Guinea
Technical Report-Public Investment Management Assessment

This Technical Report discusses Guinea’s Public Investment Management Assessment (PIMA). This report presents public investment trends and the public investment efficiency gap, details the results of the assessment, and offers recommendations to improve PIM in Guinea. The institutional PIM framework has more strengths than weaknesses, despite being incomplete, while PIM effectiveness shows more weaknesses than strengths. Guinea recently signed roughly 20 public–private partnership (PPP) contracts through direct negotiation, although the institutional framework for PPPs is not yet finalized; this represents a source of potential financial risk that has not been evaluated. It is important to ensure that PPPs are adequately addressed in the legal and regulatory framework and to promote public access to information to uphold the principles of competition, efficiency, transparency, and, in particular, to open unsolicited proposals to competition. The report highlights that if Guinea is to reap the full benefits of its increasing capital spending, the authorities need to focus on correcting PIM weaknesses and improving the efficiency of PIM.

Abstract

This Technical Report discusses Guinea’s Public Investment Management Assessment (PIMA). This report presents public investment trends and the public investment efficiency gap, details the results of the assessment, and offers recommendations to improve PIM in Guinea. The institutional PIM framework has more strengths than weaknesses, despite being incomplete, while PIM effectiveness shows more weaknesses than strengths. Guinea recently signed roughly 20 public–private partnership (PPP) contracts through direct negotiation, although the institutional framework for PPPs is not yet finalized; this represents a source of potential financial risk that has not been evaluated. It is important to ensure that PPPs are adequately addressed in the legal and regulatory framework and to promote public access to information to uphold the principles of competition, efficiency, transparency, and, in particular, to open unsolicited proposals to competition. The report highlights that if Guinea is to reap the full benefits of its increasing capital spending, the authorities need to focus on correcting PIM weaknesses and improving the efficiency of PIM.

Executive Summary

The Guinean authorities are working to reduce the country’s infrastructure deficit and have provided for this effort in Guineas 2016–20 National Economic and Social Development Plan (PNDES). Public-private partnerships (PPPs) are a mechanism used to fund major projects to be implemented. To support the process, the authorities requested technical assistance from the International Monetary Fund (IMF) to prepare a thorough assessment of the public investment management (PIM) system to supplement the Public Expenditure and Financial Accountability (PEFA) assessment conducted in March 2018. The objectives of the present mission were to evaluate PIM in Guinea using the Public Investment Management Assessment (PIMA) methodology as revised by the IMF in April 2018. This report presents public investment trends and the public investment efficiency gap, details the results of the assessment, and offers recommendations to improve PIM in Guinea.

Public investment in Guinea increased substantially in recent years. Average investment as a percentage of GDP stood at 7 percent between 2012–15, compared to 4 percent between 2000–10, but it remains below the average for the countries of sub-Saharan Africa (SSA). The execution rate of capital expenditure improved, from 42 percent in 2015 to 75 percent in 2017. On average, close to 70 percent of the investment effort was financed from domestic resources.

PIM in Guinea is relatively inefficient compared to some of its peers. Guinea’s efficiency gap relative to the efficiency frontier represented by the most efficient countries is roughly 50 percent. This exceeds the average efficiency gap, which is 40 percent for SSA countries and roughly 30 percent worldwide.

The institutional PIM framework has more strengths than weaknesses, despite being incomplete, while PIM effectiveness shows more weaknesses than strengths (Table 1). The principal PIM strengths are the following: (1) the country’s adherence thus far to the limit on total debt as a percentage of GDP; (2) the quality of the PNDES, which is a positive step toward strengthening the national and sectoral planning system; and (3) capital expenditures approved by the National Assembly, with administrative public entities having only limited resources (4 percent of the total government budget in 2017). However, PIM efficiency in Guinea is adversely affected by significant weaknesses in terms of the institutional framework and effectiveness in the three phases of PIM (planning, allocating, and implementing), as presented in the following sections.

Table 1.

PIMA Summary Heatmap

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Planning/Allocating

  • Guinea recently signed roughly 20 public-private partnership (PPP) contracts through direct negotiation, although the institutional framework for PPPs is not yet finalized; this represents a source of potential financial risk that has not been evaluated.

  • Most of the major domestically financed projects in the 2017 and 2018 budget did not undergo economic and financial evaluations or a rigorous selection process, weakening the quality of the projects.

Allocating

  • The procedure for establishing annual and/or multiyear capital spending ceilings by individual ministry is not operational, undermining the prioritization of expenditures.

  • Separate budget negotiations are held for the recurrent and capital budgets, resulting in inconsistencies in the classification of expenditures.

  • Investment expenditures are not adequately protected during budget execution, suggesting that financing of ongoing projects may be discontinued in order to finance new projects.

  • The budget nomenclature provides a framework to budget for maintenance costs, but there is no standard methodology in place to estimate and budget for these expenditures, leading to under-budgeting and ultimately the deterioration of assets.

Implementing

  • Procurement and cash flow plans are insufficiently harmonized, and no time limits are established for effective payment of expenses by the Central Bank of the Republic of Guinea (BCRG), resulting in delayed payments and delayed project implementation.

  • The existing regulations are inadequate to ensure effective oversight and ex post review of domestically financed projects, but they allow transfers of appropriations, which are implemented in practice. Adjustments are made during project implementation without the benefit of standardization, and ex post audits of major investment projects (including some externally financed projects) are not systematically conducted.

  • Monitoring of public assets is hindered by the lack of a final, detailed regulatory and operational framework. Asset records are incomplete, and the financial statements do not reflect the value of nonfinancial assets or capture fixed asset depreciation.

If Guinea is to reap the full benefits of its increasing capital spending, the authorities need to focus on correcting PIM weaknesses and improving the efficiency of PIM. The critical recommendations for this purpose are the following:

  • Strengthen the regulatory and procedural framework for PPPs. In particular, cap explicit commitments under PPPs, and open unsolicited proposals to competition.

  • Establish a process of independent review and validation of studies and define stricter selection criteria. For this purpose, the following actions should be taken in the short term: (1) prepare rigorous project selection and prioritization criteria; and (2) discontinue the practice of budgeting funds for projects that lack feasibility studies beginning with the 2020 budget law.

  • Strengthen investment budgeting and maintenance funding. In particular, implement multiyear commitment authorizations for investment expenditure, and hold single budget conferences, addressing both recurrent and investment budgets, beginning with the 2020 budget law.

  • Increase available funding for investment through harmonization of procurement and cash flow plans, including implementation of the Treasury single account (TSA), and establish time limits for payment by the BCRG.

  • Implement the capital project monitoring, management, and ex post review mechanism. The reforms needed in the short term would be to (1) immediately conduct a survey of all projects ongoing for at least 10 years before continuing funding in the 2020 budget law; (2) prepare a consolidated semiannual/annual report on the status of the physical and financial implementation of major projects; and (3) prepare and systematically review completion reports for major projects.

  • Strengthen the monitoring of public assets by continuing the work underway to update government real property assets and by developing technical guides covering all government accounting standards to prepare the valuation of assets.

    The above recommendations and associated actions of the detailed action plan (Annex I) relating to budgeting, cash flow management, and public accounting are intended as inputs to the 2019–22 PFM action plan that the authorities plan to prepare based on the results of the final PEFA report.

Table 2.

Priority Recommendations

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Note:

TA denotes technical assistance needed.

I.Public Investment

A. Total Public Investment and Public Capital Stock

1. Public investment in Guinea during the post-military regime (2009–10) was erratic (Figure 1). In 2009, following the advent of the military regime, public investment experienced a surge, reversing the declining trend from 2002. The surge was due to a threefold increase in military spending associated with multiyear contracts awarded outside of the public procurement procedures, reflecting a collapse of spending controls procedures. Most of those contracts were suspended following an audit conducted during the return to constitutional order and a restoration of budget discipline in 2011, reducing public spending to its pre-military regime average (3.8 percent of GDP).1 With the IMF support, the macroeconomic stabilization that followed led to an increase in public investment (7 percent of GDP between 2012 and 2013). Public investment declined following the outbreak of the Ebola epidemic in 2014, but it resumed an upward trend in 2015. Private investment had fallen considerably since 2009 and its contribution to total investment had sharply decreased.

