 countries face a gap of 13 percent.
- The Public Investment Efficiency indicator (PIE-X):
  - Estimates the relationship between the public capital stock and indicators of access to and the quality of infrastructure assets.
  - Countries with the highest output for given inputs form an efficiency frontier and are given a PIE-X score of 1.
  - Countries receive a PIE-X score between 0 and 1 based on vertical distance to the frontier relative to peer best performers.
  - Scores range between 0 and 1; the less efficient the country, the greater the distance from the frontier and the lower its PIE-X score.
- Economic dividend from closing the efficiency gap:
  - Moving from the lowest quartile to the highest quartile in public investment efficiency could double the impact of increases of investment on growth (IMF, 2015).

### PIMA framework: structure and scoring
- Fund staff developed the Public Investment Management Assessment (PIMA) to assess the quality of PIM practices.
- PIMA scope and mechanics:
  - Evaluates 15 key institutions for planning, allocating, and implementing public investment.
  - For each of the 15 PIM institutions, three key design features are identified; each feature can be fully met, partly met, or not met.
  - Based on how many key features are in place, countries are given a PIMA score between 0 (no key features in place) and 10 (all 45 key features fully in place).
  - The PIMA assesses PIM at three stages:
    i. Planning sustainable levels of investment across the public sector;
    ii. Allocating investment to the right sectors and projects;
    iii. Implementing projects on time and on budget.

### Application of PIMA to the G-20 — institutional patterns
- Advanced economies generally have stronger PIM institutions than emerging markets, with notable exceptions in:
  - National and sectoral planning,
  - Central-local coordination,
  - Multi-year budgeting — where some emerging G-20 countries score similar to or better than advanced G-20 countries.
- Institutional strength tends to increase along the investment cycle:
  - Planning institutions are the weakest on average.
  - Implementation institutions are the strongest on average.
- Relative strengths and weaknesses:
  - Advanced G-20 countries: relatively strong in management of PPPs, regulation of infrastructure companies, and budget comprehensiveness and unity.
  - Emerging G-20 countries: perform relatively poorly in project management and monitoring of public assets.
  - Both advanced and emerging G-20 countries perform relatively poorly in fiscal rules and project appraisal.

### Relationship between PIM institutions and public investment performance
- Four public investment outcome measures related to PIMA scores:
  - Efficiency of public investment — measured by PIE-X.
  - Volatility of public investment — measured by the standard deviation of GG investment growth.
  - Credibility of public investment — measured by the absolute difference between budgeted and actual general government capital expenditure.
  - Integrity of public investment — proxied by the ICRG Corruption Index (higher score = lower corruption).
- Key empirical findings:
  - Strong PIM institutions are linked to higher efficiency (positive relationship between PIMA score and PIE-X).
  - Improvements in PIM could close about two-thirds of the efficiency gap for the G-20:
    - On average, G-20 countries could close 67 percent of the distance from the efficiency frontier by adopting the PIM practices of the best performer.
    - Improving PIM institutions would have the largest payoff in emerging markets.
  - Strong PIM institutions are associated with less volatile investment flows, even when corrected for income levels.
  - Stronger PIM institutions are associated with more credible capital budgets:
    - Both over- and underspending relative to the approved capital budget decrease with stronger institutions.
  - Strong PIM institutions are associated with higher perceived government integrity (higher ICRG Corruption Index scores), even when adjusted for income.
- Quantitative association reported:
  - Regressions suggest an additional point in PIM overall score is statistically significantly associated with a 5 percent increase in PI efficiency.

### Priorities for strengthening public investment management (G-20)
- General findings from IMF staff case studies covering recommendations across the PIMA institutions:
  - Recommendations covered all three phases of the public investment management cycle and 14 of 15 PIMA institutions.
  - Most recommendations concentrated in planning; fewest in delivery.
  - Common themes differ by country group; planning and project appraisal/selection are recurring areas for improvement.
- Advanced G-20 country priorities:
  - Strengthen central-local coordination of public investment:
    - Improve information-sharing mechanisms during planning.
    - Link regional and national strategic planning.
    - Formalize discussion/negotiation processes.
    - Publish consolidated public investment plans of all levels of government.
  - Strengthen multi-year budgeting:
    - Multi-year budgeting increases predictability of funding, supports pipeline development, better prioritization, and disclosure of total project costs.
    - Investment spending ceilings by sector or ministry (indicative or binding) can provide discipline in planning and implementation.
  - Improve national planning and sectoral/regional guidance to ensure coherence between decentralization and national priorities.
- Emerging G-20 country priorities:
  - Establish clearer criteria and procedures for project selection:
    - Publish selection criteria to reduce political bypassing and improve use of project appraisal results.
    - Use feedback from ex post project evaluations to refine selection processes.
    - Avoid approving more projects than can realistically be financed to prevent degraded implementation performance.
  - Improve monitoring of existing stock of infrastructure assets:
    - Reliable asset registers and valuations are needed to determine maintenance and replacement needs.
    - Accounting systems often do not cover nonfinancial assets; introducing accrual accounting procedures and depreciation estimates in financial statements can proxy maintenance and capital replacement needs.

