Public Investment Management Bottlenecks in Low-income Countries

IMF Working Papers, November 1, 2024

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Public Investment Management Bottlenecks in Low-income Countries

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Bibliographic details

• Authors: Khaled Eltokhy, Nicoletta Feruglio, Kezhou Miao, Arturo Navarro, Eivind Tandberg
• Published: November 1, 2024
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9798400289231.001

Summary

• This paper uses principal component analysis (PCA) to identify bottlenecks to effective public investment management in LIDCs.
• The paper describes the current state of affairs regarding public investment and public investment management in LIDCs, drawing on the results of IMF Public Investment Management Assessments (PIMAs).
• PCA is used to analyze which public investment institutions are likely to be most important for investment efficiency estimates across the countries covered by PIMAs so far.
• Five PIMA institutions are identified as systematically highly correlated to estimates of public investment efficiency in LIDCs and are likely to be high priorities in many PIM reform processes:
  • Project management
  • Project appraisal
  • Procurement
  • Availability of funding
  • Project selection
• The paper notes that these five are not the only important institutions and that priorities will depend on country circumstances.
• Practical steps to strengthen PIM in LIDCs are elaborated in a separate How-to-Note.

Methodology and Findings

• Methodology:
  • Principal component analysis (PCA) is used to analyze relationships between PIMA institutional indicators and estimates of public investment efficiency across countries covered by PIMAs.
  • Analysis draws on alternative input data to assess robustness of results.
• Core finding:
  • Five PIMA institutions (Project management; Project appraisal; Procurement; Availability of funding; Project selection) are systematically highly correlated with public investment efficiency estimates in LIDCs.
• Contextual note:
  • The relative importance of PIMA institutions can vary depending on country circumstances; the five identified are likely high priorities in many, but not all, reform processes.

Policy Implications and Practical Steps

• Priority areas for PIM reform in many LIDCs:
  • Strengthen Project management capacities.
  • Improve Project appraisal frameworks and practices.
  • Reform and enhance Procurement systems.
  • Ensure Availability of funding for prioritized projects.
  • Improve Project selection mechanisms to focus on efficiency.
• Implementation guidance:
  • Practical steps to strengthen PIM in LIDCs are provided in a separate How-to-Note (details of that How-to-Note are described in the paper but are not reproduced here).

Subject Coverage and Keywords

• Subject areas:
  • Expenditure
  • Infrastructure
  • National accounts
  • Post-clearance customs audit
  • Public financial management (PFM)
  • Public Investment Management Assessment (PIMA)
  • Public investment spending
  • Revenue administration
• Keywords include:
  • efficiency frontier
  • Global
  • IMF Public Investment Management Assessments
  • Infrastructure
  • investment efficiency
  • Low Income countries
  • management in LIDCs
  • Post-clearance customs audit
  • priority Pima institution
  • Public Financial Management
  • Public Investment Efficiency
  • Public Investment Management
  • Public Investment Management Assessment
  • Public investment spending
  • West Africa

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