Figure 1.
Figure 1.

Public and Private Investment

(percent of GDP)

Citation: IMF Staff Country Reports 2019, 082; 10.5089/9781498303880.002.A001

Sources: Guinean authorities, World Economic Outlook (IMF), and IMF staff estimates.Note: The comparator countries are Benin, Côte d’Ivoire, Ghana, Rwanda, Senegal, Sierra Leon, and Tanzania. ASS = sub-Saharan Africa; PED = developing countries.

2. Public investment in Guinea was below the levels observed in comparable countries (Figure 2). During 2005–15, average public investment in Guinea was below that of developing countries (DC), comparable African countries, and all sub-Saharan African (SSA) countries, by about 2.5 percent, 2.6 percent, and 2.8 percent of GDP, respectively.

Figure 2.
Figure 2.

Public Investment

Guinea vs. Comparators (percent of GDP)

Citation: IMF Staff Country Reports 2019, 082; 10.5089/9781498303880.002.A001

Sources: Guinean authorities, World Economic Outlook (IMF), and IMF staff estimates.Note: The comparator countries are Benin, Côte d’Ivoire, Ghana, Rwanda, Senegal, Sierra Leon, and Tanzania. ASS = sub-Saharan Africa; PED = developing countries.

3. The increased public spending had a limited effect on economic growth, which remained weak and volatile (Figure 3). Although public investment was procyclical during the 1990s, it subsequently became mostly uncorrelated with growth. The surge in public investment during the 2009–10 military regime did not translate to stronger economic growth. The resumption of public investment in 2014–15 partially helped mitigate the Ebola epidemic’s adverse effects on economic growth (Figure 3).

Figure 3.
Figure 3.

Public Investment and Real GDP Growth

(percent of GDP and percent, respectively)

Citation: IMF Staff Country Reports 2019, 082; 10.5089/9781498303880.002.A001

Sources: Guinean authorities, World Economic Outlook (IMF), and IMF staff estimates.

4. Investment spending is a priority for public policy. They represented 30 percent of total government spending during the 1990s, or 6.3 percent of GDP. It declined thereafter to 21.5 percent of total spending during 2000–13 before rising to 39 percent and 46 percent, in 2014 and 2015, respectively (or 6.4 percent and 7.6 percent of GDP, respectively). The rise reflected the efforts to eradicate the Ebola epidemic (Figure 4) and the strengthened political will to boost public investment to realize the private sector’s development potential.

Figure 4.
Figure 4.

Composition of Total Expenditure

(percent of GDP)

Citation: IMF Staff Country Reports 2019, 082; 10.5089/9781498303880.002.A001

5. Public investment contributed little to Guinea’s capital stock, which remains below that of its peers (Figure 5). The decline in public investment between 1990 and 2005 led to a slow accumulation of capital of 3 percent on average a year. The sharper decline of public investment between 2004 and 2008 seriously curtailed the already slow formation of public capital stock. The surge in public investment reverted this trend (Figure 6). In 2015, public capital stock in Guinea was 57 percent of GDP, compared to 120 percent for SSA countries, leading to a lower per capita capital stock than that of its peers (Figure 7).

Figure 5.
Figure 5.

Public Investment and Capital Stock

(percent of GDP)

Citation: IMF Staff Country Reports 2019, 082; 10.5089/9781498303880.002.A001

Figure 6.
Figure 6.

Public Capital Stock

(percent of GDP)

Citation: IMF Staff Country Reports 2019, 082; 10.5089/9781498303880.002.A001

Figure 7.
Figure 7.

Per Capita Capital, 2011

(US$ thousands, PPP adjusted)

Citation: IMF Staff Country Reports 2019, 082; 10.5089/9781498303880.002.A001

Sources: Guinean authorities, World Economic Outlook (IMF), and IMF staff estimates. Note: SSA = sub-Saharan Africa; DC = developing countries.

6. Public investment nevertheless contributed to increasing Guinea’s public debt (Figure 8). With revenue shortfalls and the gradual dwindling of official development assistance (ODA) flows, a portion of public investment was financed through public debt. In 2005, the government’s outstanding debt stood at about 60 percent of GDP but was reduced to 43 percent of GDP when Guinea reached the completion point under the Heavily Indebted Poor Countries (HIPC) Initiative in 2012. Government debt began to rise again, due in part to the resumption of investment, and stood at more than 50 percent of GDP at end-2015.

Figure 8.
Figure 8.

Capital Stock and Government Debt

(percent of GDP)

Citation: IMF Staff Country Reports 2019, 082; 10.5089/9781498303880.002.A001

Sources: Guinean authorities, World Economic Outlook (IMF), and IMF staff estimates. Note: SSA = sub-Saharan Africa; DC = developing countries.

B. Composition of Public Investment

7. In 2009, the composition of public investment financing sources shifted toward increased domestic financing. The proportion of domestically financed investments, which represented roughly 72 percent in 2009 (4.4 percent of GDP), exceeded externally financed investments for the first time (Figure 9). This structural shift reflects the consequences of the military regime (2009–10), the dwindling Official Development Assistance (ODA) flows following the 2008 global financial crisis, and the weak capacity to absorb budgetary support. It also reflects a more proactive policy stance to bolster public investment to make it a key pillar of economic development—breaking from a pre-2011 passive role, when it used to simply represent the required domestic counterpart funds for externally financed projects.

Figure 9.
Figure 9.

Public Investment by Funding Source

(percent of GDP)

Citation: IMF Staff Country Reports 2019, 082; 10.5089/9781498303880.002.A001

Sources: Guinean authorities, World Economic Outlook (IMF), and IMF staff estimates. Note: Forecast deviations refer to absolute value. Accordingly, no distinction is made between budget over-execution and under-execution.

8. The increased share of domestically financed investment was accompanied by an increase in investment budget execution rates. The execution rate of the investment budget increased in recent years, from 42 percent to 75 percent between 2015 and 2017, partly at the expense of adequate oversight. The increased share of domestically financed investment largely reflects a relaxation of investment control procedures, which, unlike externally-financed investments, are not subject to feasibility studies. Nevertheless, room remains for improving the absorption capacity of public investment in Guinea, in view of its comparators’ performance (Figure 10).

Figure 10.
Figure 10.

Investment Spending Forecast Errors (percent)

Average (2010–14), unless otherwise indicated

Citation: IMF Staff Country Reports 2019, 082; 10.5089/9781498303880.002.A001

Sources: Guinean authorities, World Economic Outlook (IMF), and IMF staff estimates. Note: Forecast deviations refer to absolute value. Accordingly, no distinction is made between budget over-execution and under-execution.

9. The government is increasingly relying on the private sector, through public-private partnerships (PPPs), for the provision of public infrastructure. Although the PPP-driven capital stock is relatively limited, at 3.4 percent of GDP in 2014 (Figure 11), PPPs are the authorities’ envisaged instruments for implementing the ambitious investment programs of the National Economic and Social Development Plan (PNDES), with more than one-third of the projects under consideration for implementation through PPPs. At end-2017, an inventory by the National Directorate of Government Assets and Private Investment (DNPEIP) pointed to some 20 PPP contracts signed between 2012 and 2017 (see paragraph 24).2

Figure 11.
Figure 11.

Capital Stock from Public-Private Partnerships

(percent of GDP)

Citation: IMF Staff Country Reports 2019, 082; 10.5089/9781498303880.002.A001

Source: IMF staff.Note: The comparator countries are Benin, Côte d’Ivoire, Ghana, Rwanda, Senegal, Sierra Leone, and Tanzania. DC = developing countries; SSA = sub-Saharan Africa.1/ Economic infrastructure is proxied by economic affairs and includes public investment in transportation infrastructures.2/ Social includes investment in education, health, housing, social protection, and recreation and cultural.3/ Other includes public investment in general services, security, and environmental protection.

10. Unlike other SSA countries, public investment in Guinea appears to be highly concentrated in economic infrastructure. Based on data available in 2011, nearly 92 percent of capital expenditure in Guinea was geared toward economic infrastructures, leaving only 4 percent for social infrastructure. In contrast, SSA countries devote 45 percent and 32 percent of capital expenditure to economic and social infrastructures on average, respectively (Figure 12). Some caution should be exercised in interpreting these figures, however, as they could reflect the fact that the new classification of government functions was implemented only recently.3

Figure 12.
Figure 12.