*Source: IMF staff estimates and analysis as presented in the chapter excerpt.*

### 31.      Project management and evaluation are bottlenecks in quite a few emerging G-20

### 31.      Project management and evaluation are bottlenecks in quite a few emerging G-20 countries

### Project management and evaluation — findings
- Project management capacity is often limited, not properly assigned or not properly overseen.
- Project implementation plans are not always developed prior to project approval, reducing continuity between project design and implementation.
- Ex post evaluations of project management, outputs, and outcomes are often overlooked despite providing important inputs to planning, design, and appraisal of future projects.
- Ex post financial audits of projects should be done on a risk-based manner, but emerging G-20 countries often do not have criteria on when to audit a project and do not publish the results.

### Fiscal framework recommendations (paragraph 32)
- All G-20 countries should make fiscal frameworks more supportive of sustainable, stable, and adequate levels of public investment.
- Fiscal frameworks should:
  - protect investment spending against fiscal pressures in the near term—even if this is not always fully possible under tight financing constraints;
  - make investment flows less pro-cyclical and more fiscally sustainable in the longer term.
- The use of structural balance limits or investment floors, coupled with firm ceilings on overall indebtedness, has proven helpful in some countries.
- More predictable and stable levels of aggregate public investment support improved sectoral and major project planning, and ensure that recurrent spending shares in any consolidation efforts.

### Strengthening project appraisal and transparency (paragraph 33)
- Most G-20 countries could strengthen the rigor and transparency of project appraisal by:
  - adopting standard project appraisal guidelines;
  - more systematic use of cost-benefit analyses;
  - incorporating risk assessments in project evaluation.
- Many G-20 countries conduct but do not publish project evaluations or cost-benefit analyses; publishing would:
  - provide an incentive to perform studies more thoroughly;
  - contribute to greater discipline in project selection.
- While many G-20 countries have devolved responsibility for project appraisals to line ministries, a central review or second opinion can:
  - ensure compliance with national priorities;
  - ensure comparability of project analyses across sectors.
- Feasibility studies by external experts are often warranted for large, complex, or politically sensitive projects.

### Public-Private Partnerships (PPPs) (paragraph 34)
- Many G-20 countries are still struggling to make PPPs a cost-effective alternative to traditional budget financing of public infrastructure.
- Successful country practices include:
  - publishing national strategies for the use of PPPs;
  - selecting PPP projects based on value-for-money reviews by a dedicated PPP unit;
  - guidance by clear criteria for choosing between PPPs and traditional financing.
- PPP commitments should be systematically monitored, with overall limits on the accumulation of PPP liabilities, to minimize related fiscal risks.

### Annex I — The Public Investment Management Assessment (PIMA) Diagnostic (summary)
- The PIMA evaluates 15 public investment management institutions across a sample of 25 countries.
- Assessment structure:
  - Each institution assessed on three indicators related to key design features, resulting in a total of 45 indicators.
  - Three possible scores were set for each indicator; criteria for each score accumulate key characteristics (lowest score requires A, next requires A and B, highest requires A, B, and C).
  - If B was not present but C was, the middle score was given.
  - Some indicators (e.g., PPP-related) were not assumed to be present in every country and could be judged inapplicable.
- Scoring approach:
  - Scores were based on current practice; if very recently introduced with no opportunity to influence outcomes, scores were based on previous practice.
  - Scoring assumed practices were effective and present unless clear evidence to the contrary.
  - The 45 indicator scores were aggregated using simple averaging.
  - Averages were calculated for institutions, phases of the PIM process, countries, and classes of countries.
  - If an indicator was judged inapplicable, it was removed entirely from the average calculation.
  - Indicators and scoring criteria were designed with roughly equal weighting in mind.
- Implementation of scoring:
  - Scoring was performed by Fiscal Affairs Department (FAD) staff members with knowledge of public financial management practices in each country.
  - The desk economist in the respective IMF country team reviewed scoring for each country.
  - Countries were consulted directly regarding factual questions about particular institutions.
  - An internal review was conducted to ensure consistency of scoring across countries.
- Comparative note:
  - The PIMA results are highly correlated with wider measures of government integrity, such as the World Bank’s Worldwide Governance Indicators (WGI).
  - Results are also correlated with the Public Investment Management Index (PIMI) developed by the IMF and the World Bank, though sample overlap is relatively low.
  - PIMA compares well to the conceptual framework for PIM developed by the World Bank.

