Abstract

Both the Bank and the Fund have included various dimensions of civil service reform in the programs they support. The immediate objectives of Bank-Fund involvement have been to:

Both the Bank and the Fund have included various dimensions of civil service reform in the programs they support. The immediate objectives of Bank-Fund involvement have been to:

  • Ensure that the wage bill and the pension system are consistent with a sustainable fiscal framework.

  • Streamline pay and career structures (with wage levels linked to appropriate private sector comparators), address shortages of qualified labor, and enhance incentives for senior staff performance.

  • Improve accountability and service delivery (particularly in health and education), reduce corruption and partisan influence, and provide assistance to restructure key functions such as tax administration.

Prior to the introduction of adjustment lending, the World Bank was not substantially involved with civil service reforms. This changed in the early 1980s when the Bank became more engaged with administrative and civil service reforms in the context of broader public sector and governance reforms. Civil service reforms are now a fundamental part of the Bank’s agenda to reduce poverty. In addition, the Bank supports the introduction of coordination mechanisms within government that provide a clear focal point for sustaining reform programs. The Fund’s increased focus, since the 1980s, on fiscal and structural problems has also resulted in more attention being paid to civil service reform. This is likely to continue, although the focus would be on those elements with significant macroeconomic impact.

Fund-Supported Programs

Civil service reform becomes a part of Fund-supported programs to the extent that it is required to ensure macroeconomic stability and sustainability. Although 60 percent of all Fund-supported programs in 2000 contained elements of civil service reform, only 30 percent of these included specific performance criteria or benchmarks. More than 40 percent of Poverty Reduction Growth Facility (PRGF) 8 programs included specific benchmarks or performance criteria, while in the case of Extended Fund Facilities (EFFs), 9 only one in eight included specific conditionality (see Annex 1).

Benchmarks in recent Fund-supported programs have included annual downsizing of civil service employment within a medium-term strategy (Cambodia and Zambia). Other programs have called for: (a) rationalization, retrenchment, and initiation of pay reform (Tanzania and the FYR of Macedonia); and (b) establishment of a committee to formulate a medium-term wage policy aimed at the gradual reduction in the wage bill (the Republic of Yemen).

Fund-supported programs also have recognized that structural reforms in the civil service are often critical for fiscal sustainability. In particular, issues related to the size of the wage bill frequently can be resolved only by addressing the payroll system, 10 the size and structure of the work force (including conditions for retirement), and the nature of the pension system. In this regard, Fund conditionality on civil service reform in the 11 country cases has included: (a) completion of a civil service census and elimination of ghost workers (Cambodia); (b) passage of legislation on retirement and civil service packages, streamlining retirement procedures, and the retirement of 9,000 over-age civil servants (the Republic of Yemen); 11 (c) improvements in payroll systems and implementation of a performance-based compensation system (Benin); and (d) presentation of a plan to make the civil service pension system actuarially sound (Zambia).

In light of the recent discussions on streamlining conditionalities in Fund-supported programs, 12 it is noteworthy that several of the case studies make reference to an improved division of labor between the Bank and the Fund in the area of civil service reform. It is also presumed that under streamlined conditionality some elements of civil service reform now found in Fund-supported programs would be shifted to Bank-supported programs. In the Republic of Yemen, for example, while it is expected that the Fund will encourage the authorities to restrain the wage bill in the future and continue progress in civil service reform, conditionalities in these areas are expected to shift to the Bank. On the other hand, in Bolivia it is envisaged that both the Fund and the Bank will continue to monitor progress in reforming customs and the National Tax Service. Structural benchmarks for the reform of the two agencies are likely to be included in future Fund-supported programs.

Bank-Supported Programs

The World Bank seeks to facilitate reform in several ways. Some Bank operations address civil service reform directly, identifying the core civil service as the explicit object of reform. In fiscal 1999 and fiscal 2000, there were 45 operations with explicit civil service reform components, representing 9 percent of total Bank operations. In addition, the Bank supports many reforms in the health and education sectors that affect the employment arrangements for these staffs. The majority of civilian central government staff is in these sectors. Finally, the Bank is increasingly supporting decentralization and “community-driven” approaches that seek to stimulate better-quality services from central government. In fiscal 1999 and fiscal 2000, 60 percent of Bank operations had at least one public sector reform and governance component.

Most of the Bank’s explicit civil service reform operations are in Africa, but the regional balance is changing. The profile of the adjustment operations 13 indicates that downsizing is undertaken only with support for accompanying structural reforms, and a rough balance exists between the three overarching reform objectives (correcting fiscal imbalances, reforming pay and career structures, and improving accountability and service delivery). The profile of investment operations 14 during fiscal 1999 and fiscal 2000 indicates that the emphasis is on accountability and service delivery, but always in tandem with other structural reforms, and that training and provision of information technology and other office equipment are rarely undertaken unless they support a larger structural reform (see Annex 1).

Conditionalities in Bank-supported programs have included: (a) reform of nonwage compensation rules (Benin); (b) specific institutional benchmarks on the restructuring of government agencies (such as the Customs and National Tax Service), entailing separate salary structures for the reformed agencies; (c) reduction in government employment and reform of pay scales (Zambia); and (d) steps to make the civil service more meritocratic and career-oriented (the FYR of Macedonia).

Bank-supported programs increasingly recognize that the political incentives for reform can be strengthened in two ways. First, programmatic adjustment operations 15 can help assure governments that long-term structural reforms will continue to receive Bank financing. Longer-term programmatic adjustment operations, including Poverty Reduction Support Credits (PRSC), have been introduced to encourage the necessary political acceptance of the short-term pain that civil service reforms often bring. However, including civil service reform as part of these longer-term operations may not allow for enough technical support and monitoring of reform measures. In this regard, parallel civil service investment loans can allow for sustained support and closer scrutiny of the implementation of reform measures.

A second way to strengthen the political incentives for reform is to encourage civil society to demand better governance by providing information on the quality of services, including through beneficiary monitoring of service delivery. Depending on the context, decentralization and other community-driven solutions to the delivery of government services can also assist. Public monitoring of progress in the implementation of reforms helps to promote sustainability. The acceptance of civil service reform is further bolstered by the publication of evidence on the impact of reform measures on improving the provision of public goods and services.

Elements of civil service reform seek to address administrative corruption. Bank reforms have included the introduction of an independent Public Service Commission that aims to ensure that recruitment and promotion in Pakistan are based on merit. A similar body is planned for the newly developed civil service in Bolivia. Some Fund-supported programs have been closely aligned with these objectives. For example, structural benchmarks for the Fund-supported program with Benin included the adoption of a law against the illegal acquisition of wealth.