Public Investment by Function, 2011

(percent)

Citation: IMF Staff Country Reports 2019, 082; 10.5089/9781498303880.002.A001

Source: IMF staff.Note: The comparator countries are Benin, Côte d’Ivoire, Ghana, Rwanda, Senegal, Sierra Leone, and Tanzania. DC = developing countries; SSA = sub-Saharan Africa.1/ Economic infrastructure is proxied by economic affairs and includes public investment in transportation infrastructures.2/ Social includes investment in education, health, housing, social protection, and recreation and cultural.3/ Other includes public investment in general services, security, and environmental protection.

II. Efficiency and Impact of Public Investment

11. The quality of and access to infrastructure in Guinea are mixed and point to gaps compared to its peers (Figures 13 and 14). In 2015, access to social (education and health) infrastructure was below the average for that in comparable SSA countries and DCs. The access to economic infrastructure (roads) was better than that in peer countries;4 however, the indicators of perception of infrastructure quality show a marked gap between Guinea and its peers.

Figure 13.
Figure 13.

Access to Infrastructure, 2015

Citation: IMF Staff Country Reports 2019, 082; 10.5089/9781498303880.002.A001

Sources: World Development Indicators (World Bank) and Global Competitiveness Index (World Economic Forum).Note: Education: number of secondary school teachers per 1,000 persons; Electricity: number kWh per 1,000 inhabitants; Roads: number of kilometers per 1,000 inhabitants; Health: number hospital beds per 1,000 inhabitants; Water: proportion of population with access to safe drinking water.
Figure 14.
Figure 14.

Perception of Infrastructure Quality

Citation: IMF Staff Country Reports 2019, 082; 10.5089/9781498303880.002.A001

Sources: World Development Indicators (World Bank) and Global Competitiveness Index (World Economic Forum).Note: Education: number of secondary school teachers per 1,000 persons; Electricity: number kWh per 1,000 inhabitants; Roads: number of kilometers per 1,000 inhabitants; Health: number hospital beds per 1,000 inhabitants; Water: proportion of population with access to safe drinking water.

12. The efficiency of public investment in Guinea is weaker than that of its peers, indicating considerable room for improvement (Figures 15 and 16). Guinea’s efficiency gap relative to the efficiency frontier5—the countries with the highest public investment efficiency—is estimated at roughly 50 percent, well above the average of 36 percent for Guinea’s SSA peers. It is important to note, however, that the calculation does not include the fixed capital stock formed by public corporations (PCs). A more complete measure of capital stock would increase the public capital stock per capita but would neither increase nor decrease the score for perception of quality and access to public infrastructures. As such the calculated efficiency gap remains relevant. In addition, the measurement of public investment efficiency is a composite indicator and may hide some heterogeneity of inefficiency across sectors.

Figure 15.
Figure 15.

Hybrid Indicator of the Efficiency Frontier

Citation: IMF Staff Country Reports 2019, 082; 10.5089/9781498303880.002.A001

Source: IMF staff estimates.
Figure 16.
Figure 16.

Hybrid Indicator of the Efficiency Gap

Citation: IMF Staff Country Reports 2019, 082; 10.5089/9781498303880.002.A001

III. Public Investment Management Assessment

13. Public investment can be an important catalyst for economic growth, but the efficiency of public investments is crucial to its effect. The average country loses roughly 30 percent of the value of its investment to inefficiencies in their PIM processes. Improvements in PIM can help countries to reduce the efficiency gap by nearly two-thirds. The growth dividend from doing so is substantial; the most efficient investors get twice the growth “bang” from their investment “buck” than the least efficient investors.

14. The new PIMA tool developed by the IMF is intended to help countries evaluate and strengthen their PIM practices.6 The PIMA evaluates 15 institutions involved in the three phases of the public investment cycle (planning, allocating, implementing) in addition to the three crosscutting institutionsIT support, legal framework, and staff capacitiesthat affect them. For purposes of the PIMA, an institution is defined as a set of rules, relationships among actors, and effective practices in a given PIM area.

  • Planning sustainable investment across the public sector

  • Allocating investment to the right sectors and projects

  • Implementing investments within the timeframe and budget allocated.

Figure 17.
Figure 17.

Updated PIMA Framework

Citation: IMF Staff Country Reports 2019, 082; 10.5089/9781498303880.002.A001

Source: The 2018 IMF’s Public Investment Management Assessment.

A. Overall Assessment

15. Overall, the institutional strength of IM in Guinea is below that of its peers (Figure 18). With the exception of the institution relating to maintenance funding, for which data from comparable countries are not available, Guinea’s institutional strength relative to its peers is as follows: (1) The institutional performance of most of Guinea’s institutions is below that of its peers: national and sectoral planning, coordination between entities, project appraisal, project selection, budgeting for investments, procurement, portfolio management and oversight, management of project implementation, and monitoring public assets; (2) Guinea’s institutional framework is comparable to that of its peers for specific institutions: fiscal objectives and rules, multiyear budgeting of investments, and budget comprehensiveness and unity; (3) Guinea’s institutional framework is relatively superior for a few institutions: alternative infrastructure financing and availability of funding.

Figure 18.
Figure 18.

PIM Institutional Strength

Citation: IMF Staff Country Reports 2019, 082; 10.5089/9781498303880.002.A001

16. The effectiveness of PIM in Guinea is below that of its peers for most of institutions (Figure 19). With the exception of the institution relating to maintenance funding, for which data from comparable countries are not available, Guinea’s effectiveness strength relative to its peers is as follows: (1) Practices in Guinea are superior for some institutions: national and sectoral planning, budget comprehensiveness and unity, alternative infrastructure financing, and portfolio management and oversight; (2) Practices in Guinea are comparable for some institutions: fiscal objectives and rules, coordination between entities, multiyear budgeting of investments, and procurement; (3) Guinea’s performance was below its peers for a majority of institutions: project appraisal, project selection, budgeting for investment, availability of funding, management of project implementation, and monitoring of public assets.

Figure 19.
Figure 19.

PIM Effectiveness

Citation: IMF Staff Country Reports 2019, 082; 10.5089/9781498303880.002.A001

17. Institutional strength is superior to the effectiveness of practices for most PIM institutions (Figure 20). This difference clearly illustrates implementation gaps in the provisions of existing regulatory frameworks. To improve PIM, Guinea should work to fully implement the provisions of existing laws and decrees on capital spending, and it should gradually implement the recommendations provided in the following sections of the report. Doing so would significantly strengthen PIM, as shown in Figure 21.

Figure 20.
Figure 20.

Comparison of PIM Institutional Strength vs. Effectiveness

Citation: IMF Staff Country Reports 2019, 082; 10.5089/9781498303880.002.A001

Figure 21.
Figure 21.

Potential Improvements to PIM Effectiveness by 2020–21

Citation: IMF Staff Country Reports 2019, 082; 10.5089/9781498303880.002.A001

Sources: Mission’s findings.

B. Planning Sustainable Levels of Public Investment

18. Sound planning would ensure the sustainability of public investments and the coordination of development strategies. This pillar is evaluated in terms of the following principles: (1) the existence of fiscal principles or rules that promote fiscal sustainability and facilitate medium-term public investment planning; (2) the existence of national and sectoral plans defining the investment strategies; (3) the existence of effective coordination between the central government and other entities, such as subnational governments (SNGs) and PCs, in the area of investments and communication of contingent liabilities arising from investment projects; (4) whether major project proposals routinely are subject to standardized appraisal, taking account of risks; and (5) the existence of a favorable climate for infrastructure financing by the private sector, PPPs, and PCs.