*IMPROVING PUBLIC INVESTMENT EFFICIENCY IN THE G-20 — excerpt provided in the source content*

### Annex Figure 1. Correlation with Other Measure

### Annex Figure 1. Correlation with Other Measure

### Correlation findings
- "A principal component analysis confirmed the correlations between our framework and WGI, but not the PIMI."
- PIMI description (verbatim): "The PIMI was developed as a composite index of the efficiency of the public investment process for 71 EMs and LIDCs across four consecutive stages: project appraisal, selection, implementation, and evaluation. Each of the stages is made up of several individual components (17 in total)."

*IMPROVING PUBLIC INVESTMENT EFFICIENCY IN THE G-20 — Annex Figure 1. Correlation with Other Measure*

---

### C. The PIMA Questionnaire — overview
- The questionnaire is organized into three broad pillars reflected in the text:
  - A. Planning Sustainable Levels of Public Investment
  - B. Ensuring Public Investment is Allocated to the Right Sectors and Projects
  - C. Delivering Productive and Durable Public Assets
- Each pillar contains numbered thematic areas (e.g., 1. Fiscal principles or rules; 2. National and Sectoral Planning; …; 15. Monitoring of Public Assets).
- For each thematic area, multiple sub-questions (a, b, c) present three alternative, verbatim categorical responses describing institutional arrangements or practices.