1. Fiscal objectives and rules (institutional strength: medium; effectiveness: medium; reform priority: high)

19. Government debt in Guinea is limited by the Economic Community of West African States (ECOWAS)-wide provisions. The provisions were established by Decision A/DEC.7/12/99 on macroeconomic convergence criteria for the implementation of the ECOWAS monetary cooperation program, and they were revised by the Conference of Heads of State and Government on May 19, 2015, in Accra. There are now six convergence criteria, of which four are first-order criteria and two are second-order criteria, including a limit of 70 percent on total debt in proportion to GDP (Table 3). The ECOWAS-wide rules were transposed in Law L/2012/No. 012/CNT, the framework budget law (LORF). Like the LORF, the implementing decree, D/2014/222/PRG/SDG on public financial governance provides, in Article 2, that the objectives of fiscal policy should be consistent with Guinea’s commitments under international agreements relating to the ECOWAS.

Table 3.

ECOWAS Convergence Criteria and Guinean Government Projections Through 2020

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Sources: Guinean authorities, 2018–2020 DPBP, and IMF staff estimates.Note: Cases where the convergence criteria are not met are indicated in red.

20. However, the lack of a limit on the outstanding stock of guarantees that the government can grant represents a serious fiscal risk. In addition, the 2017 PPP law provides no ceilings on the total amount of PPP commitments (explicit or implicit), which can pose a risk to debt sustainability. Similarly, SNGs borrowings are not adequately limited. The revised Regions and Communes Code (CCL) (articles 180 and 490) authorized borrowing by the SNGs. However, no decree has been adopted establishing the limits or terms or conditions of SNG borrowing, notably in the domestic market.

21. A draft policy statement on public borrowing and public debt management has been prepared. The statement makes the public debt sustainability objective more operational. It would serve as the reference tool in strengthening the institutional framework for monitoring, oversight, and management of public borrowing. The scope of application extends to all public entities that contract or agree to a debt or receive sovereign guarantees. Those entities must first request approval of the National Public Debt Committee (CNDP) based on the report prepared by the Ministry of Economy and Finance (MEF).7

22. In practice, borrowing by the Guinean government is subject to stricter limits agreed under the IMF-supported ECF program. The program, approved in December 2017, limits the government’s non-concessional borrowing to US$1.85 billion, of which US$1.2 billion is set aside for the Souapiti hydropower project and US$650 million to finance priority infrastructure projects (energy, transportation, and education).

23. The Guinean government’s commitment to adhere to the debt limits can be readily appreciated from the quarterly monitoring reports. Quarterly reports on Guinea’s performance with respect to the convergence criteria are prepared under the supervision of the National Economic Policy Coordinating Committee and submitted to the ECOWAS Commission. The reports show that following the debt relief secured when reaching the completion point under the HIPC Initiative in 2012, Guinea has enough margin with respect to the limit of 70 percent of GDP on the outstanding public debt.

24. However, the growing reliance on PPPs to provide infrastructure in Guinea could make it difficult to comply with the debt limit in the future. At end-2017, the DNPEIP’s inventory of PPP projects indicated a total of 25 PPP contracts signed between 2012 and 2017, notably in the areas of energy, housing, and hotel services. These contracts represented a total of roughly 58 percent of GDP, although only two contracts (representing a total commitment of about 0.4 percent of GDP) are currently under execution (Table 4).8 Data limitations prevented from quantifying the sovereign guarantees associated with those PPPs. The envisaged PPPs represent a serious fiscal risk; accordingly, an urgent finalization and adoption of the decree implementing the 2017 PPP law is warranted to put the institutional framework into effect to supervise, monitor, and manage the potential risks associated with PPPs.

Table 4a.

Portfolio of PPP Agreements Signed at End-2017

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Source: Guinean authorities, MEF.

25. Like borrowing, fiscal policy is also governed by the ECOWAS-wide rules transposed into Guinean law, the LORF, and the implementing decree on public financial governance. Two out of the four first-order ECOWAS convergence criteria refer directly to fiscal policy: the limit of 3 percent of GDP on the overall fiscal deficit, and the ceiling on central bank financing of the deficit at 10 percent of prior year tax revenue. The lack of ceilings on annual PPP commitments or annual sovereign guarantees is a weakness of the community rules, which their binding feature does not apply beyond the central government.

26. In practice, fiscal policy remains subject to stricter performance criteria under the IMF-supported ECF arrangement. The program defines quantitative performance criteria for the basic fiscal balance and net BCRG lending to the government. Although the government has not always met these stricter criteria under the IMF-supported arrangement, its adherence to the ECOWAS fiscal convergence criteria has improved over the years. Both the 2018–20 multiyear budget programming document (DPBP) and the 2018 Economic and Financial Reports refer to this performance, noting that Guinea met five of the six convergence criteria in 2017 (Table 3).

27. A medium-term macro-fiscal framework is prepared ahead of budget preparation and includes budget aggregates broken down between current and capital expenditures. The LORF and the implementing decree on public financial governance require the government to prepare a medium-term budget framework (MTBF) each year, which serves as the basis for establishing limits for the medium-term expenditure framework (MTEF). The MTEF, in turn, establishes the major categories of public expenditure by nature, function, and department for the following three years (see paragraph 50). The LORF also requires that the draft annual budget law (PLF) must be consistent with the first year of the medium-term framing documents. However, the MTBF does not distinguish between ongoing and new projects.

28. The preparation of the medium-term macro-fiscal framework ahead of the annual budget is operational in Guinea. However, the practice was established only recently, and implementation entailed approximations. The 2018–20 DPBP is the government’s third, following those of 2016–18 and 2017–19. Forecast errors between the DPBP and annual budgets are observed (cf. Table 4b). The credibility of the medium-term macro-fiscal framework should be improved as staff learn by doing the DPBP preparation ahead of the budget.

Table 4b.

Comparison of 2018–20 DPBP and the 2018 Draft Budget Law

(GNF billions)

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Sources: 2018–20 DPBP and 2018 PLF.

2. National and sectoral planning (institutional strength: medium; effectiveness: medium; reform priority: low)

29. Guinea has a public investment strategy (the PNDES) and sectoral strategies but lacks standardized tools, in particular, for the preparation of sectoral policies. Planning is within the responsibilities of the Ministry of Planning and International Cooperation (MPCI). By decree,9 the MPCI is responsible for the design and development of economic, social, and cultural development plans. It exercises these authorities through the National Directorate of Plans and Long-Term Planning (DNPP). Decree 044 of March 27, 2015,10 created Development and Strategy Bureaus (BSDs) in all ministries charged with coordinating the formulation of the ministries’ development policies and strategies, in liaison with the ministries’ technical directorates and the MPCI. However, there are no standardized tools, codified methods, or procedures to facilitate the preparation of sectoral policies or strategies in terms of minimum content. For example, a guide could refer to the need to transform strategies into programs and projects, define measurable targets to assess results, estimate the associated costs, and provided methodologies.

30. Guinea’s public investment strategy is essentially based on the PNDES, but the PNDES projects are not adequately prioritized or coordinated with the sectoral strategies. Recently, Guinea developed a PNDES for 2016 through 2020. It was the product of a participatory process that included the MPCI, the Prime Minister’s Office, the ministries through their BSDs, the private sector, civil society, and the technical and finance partners (TFPs). It is intended as a strategic and programmatic frame of reference for all development actions for the 2016–20 period. It includes most of the projects financed from the budget, with associated costs, and a results framework with target indicators of outputs and results. It was adopted by the legislature and published. However, the investment projects included in the PNDES are not sufficiently prioritized, which limits the effectiveness of the PNDES as a guide for investment programming. Most of the sectoral ministries have strategies, but the strategy documents are diverse in terms of format and time horizon in the absence of standardized tools, as shown in Table 5. The sectoral strategies do not necessarily include a prioritized list of projects and estimated costs, funding constraints, or results frameworks; most are not published. Under such conditions, the sectoral strategies are of limited use in guiding investment programming for the different sectors. Moreover, the strategies, to the extent they exist, are not systematically aligned with the PNDES.

Table 5.

Overall Analysis for Institution 2—National and Sectoral Planning

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Source: Mission analysis of some selected sector strategies.

31. Although the PNDES is a good practice, it is important to consider strengthening the planning process to improve the quality and effectiveness of national and sectoral investment programming. Currently, the lack of certain information on investment projects such as estimated total cost, impact, and priority, especially for sector projects, limits the credibility of those plans. It also limits their impact on the prioritization and selection of investment projects during preparation of the public investment program (PIP). Strengthening the planning and programming of investments, then, is important to ensure that a framework and standard tools are in place to support sectoral planning to better prioritize investment programming and make investments more productive.

3. Coordination between entities (institutional strength: medium; effectiveness: low; reform priority: low)

32. The regulatory framework provides for a degree of coordination of SNG investment plans with the regional central government agencies. The CCL provides that the SNGs11 develop a number of planning tools,12 including a local development plan (PDL) and a regional development plan (PDR) that present the requirements of all sectors, and an annual investment plan (PAI) covering projects within the SNG’s scope of authority. The communal budget, which includes the PAI, must be approved by the prefecture and publicized locally.13 The local planning guide issued by the Ministry of Regional Administration and Decentralization (MATD) provides that the PDLs must take account of the government’s strategy objectives and sectoral strategies.14 However, there are no directives providing for the consolidation of the various lists of prefectural, regional, or national investment projects. Since the methodology for preparing PDRs is not yet defined, no conclusion can be drawn as to the modalities of coordination among the PNDES, the sectoral strategies, the PDLs, and the PDRs.

33. The legislation also provides for transfers from the central government budget to the SNGs to finance investment, but the implementing regulations are not yet in place. Currently, the Mining Code,15 the 2016 budget law creating the National Local Development Fund (FNDL),16 and the decree creating the National Regional and Local Finance Agency (ANAFIC)17 provide for the allocation of 15 percent of certain mining royalties to all the SNGs. There are also plans for the creation of a Local Mining Development Fund (FMDL) for the allocation of 5 percent of royalties to the communes bordering the mining areas. However, neither the formulas for cross-subsidization of the FNDL or the FMDL, nor the terms and conditions of utilization, management, or oversight, have been defined. Finally, there are no legal provisions entitling the SNGs to receive information on capital transfers prior to the adoption of the budget law.

34. In practice, the SNG investment plans are not discussed with the central government or systematically published, but the SNGs do not have neither major projects nor capital transfers. To date, all of the rural communes have a PDL; most produce a PAI each year, but only 12 of the 38 urban communes have PDLs. PAIs are not consolidated or discussed with the sectoral ministries or prefectural staff.18 The regional councils have not yet been established, so there is no question of PDRs. However, the SNGs do not undertake major investment projects in view of their limited resources19 and the lack of transfers from the FMDL and FNDL. The communes’ investment expenditures are quite low; they are estimated at less than 0.4 percent of the government budget.

35. The regulatory framework provides for limited monitoring of contingent liabilities associated with PCs and PPPs. Law 075 on the governance of PCs20 provides for financial oversight of PCs by the MEF through the DNPEIP.21 The DNPEIP oversees the government’s equity interests and submits a report on the PCs to the MEF. The MEF holds the portfolio of government investments, other than investments in mining sector entities. Law 075, article 57 provides that a report on the performance of PCs and government investments is to be annexed to the proposed budget review law (loi de règlement) each year. The DNPEIP sends a questionnaire to the PCs for this purpose that includes, in particular, the status of their long-term debts and contingent liabilities. The PPP law further requires that the MEF manage and oversee public commitments in the context of PPPs.22 Finally, although the CCL provides for borrowing by the SNGs or investment expenditure, the implementing decrees lack provisions specifying the terms and conditions of authorization, guarantee, and monitoring of such borrowing and the contingent liabilities they represent.23

36. In practice, the DNPEIP monitors the explicit contingent liabilities of PCs and some PPPs, although the documentation attached to the budget law does not include sections on the subject. The DNPEIP collects information from PCs and consolidates information on their debts. The DNPEIP’s analysis is summarized in a note on the status of the corporations of the government portfolio prepared for the MEF. The note was used in the analysis contained in the report on PCs, which was attached to a budget proposal for the first time with the proposed 2018 budget law. However, the note was limited to the liabilities associated with employer obligations, tax liabilities, and debts to suppliers. Regarding PPPs, the DNPEIP conducts limited monitoring of explicit contingent liabilities associated with PPPs in an internal document focused particularly on government guarantees.24 However, the monitoring of PPPs is not comprehensive.

37. The failure to strengthen the coordination of SNG investment expenditures and the central government when the FNDL becomes operational could affect the effectiveness of those expenditures. Since transfers from the FNDL could quadruple the communal budgets once the fund is operational, there is a potential risk that the areas of authority of the communes could overlap with those of the sectoral ministries.25

4. Project appraisal (institutional strength: low; effectiveness: low; reform priority: high)

38. A number of texts require feasibility studies for major investment projects but are silent as to the methodology to be used and the question of economic, financial, and risk analyses. The circular on the preparation of the 2019–21 PIP requires that feasibility studies accompany project information forms. However, important omissions exist: (1) no explicit requirement for the transmittal of project documents is included; (2) no text specifies the content of a feasibility study; (3) no explicit requirement for technical studies is stated; (4) no requirement is established for economic and financial analyses providing estimated costs and benefits, including in terms of environmental, social, and economic impact, although sectoral ministries will use those analyses to prioritize their projects; and (5) no mention is made of risk analyses. Moreover, a circular lacks the legal force of a presidential decree. However, the law on PPPs requires that the feasibility study analyze the project’s environmental and socioeconomic impact and financial sustainability.26

39. A study fund was created in 2013 within the Large Projects and Contracts Management and Oversight Unit (ACGPMP)27 to finance feasibility studies for major projects, but there are no provisions addressing governance of the fund.28 Several entities are tasked with supporting the sectoral ministries in conducting feasibility studies: the National Directorate of Public Investment (DNIP)29 and the Technical Programming Support Bureau (BTAP)30 within the MPCI, the sectoral ministry BSDs31, and the Central Project Studies Bureau (BCEP).32 For PPPs, the law provides for different units—the PPP committee and PPP units—that could play a role of central support in the appraisal of PPPs, but the implementing texts have yet to be prepared.

40. In practice, domestically funded priority investment projects do not systematically undergo socioeconomic analyses as do externally funded projects. Of the 23 major projects reviewed for the PEFA,33 economic analyses were only conducted for 11. Of the 113 projects identified in the Post-Ebola Plan, feasibility studies were prepared for 34, of which 32 percent domestically funded.34 Technical, social, economic/financial, and environmental feasibility studies are systematically conducted for externally financed projects. However, the methodologies used vary according to the partners’ particular requirements. In general, domestically funded infrastructure projects undergo technical studies, but they do not do so systematically; further, no economic/financial analyses were observed, with the exception of two studies conducted by the BCEP that include profitability ratios.35 A review of the project information indicates that the majority of information required is financial in nature. The information forms are rarely completed in full. The relationship with the PNDES is rarely explicit, the financial evaluation is summary, and no information is provided concerning potential project impacts.36 At best, the feasibility studies for domestically funded projects are funded after the projects have been programmed in the PIP. Likewise, PPPs are apparently not always subject to economic and financial analyses. For example, recent PPPs for independent electricity production units underwent technical and financial studies, in particular to establish the price to be charged for the power produced, but the projects’ socioeconomic impact and financial sustainability were not evaluated.

41. Central support for the preparation of studies is not yet fully effective. The DNIP and BTAP lack the financial and human resources to conduct or delegate those studies. The funding allocated to feasibility studies is usually reallocated to the implementation of ongoing projects, creating a vicious circle from one year to the next. Concerning human resources, the BTAP, created in 2017, has only seven engineers in place out of the 27 provided. The BCEP recently increased its team from four professionals to 30 in 2018. The BCEP is intended to serve as the central support structure, based on the Ivoirian model (cf. Box 1). However, coordination and sharing of responsibilities among the BSDs, the DNIP, the BTAP, and the BCF is not yet defined in practice or in the applicable regulatory texts.

42. The lack of technical, economic, and financial evaluations of domestically financed projects creates a significant risk. The lack of detailed evaluations impacts the following stages of the investment management cycle: (1) the project selection process, because of the lack of objective data on which to base the sectoral prioritization, and the selection during budget conferences; (2) the execution of the PIP due to contingencies that will arise during implementation, impacting the implementation schedule and costs; (3) the ex post evaluation of projects due to lack of data on expected results. A risk analyses would enable political decision makers to mitigate risks in advance, especially risks to costly projects.