---

### A. Planning Sustainable Levels of Public Investment (items 1–5)
- 1. Fiscal principles or rules: Are there permanent fiscal principles or rules that support sustainable levels of capital spending?
  - 1.a. "Is fiscal policy guided by one or more permanent fiscal principles, or rules?"
    - "There are no permanent fiscal principles or rules"
    - "Fiscal policy is guided by one or more permanent fiscal rules but they have not been adhered to over the last three years and there is no provision in the law allowing rules to be suspended in exceptional circumstances"
    - "Fiscal policy is guided by one or more permanent fiscal rules and they have been adhered to over the last three years or there is a provision in the law allowing rules to be suspended in exceptional circumstances"
  - 1.b. "Do fiscal principles or rules protect capital spending over the short term or medium term?"
    - "Capital spending is included under a target or limit for the overall fiscal balance or aggregate expenditure"
    - "Capital spending is included under a target or limit for the overall fiscal balance or aggregate expenditure, but these are expressed in structural terms"
    - "Capital spending is excluded from a target or limit for the balance (Golden Rule) or expenditure (Operating Expenditure Rule) or there is a floor on the overall level of capital spending"
  - 1.c. "Is there a target or limit for government liabilities, debt, or net worth?"
    - "There is no target or limit for government liabilities, debt, or net worth"
    - "There is a target or limit for government liabilities, debt, or net worth"
    - "There is a target or limit for government liabilities, debt, or net worth with an automatic adjustment mechanism when the target is not being met"
- 2. National and Sectoral Planning: Are investment allocation decisions based on sectoral and inter-sectoral strategies?
  - 2.a. "Does the government publish national and sectoral strategies for public investment?"
    - "No national or sectoral public investment strategies are published"
    - "Either a national public investment strategy or sectoral strategy is published"
    - "Both national and sectoral public investment strategies are published"
  - 2.b. "Are the government’s national and sectoral strategies or plans for public investment costed?"
    - "The government’s investment strategies or plans include no cost information on planned public investment"
    - "The government’s investment strategies include broad estimates of aggregate and sectoral investment plans"
    - "The government’s investment strategies include costing of individual, major investment projects"
  - 2.c. "Do sector strategies include measurable targets for the outputs and outcomes of investment projects?"
    - "Sector strategies do not include measurable targets for outputs or outcomes"
    - "Sector strategies include measurable targets for outputs (e.g., miles of roads constructed)"
    - "Sector strategies include measurable targets for both outputs and outcomes (e.g., reduction in traffic congestion)"
- 3. Central-Local Coordination: Is there effective coordination of central and sub-national governments’ investment plans?
  - 3.a. "Are there limits on subnational government (SNG) borrowing?"
    - "There are no limits on SNG borrowing"
    - "SNGs may borrow only for investments"
    - "SNGs may borrow only for investment and within limits set by law"
  - 3.b. "Is capital spending by SNGs coordinated with the central government?"
    - "Capital spending plans of sub-national governments are not submitted to central government nor discussed with central government"
    - "SNG capital spending plans are consolidated alongside central government investments, but there are no formal discussions, between the central government and SNGs on investment priorities"
    - "SNG capital spending plans are consolidated alongside central government investments, and there are formal discussions between central government and SNGs on investment priorities"
  - 3.c. "Does the central government have a transparent, rule-based system for making capital transfers to SNGs, and for providing timely information on such transfers?"
    - "The central government does not have a transparent rule-based system for capital transfers to SNGs"
    - "The central government uses a transparent rule-based system for capital transfers to SNGs, but SNGs are notified about expected transfers less than six months before the start of each fiscal year"
    - "The central government uses a transparent rule-based system for capital transfers to SNGs, and expected transfers are made known to SNGs at least six months before the start of each fiscal year"
- 4. Public-Private Partnerships: Is there a transparent framework for the scrutiny, selection, and oversight of PPP projects?
  - 4.a. "Has the government published a strategy for PPPs and issued standard criteria for entering into PPP arrangements?"
    - "There is no published PPP strategy or set of criteria for entering into PPP arrangements"
    - "A PPP strategy has been published, but there are no standard criteria to guide the choice between traditional financing and PPPs"
    - "A PPP strategy has been published and there are standard criteria to guide the choice between traditional financing and PPPs"
  - 4.b. "Are PPPs subject to value for money review by a dedicated PPP unit prior to approval?"
    - "PPPs are not normally subject to value for money review"
    - "All or most PPPs are subject to value for money review but not by a dedicated PPP unit"
    - "All or most PPPs are subject to value for money review by a dedicated PPP unit"
  - 4.c. "Is the accumulation of explicit and/or contingent PPP liabilities systematically recorded and controlled?"
    - "Explicit and/or contingent PPP liabilities are not systematically recorded and there are no overall limits for the accumulation of such liabilities"
    - "Explicit and/or contingent PPP liabilities are systematically recorded but there are no overall limits for the accumulation of such liabilities"
    - "Explicit and/or contingent PPP liabilities are systematically recorded and there are overall limits for the accumulation of such liabilities"
- 5. Regulation of Infrastructure Companies: Is there a favorable climate for the private sector and SOEs to participate in infrastructure provision?
  - 5.a. "Does the regulatory framework support competition in contestable markets for economic infrastructure (e.g., power, water, telecoms, and transport)?"
    - "Provision of economic infrastructure is restricted to domestic monopolies"
    - "There is domestic competition in some economic infrastructure markets"
    - "There is international and domestic competition in major economic infrastructure markets"
  - 5.b. "Are there independent regulators who set the prices of economic infrastructure services based on objective economic criteria?"
    - "The prices for economic infrastructure services are generally set by the central government"
    - "The prices for economic infrastructure services are set by independent regulators, but the regulators do not have full organizational, financial and managerial autonomy"
    - "The prices for economic infrastructure services are set by independent regulators, and the regulators have full organizational, financial, and managerial autonomy"
  - 5.c. "Does the government oversee the investment plans of infrastructure SOEs and monitor their financial performance?"
    - "The government does not review the investment plans and financial performance of infrastructure SOEs"
    - "The government reviews, but does not publish, a consolidated report on the investment plans and financial performance of infrastructure SOEs"
    - "The government reviews and publishes a consolidated report on the investment plans and financial performance of infrastructure SOEs"