Côte d’Ivoire: BNETD and Studies Fund Support Appraisal of the PIP

The experience in Côte d’Ivoire points to two lessons:

  • A strong central support unit

    Côte d’Ivoire’s National Technical and Development Studies Bureau (BNETD) is a central support structure created in 196. The BNETD is the result of an institutional process whereby the Directorate of Large Projects Oversight was converted to a public corporation in which the government is the sole shareholder and its activities were refocused on assisting the government in the following: (1) identifying, preparing, and defining medium- and long-term development objectives; and (2) improving the utilization of resources, completion of projects, and establishment of standards and methodologies for the sectoral ministries. At the request of the authorities, the BNETD may monitor project implementation; monitor, oversee, or conduct studies; and contribute to feasibility, technical, economic, and financial studies.

    Specifically, in addition to providing training and producing standards and methodologies, the BNETD supports the sectoral ministries in conducting the various studies required for the preparation of the PIP. The BNETD may conduct studies on a contractual basis, usually pursuant to competition but at times through direct negotiation for strategic reasons. In some cases, as requested by the Directorate of Public Investment Programming (DPIP), the BNETD supports the sector ministry in quality review and validation of feasibility studies. The BNETD then plans the additional studies needed for project preparation at the request of the DPIP. The BNETD also offers an extensive program of short-term training on the different phases of investment project management.

  • Protected funding for feasibility studies

    The financing of feasibilities studies from own resources comes from several sources: (1) the sector ministry budget appropriation earmarked for the preparation of the PIP; (2) a special studies fund established within the Treasury in 2013 and managed by an interagency committee (the Presidency, the Prime Minister’s Office, and the ministries of planning, finance, and budget) that makes additional funding available to the sector ministries by means of an internal, competitive process used for major projects; and (3) external funding. Between 2013 and 2014, the fund financed 119 studies for a total cost of US$25.8 million (GNF 232.5 billion).

Source: World Bank (2017), “Republic of Guinea: Toward a More Efficient Appraisal System of Public investment Projects for Greater Impact in Guinea,” Report AUS17387.

Chile: Project Appraisal and Selection

Project appraisal and selection in Chile is based on four pillars:

  • A rigorous, systematic training program on formulating and preparing projects of different levels of complexity

  • A mandatory socioeconomic evaluation based on the net present value or internal rate of return of social investments

  • Efficient allocation of resources among competing projects from different sectors

  • A transparent procurement system based on competition.

On this basis, the National Investment System (SNI) was established in the 1980s. It provides for a well-structured process for evaluating and selecting projects and is considered an example for emerging countries. The system currently operates under the joint supervision of the Ministry of Social Development (MDS, the former Ministry of Planning) and the Ministry of Finance. The SNI provides for a number of shared tools, in particular:

  • Published directives prescribe the process to be followed in evaluating and selecting projects.

  • An integrated project database, a shared IT tool, is used throughout the process.

Projects must be supported by either a cost-efficiency analysis (health, education, and water projects) or a cost-benefit analysis (transportation and infrastructure). These tools are accessible on the MDS website. Risk analysis are also considered. To receive a favorable rating, a project appraisal document must also present any information on sensitivity to fluctuations in the variables. The MDS investment studies department reviews all investment project appraisals and recommends the projects to be included in the budget. Although the MDS is not formally independent, it is a technical and professional institution less subject to political pressure.

Source: IMF mission.

5. Alternative infrastructure financing (institutional strength: medium; effectiveness: medium; reform priority: medium)

43. The regulatory framework governing the provision of infrastructure in Guinea is partly open to competition. Law L/2001/18/AN on the reform of PCs and government divestment establishes open competition as the preferred mode of infrastructure provision.

  • Electricity and water. The 2001 law, which replaced the Build, Operate, and Transfer (BOT) law of 1998, authorizes the use of PPPs and private investment for electricity production. Discussions are underway to extend competition to the electricity distribution segment by end-2018. Competition does not yet extend to the supply of water. A water and electricity regulatory authority was recently created, but the implementing decrees have yet to be adopted.

  • Telecommunications and new information and communications technologies (NICT). The 2015 law on telecommunications and NICT establishes the principle of an open, competitive market. The Postal and Telecommunications Regulatory Authority (ARPT) is responsible for regulating the market in an independent, neutral, proportionate, impartial, and transparent manner.

  • Transportation. Competition in the transportation sector is regulated by the Ministry of Transportation through the sector directors of ground, rail, maritime, and air transport.

44. In practice, the production of economic infrastructures is partly open to competition.

  • Electricity and water. The public electric utility, Electricité de Guinée (EDG), signed power purchase agreements (PPA) with seven independent electricity producers (Table 6) and two PPPs for hydropower production.37 The supply of water in urban areas is monopolized by the public corporation Société des Eaux de Guinée (SEG).

  • Telecommunications and new information and communications technologies (NICT). Several operators are present in the telephone services market, which is effectively regulated by the ARPT.

  • Transport

    • I. Air. Following disappointing earnings, the few private airlines providing domestic service between different Guinean cities discontinued operations. The government is reportedly negotiating with Ethiopia to create a national airline company.

    • II. Ground. With the exception of the public transportation corporation Société de transport guinéen (SOTRAGUI), ground transport is monopolized by private companies, most of which operate in the informal sector.

    • III. Rail. The national railroad company is the only real transportation provider, with an express train between Conakry and the suburbs.

    • IV. Maritime. In addition to the public shipping corporation Société Navale de Guinée, small private operators provide canoe service between Conakry and the Guinean islands under the supervision of the Directorate of the Merchant Marine, the regulatory authority.

Table 6.

PPAs Signed by Electricité de Guinée (EDG)

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Source: EDG.Note: AON = Groupe Abdelhedi Ould Noueigued (Malian Corporation); BDG = Branch of Guinea’s Development Bank); SPV = Special Purpose Vehicle.

45. Guinea has established an institutional framework for PPPs, but it is not yet operational. A PPP law adopted in July 2017 replaced the 1998 BOT law that had not taken effect due to the lack of implementing regulations. In view of the important role that PPPs are expected to play in implementing the ambitious investment program provided by the PNDES, the timely adoption of the 2017 PPP law provides a frame of reference for the management and supervision of Guinea’s PPP projects. The law defines the institutional framework and rules governing the award, implementation, oversight, and regulation of PPPs. It provides for the use of PPPs for projects in all economic and social sectors, with the exception of oil and mineral rights, which are governed by specific codes. It presents an overview of the different public entities involved in the various phases of implementing PPP projects. However, the institutional framework is not yet operational, since two important texts have not been finalized or adopted: the proposed decree implementing Law 2017/AN of July 4, 2017, on Public Private Partnerships and Organization of the Institutional Framework Applicable to Public Private Partnerships, and a second decree implementing the draft PPP Policy Letter. Until they are adopted, two key units within the DNPEIP—the PPP committee, responsible for directing the national PPP policy, and the PPP unit, charged with assisting other entities in the process of PPP projects—will lremain non-operational.

46. Some 20 PPP contracts have been signed in disregard of the regulations guiding project preparation, selection, and management. At end-2017, the DNPEIP identified roughly 20 signed PPP contracts (see paragraph 24). The adoption of the draft decrees implementing the 2017 PPP law will improve the control of the process of selecting and preparing PPP project based on appropriate criteria and feasibility studies. The new model for evaluating the fiscal risks of PPPs, developed jointly by the IMF and the World Bank, could support the mechanism for evaluating the relevance and appropriateness of PPP projects. Technical staff of the PPP unit would benefit by familiarizing themselves with this tool.38

47. The monitoring of PCs’ investment plans and financial results is based on feedback of financial information by the government’s representatives on the boards of directors. The 2017 law on the financial governance of public corporations and entities confers a key role on the government directors (auditors/financial analysts) in the transmittal of financial information (including the budget, investment plan, and financial statements) to the ministry having technical oversight and to the MEF, and in the consolidation of information within the DNPEIP. However, the absence of a decree implementing the law on financial governance of public corporations and entities limits the effectiveness of this institutional mechanism.