---

### B. Ensuring Public Investment is Allocated to the Right Sectors and Projects (items 6–10)
- 6. Multi-Year Budgeting: Does the government prepare medium-term projections of capital spending on a full cost basis?
  - 6.a. "Is capital spending by ministry forecasted over a multiyear horizon?"
    - "No projections of capital spending are published beyond the budget year"
    - "Projections of total capital spending are published over a three-five year horizon"
    - "Projections of capital spending disaggregated by ministry or program are published over a three-five year horizon"
  - 6.b. "Are there multiyear ceilings on capital expenditure by ministry or program?"
    - "There are no multiyear ceilings on capital expenditure by ministry or program"
    - "There are indicative multiyear ceilings on capital expenditure by ministry or program"
    - "There are binding multiyear ceilings on capital expenditure by ministry or program"
  - 6.c. "Are projections of the full cost of major capital projects over their life cycles published?"
    - "Projections of the cost of major capital projects are not published, or are only published for the budget year"
    - "Projections of the total cost of major capital projects are published"
    - "Projections of the total cost of major capital projects are published together with annual projections over a three-five year horizon"
- 7. Budget Comprehensiveness: To what extent is capital spending undertaken through the budget?
  - 7.a. "Is capital spending mostly undertaken through the budget?"
    - "Significant capital spending is undertaken by extrabudgetary entities with no legislative authorization or disclosure in the budget documentation"
    - "Significant capital spending is undertaken by extrabudgetary entities, but with legislative authorization and disclosure in the budget documentation"
    - "Little or no capital spending is undertaken by extrabudgetary entities"
  - 7.b. "Are externally funded capital projects included in the budget documentation?"
    - "Externally funded capital projects are not included in the budget documentation"
    - "Externally funded capital projects are included in an appendix to the budget documentation"
    - "Externally funded capital projects are integrated into ministerial or sectoral investment budgets in the budget documentation"
  - 7.c. "Is information on PPP transactions included in the budget documentation?"
    - "No information on PPP transactions is included in the budget documentation"
    - "Information on PPP transactions is included in supplementary information or in an appendix to the budget documentation"
    - "Information on PPP transactions is fully integrated into the tables on capital investment by ministry or sector in the budget documentation"
- 8. Budget Unity: Is there a unified budget process for capital and current spending?
  - 8.a. "Are capital and recurrent budgets prepared and presented together?"
    - "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 in a single document but without using a program classification"
    - "Capital and recurrent budgets are prepared by a single ministry and presented in a single document, using a program classification"
  - 8.b. "Does the budget include appropriations of the recurrent costs associated with capital investment projects?"
    - "The budget does not include appropriations of the recurrent costs associated with investment projects"
    - "The budget includes appropriations of the recurrent costs associated with investment projects for the budget year only"
    - "The budget includes appropriations (or estimates) of the recurrent costs associated with investment projects for the budget year and the medium term"
  - 8.c. "Does the budget classification and chart of accounts distinguish clearly between recurrent and capital expenditure, in line with international standards?"
    - "The budget classification and chart of accounts includes some recurrent expenditure in the definition of capital expenditure or some capital expenditure in recurrent expenditure"
    - "The budget classification and chart of accounts includes some capital expenditure in financing or some financing in capital expenditure"
    - "The budget classification and chart of accounts clearly distinguishes between recurrent and capital expenditures and financing, in line with international standards"
- 9. Project Appraisal: Are project proposals subject to systematic project appraisal?
  - 9.a. "Are capital projects subject to standardized cost-benefit analyses whose results are published?"
    - "Capital projects are not systematically subject to cost-benefit analyses"
    - "Cost-benefit analyses are usually conducted for major projects but not systematically published"
    - "Cost-benefit analyses are conducted systematically for major projects and the results published"
  - 9.b. "Is there a standard methodology and central support for the appraisal of projects?"
    - "There is no published methodology or central support for project appraisal"
    - "There is either a standard methodology or central support for project appraisal"
    - "There is both a standard methodology and central support for project appraisal"
  - 9.c. "Are risks taken into account in project appraisals?"
    - "Risks are not systematically assessed as part of the project appraisal"
    - "A risk assessment covering a range of potential risks is included in the project appraisal, but budgets do not include contingency reserves to cater for possible cost overruns"
    - "A risk assessment covering a range of potential risks is included in the project appraisal and budgets include contingency reserves to cater for possible cost overruns"
- 10. Project Selection: Are there institutions and procedures in place to guide project selection?
  - 10.a. "Does the government undertake a central review of major project appraisals before decisions are taken to include projects in the budget?"
    - "Project selection is largely made by the line ministry"
    - "Major projects are reviewed by Ministry of Finance (MoF) staff prior to inclusion in the budget."
    - "All major projects are scrutinized by MoF staff with input from external experts prior to their inclusion in the budget"
  - 10.b. "Does the government publish and adhere to standard criteria for project selection?"
    - "There are no published criteria for project selection"
    - "There are criteria published for project selection but projects are regularly selected without going through the required selection process"
    - "There are published criteria for project selection and generally projects are selected through a required selection process"
  - 10.c. "Does the government maintain a pipeline of approved investment projects for inclusion in the annual budget?"
    - "Investment projects are included in the budget on an ad hoc basis"
    - "The government maintains a pipeline of approved investment projects but other projects may be selected for financing through the annual budget"
    - "The government maintains a comprehensive pipeline of investment projects, which is used for selecting projects for inclusion in the annual budget, and for the medium term"