48. Although the monitoring of the investments and performance of public corporations and entities is being modernized, there is room for further improvement. The DNPEIP has systematized the collection of financial information from public entities (PCs and administrative public entities, EPAs) through the use of an annual questionnaire addressing such issues as revenue, recurrent expenditure (including subsidies) and investment expenditure, dividends, and contingent liabilities (including guarantees and bonds). Based on that information, an initial annual review of EPAs was published in September 2017, and a financial report on the PCs was produced and transmitted to the National Assembly for the first time in December 2017. These laudable initiatives should be strengthened by further standardizing the format of the information, which should then be consolidated in more informative reports and better harmonized among sectors of activity to facilitate comparison. A decree implementing the financial governance law should be adopted to enhance the legal force of the requirement that PCs provide complete and accurate responses to the annual questionnaire.

Recommendations:

Problem. Alternative financing of public infrastructure is not well regulated. There are no explicit caps on the annual or total amount of PPP commitments or guarantees provided by the government. The monitoring of PCs’ investment plans is inadequate, and there are no explicit ceilings on borrowing by PCs. Neither the revised 2017 CCL, nor the policy statement on public borrowing and public debt management, clarify the limits or terms and conditions applicable to borrowing by the SNGs.

Recommendation 1: Strengthen the regulatory framework to provide for alternative infrastructure financing, and encourage competition in the provision of economic infrastructures.

  • Adopt the draft decrees implementing Law 2017/AN of July 4, 2017, on PPPs and organizing the Institutional Framework Applicable to PPPs; include explicit ceilings on the annual and total amounts of PPP commitments and guarantees provided in connection with PPPs.

  • Adopt the draft PPP Policy Letter.

  • Adopt the decree implementing the Public Entities Financial Governance Act, including explicit caps on public entities’ borrowing and guarantees provided to public entities; strengthen the mechanism to monitor investments by public corporations.

  • Adopt the decrees implementing the revised CCL to clarify the ceilings and conditions applicable to borrowing by decentralized authorities.

  • Finalize the regulatory framework opening electricity distribution and the production and distribution of water to competition; adopt the decree instituting the water and electricity regulatory authority.

Problem. The lack of a guide for the preparation of sectoral policies and strategies limits the credibility and usefulness of those plans, as well as the effective programming of national and sectoral investments.

Recommendation 2: Strengthen procedures for preparing sectoral policies and strategies.

  • Prepare a guide for formulating sectoral policies containing methodological guidance and indicative contents—such as prioritized list of projects, estimated costs, results framework, results indicators (to be implemented in 2018).

  • Ensure that sectoral policies or strategies are up to date and aligned with the new strategic objectives of the PNDES, in particular, in terms of the results framework (to be implemented in 2018 and 2019).

  • Develop an organizational framework and procedures manual that formalizes the relationships between the DNPP and the sectoral ministry BSDs (to be implemented in 2019).

Problem. The lack of final implementing texts for the PPP law and the lack of adjustment of PPPs in procurement regulatory framework may result in elevated financial risks.

Recommendation 3: Strengthen the regulatory and procedural framework for PPPs. In particular, cap explicit commitments under PPPs, and open unsolicited proposals to competition.

  • Finalize and adopt the texts implementing the PPP law with respect to the coordinating and monitoring structures (including risks in the appraisal and capping explicit and implicit contingent liabilities in monitoring) (to be implemented in 2019).

  • Address and define the modalities of PPPs in the procurement regulatory framework (to be implemented in 2019).

  • Promote public access to information to support the principles of competition, efficiency, and transparency; in particular, open unsolicited proposals to competition (to be implemented in 2019).

Problem. The regulatory framework does not yet support the role of the communes as key actors in local development, as provided by law; the communes’ capacities to manage the public finances are still limited as well.

Recommendation 4. Put the FNDL into effect, and strengthen the framework for local public financial management.

  • Adopt texts supplementing the Mining code and CCL concerning the FNDL, the FMDL, and terms and conditions applicable to the SNGs’ borrowing.

  • Launch the operations of the SNG funding agency (ANAFIC) (procedures manual, funding, and human resources).

C. Ensure That Public Capital Expenditure Is Allocated to the Right Sectors and Projects

49. The allocation of investment expenditure to the most productive sectors and projects requires rigorous programming and budgeting. To this end, the PIMA determines whether the countries:

  • Have implemented multiyear budgeting to take account of all future costs of investment projects and verify the sustainability of the investment program;

  • Observe budget comprehensiveness and unity, which are essential to efficient resource allocation;

  • Protect investment in the budget and avoid indiscriminate funding of too many projects by ensuring adequate financing for ongoing projects;

  • Accurately project maintenance costs for physical assets to preserve the benefits of investment programs;

  • Prioritize and select projects based on objective criteria.

6. Multiyear budgeting (institutional strength: medium; effectiveness: medium; reform priority: medium)

50. The budget framework law (LORF) of July 27, 2012, introduced a multiyear approach to budgeting that covers investment expenditure. Articles 13 and 14 of the LORF require the government to prepare both an MTBF projecting budget aggregates over three years and three-year MTEFs that breakdown the total expenditure indicated in the MTBF by ministry, function, and economic nature. LORF article 15 provides that the documents should be presented to the legislature before July 1 for budget strategy discussions; article 48 requires that they be attached to the PLF, which should, in turn, be consistent with the first year of the MTBF and MTEF. Projected expenditures for the second and third years of the MTEF and MTEF may be revised each year and are not binding. The provisions of the LORF concerning the MTBF are reiterated and clarified by Decree 2014/222 on the public financial governance framework.

51. Three-year investment expenditure projections by ministry are published. In 2017, like each year, a three-year PIP was prepared indicating investment expenditure by project ministry, and a multiyear budget programming documents (DPBP) was prepared indicating investment expenditure by ministry. The 2018–20 DPBEP was presented to the legislature on October 3, 2017, for budget strategy discussions. A summary of the 2018–20 PIP by ministry and funding source was attached to the 2018 PLF, and its 2018 tranche is consistent with the 2018 PLF. The total annual investment expenditures indicated in the PIP and the DPBP are close. However, significant discrepancies exist between the projected investment spending by ministry in the two documents, published several days apart (cf. Table 7). The discrepancies point to insufficient coordination between the staffs responsible for programming expenditures and undermine the reliability of multiyear projections. The PIP presents three-year expenditure projections by project, but it does not present total project costs or expenditures remaining to be executed beyond the three years covered by the PIP.

Table 7.

Comparison of 2018–20 DBPB Projections with the 2018–20 PIP

(GNF billions)

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Sources: 2018–20 DPBP and 2018–20 PIP annexed to the 2018 proposed budget law (PLF).

52. Strengthening of the multiyear programming process is a precondition to the implementation of a reliable, sustainable investment program. The strengthening must address procedures and the contents of the documentation that supports programming. In order to better measure the financial impact of projects, the PIP should present, in addition to three-year expenditure projections by project, the total project cost, total expenditures executed, total expenditures remaining to be committed, three-year distributions, and expenditure beyond the period of the current PIP. The DPBP is a framing document and should effectively frame the programming of investment. To this end, budget preparation and programming activities should be scheduled in a way that ensures that the preparation of multiyear programming documents (DPBP, ministerial MTEFs, and PIP) is adequately coordinated.

7. Budget comprehensiveness and unity (institutional strength: medium; effectiveness: medium; reform priority: medium)

53. The LORF is based on the principles of budget unity and comprehensiveness. Those principles are applied to the government budget and those of EPAs in LORF article 3. Article 39 provides that the government budget must include funds from international donors and the expenditures financed by those funds. With respect to PPP contracts, LORF article 27 stipulates that a commitment authorization (AE) covering the total amount of the legal commitment should be included in the budget law for the year the contract is signed. Decree 2016/75 of March 30, 2016, on the authorities and organization of the MPCI provides that the investment budget is prepared by a specialized directorate within that ministry. In addition, Decree 2016/92 of March 30, 2016, on the authorities and organization of the Ministry of Budget provides that the ministry prepares the recurrent budgets and consolidates the recurrent and investment budgets in a single document in cooperation with the MPCI.