---

### C. Delivering Productive and Durable Public Assets (items 11–15)
- 11. Protection of Investment: Are investment projects protected during budget implementation?
  - 11.a. "Are total project outlays appropriated by parliament at the time of the project’s commencement?"
    - "Outlays are appropriated on an annual basis"
    - "Outlays are appropriated on an annual basis, but information on total project costs is included in the budget"
    - "Total project outlays are appropriated upon commencement of the project, with adjustments being made to the budget appropriation on a year-by-year basis"
  - 11.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 is allowed only by act of parliament"
  - 11.c. "Can unspent appropriations for capital spending be carried over to future years?"
    - "Unspent appropriations for capital spending lapse at the end of the year"
    - "Unspent appropriations for capital spending may be carried over within certain limits"
    - "Unspent appropriations for capital spending may be carried over without limitations"
- 12. Availability of Funding: Is financing for capital spending made available in a timely manner?
  - 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 whole year"
  - 12.b. "Is cash for project outlays released in a timely manner?"
    - "The financing of project outlays is frequently subject to cash rationing, leading to significant delays in project implementation"
    - "Cash for project outlays is sometimes released with delays, leading to some delays in project implementation"
    - "Cash for project outlays is normally released in a timely manner according to the appropriation"
  - 12.c. "Is external (donor) financing of capital projects integrated into cash management and the TSA?"
    - "External financing is largely held in commercial bank accounts outside the central bank’s government accounts/TSA"
    - "External financing is held at the central bank’s government accounts but is not part of a TSA"
    - "External financing is fully integrated into a TSA"
- 13. Transparency of Budget Execution: Are major investment projects executed transparently and subject to audit?
  - 13.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"
  - 13.b. "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.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 auditors"
    - "Most major capital projects are subject to ex post external audit information on which is regularly published and scrutinized by the legislature"
- 14. Management of Project Implementation: Are capital projects well managed and controlled during the execution stage?
  - 14.a. "Do ministries have effective project management arrangements in place?"
    - "Ministries do not systematically identify senior responsible officers for major investment projects and implementation plans are not prepared prior to budget approval"
    - "Ministries systematically identify a senior responsible officers for major investment projects, but implementation plans are not prepared prior to budget approval"
    - "Ministries 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 that are applied systematically across all major projects?"
    - "There are no standardized rules and procedures for project adjustments"
    - "There are standardized rules and procedures for project adjustments that are generally applied but do not include a fundamental review and reappraisal of a project’s rationale, costs and expected outputs"
    - "There are standardized rules and procedures for project adjustments that are applied systematically and if required include a fundamental review of the project’s rationale, costs and expected outputs"
  - 14.c. "Does the government systematically conduct an ex post review and evaluation of a project that has completed its construction phase?"
    - "Ex post reviews are neither systematically required, nor frequently conducted"
    - "Ex post reviews focusing on project costs, deliverables and outputs are sometimes conducted"
    - "Ex post reviews focusing on project costs, deliverables and outputs are conducted regularly, as are evaluations of project outcomes, in some cases"
- 15. Monitoring of Public Assets: Is the value of assets properly accounted for and reported in financial statements?
  - 15.a. "Are surveys of the stocks, values, and conditions of public assets regularly conducted?"
    - "Asset surveys are conducted rarely or only on an ad hoc basis by external stakeholders"
    - "Asset surveys are conducted regularly by the government for some sectors or subsectors"
    - "Comprehensive asset surveys are conducted regularly by the government"
  - 15.b. "Are nonfinancial asset values recorded in the government balance sheets?"
    - "Balance sheets do not include non-financial assets"
    - "Balance sheets include some non-financial assets, which are revalued irregularly"
    - "Balance sheets include all or most nonfinancial assets, which are revalued regularly"
  - 15.c. "Is depreciation of fixed assets captured in government operating statements?"
    - "Depreciation of fixed assets is not recorded in operating statements"
    - "Depreciation of fixed assets is recorded in operating statements based on statistical estimates"
    - "Depreciation of fiscal assets is recorded in operating expenditures based on asset-specific depreciations"

*IMPROVING PUBLIC INVESTMENT EFFICIENCY IN THE G-20 — Annex Figure 1. Correlation with Other Measure*

---


_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2015/_090115.pdf_