54. In practice, the investment budget is relatively comprehensive, but the unity of the government budget is limited and does not adequately reflect the impact of investment budgets on the recurrent budget. Investment expenditures are presented in Title V of the 2018 budget and represent 37 percent of total budget expenditure. However, a number of projects included in Title V are hybrid in nature and include both capital and current expenditure. The budget nomenclature at the paragraph level and the accounting framework provides for a clear distinction between current and capital expenditure, in accordance with international standards. However, the nomenclature is not yet applied to expenditures financed externally. Most capital expenditure is approved by the national assembly. Only PPP projects are not yet included in the budget, although article 27 of the LORF provides that they should be. Investment operations by EPAs, which are very limited, and specific external funding are not included in the budget.39 Although the budget is presented in a single document, the investment and recurrent budgets are prepared by two different ministries. There is insufficient coordination between them to ensure that the impact of investments on the recurrent budget is given adequate consideration and the allocation of resources between the two types of expenditure (particularly between maintenance and investment) is optimized.

55. Improving budget comprehensiveness and unity is essential to provide a comprehensive view of investment expenditure and facilitate the allocation of sufficient resources to maintenance to ensure the durability of the infrastructures provided. A more complete view of capital expenditure in the budget would enable the legislature to properly fulfill its role of authorizing all public expenditure and overseeing execution. The lack of information on expenditure not recorded in the budget and the failure to apply the economic nomenclature to some projects limits macroeconomic analysis. Insufficient coordination between the preparation of the investment program and the recurrent budget, particularly the absence of joint budget conferences, undermines the effectiveness of resource allocation. As a result, the recurrent costs of investment projects are often overlooked, which can impact the durability of the assets and compromise their impact on growth.

8. Budgeting for investment (institutional strength: medium; effectiveness: low; reform priority: high)

56. Legal and regulatory provisions aim to protect investment expenditure over the medium term, particularly expenditure relating to ongoing projects, but implementing texts are lacking. LORF article 26 provides that the budget should include AEs for multiyear investment expenditure. For an investment project corresponding to a homogenous, indivisible unit, the AE should correspond to the total project cost.40 However, no implementing texts have been adopted to define the modalities of implementing AEs, in particular, the treatment of projects combining multiple, homogenous subprojects. Thus, the question of whether the AE covers the total cost of the project remains to be clarified in a regulatory text. LORF article 24 provides that the payment officer for each program may modify the distribution of appropriations between the different budget titles as long as the modifications do not increase the total amount under Title II (personnel expenditure) or reduce the amount under Title V (investment expenditure). LORF article 33 permits unused available payment appropriations (CP) for investment expenditures to be carried over at the end of the year. The amount of CPs to be carried over is limited to the amount of the AE consumed. This procedure ensures the completion of projects for which execution or payments were delayed during the year.

57. Investment expenditures are not adequately protected during the multiyear time horizon. Financing for ongoing projects may be impacted by the introduction of new projects in the budget. The Prime Minister’s framing letter of September 27, 2017, accords the same priority to ongoing projects and mature new projects introduced in the budget.41 Transfers from Title V to other titles were limited to two operations in 2017 that together represented 7 percent of the budget for domestically financed investment. The proportion of domestically financed new projects in the 2018 PIP totaled 35 percent, or 16 percent if the local counterpart of externally financed projects is excluded. An analysis of 16 projects launched since 2010 indicates that projects representing a total cost of GNF 1099 billion were interrupted due to lack of financing, although 68 percent of the financing had been executed.42

58. To ensure the investment program’s effectiveness, budget appropriations should not be stretched thin by funding an excessive number of projects. During programming of investments, each project’s total cost and projected future costs should be examined and compared to the optimal project implementation period to ensure that the project will be executed under proper conditions. Clear directive on whether to consider new projects should aim to avoid distribution appropriations among too many projects. A regular review of projects should be conducted to ensure that projects that have become inactive for lack of financing are not included in the PIP. In parallel, investments should be protected in terms of budget execution by prohibiting appropriations transfers from Title V to other titles. In addition, during preparation of commitment plans, consideration should be given to the situation of ministries whose investment activities are subject to seasonal weather constraints.

9. Maintenance funding (institutional strength: medium; effectiveness: low; reform priority: high)

59. The budget provides a framework for estimating current and periodic maintenance expenditure, but there is no standard methodology for estimating and programming these expenditures. The budget nomenclature defined by Decision A/2014/5262/MEF/SGG of October 9, 2014, provides for the detailed presentation of maintenance expenses in the government budget. Routine maintenance expenditures are recorded in Title III (goods and services expenditures); periodic maintenance is included in Title V (investment expenditure). However, there is no standard methodology for estimating routine maintenance requirements or the corresponding budget funding.

60. Recurrent expenses receive insufficient consideration in project programming, and maintenance is underfunded. The project forms completed during project preparation require estimates of recurrent costs, but the figures receive little attention during budget conferences. The road maintenance fund (FER) funded by the road maintenance fee assessed on fuel sales covers less than one-fourth of total road maintenance requirements (cf. Table 8). In the 2018 PLF, the provisions of the new nomenclature were applied for routine maintenance expenditure but not for maintenance work. However, the new nomenclature was applied during execution of the 2018 budget. The points remaining to be resolved concern externally financed rehabilitation work. The budget nomenclature has not yet been applied to this category of expenditure, and the categorization of expenditure used for the FER—which is intended to finance routine maintenance—at times results in the use of those resources to finance rehabilitation work.

Table 8.

Road Maintenance Requirements Compared to Anticipated Proceeds of the Road Maintenance Fee (RER)

(GNF billions)

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Source: Activity Reports, FER.

61. Several sectors have nonetheless developed their own methodology for estimating maintenance expenditure. In particular, the Ministry of Public Works (MTP) surveys road conditions using the VIS-ROAD system and estimates maintenance funding requirements based on the unit costs of repair work. It should extend this approach to heavy maintenance using the L2-R system, which identifies structural deterioration of roads. In the education sector, projects have defined standards for routine and heavy maintenance; a health sector guide was prepared 20 years ago but is considered obsolete. In the agriculture sector, externally funded project studies generally estimate cost recovery revenues, but cost recovery has proven inadequate in practice to support the operation and maintenance of project plant and equipment.

62. Effective maintenance of infrastructures is indispensable to ensure the durability of investments. Maintenance costs should be forecast and budgeted concomitantly with investment expenditure. Combined investment-recurrent budget conferences should examine the proposed budget and multiyear forecast for both investment expenditure and maintenance costs. New construction should also be compared with rehabilitating existing infrastructures where relevant. The projected maintenance costs should be clearly identified in the MTBFs. General directives should be developed on forecasting, budgeting, and implementing maintenance operations, and these should be gradually supplemented by specific sectoral guides. The directives should specify the following: (1) the procedures and responsibilities for condition inspections of key plant and infrastructure; and (2) methods to be used to estimate routine and periodic maintenance requirements and costs. The estimated maintenance requirements could be based on reference estimates calculated using simple physical indicators (for example square footage of administrative buildings or miles of paved roads). However, the reference estimate should be supplemented and refined through specific analyses to be defined for each sector (cf. for example, the tools used by the MTP to assess road maintenance requirements).43

10. Project selection (institutional strength: low; effectiveness: low; reform priority: high)

63. The criteria and procedures for project selection and prioritization are inadequate. The decisions to include projects in the budget are made during budget preparation based on a review of project information forms and the availability of completed studies. No independent review of the studies is performed, and the DNIP has no formal methods for project selection. However, in the context of preparing the 2016–20 PNDES, the MPCI reviewed the investment projects identified by ministries and other institutions and assigns them one of three priority rankings. Selection criteria developed for that purpose are presented in Box 3. The criteria are insufficient to prioritize projects for budgeting for the following reasons:

  • They are insufficient to prioritize major projects in sectors such as energy or transportation for which cost-benefit analyses, including calculation of an internal economic rate of return, are generally required.

  • They do not require cost-efficiency analyses in the other sectors or consideration of alternative solutions for a given project.

  • They do not provide for a review of project management provisions or future recurrent charges and comparison with the recurrent budget for the sector concerned.

64. Key projects do not constitute a reserve of appraised projects, and capacities are currently inadequate to review major projects. As presented in Box 3 and Table 9, PNDES projects are classified according to three categories: active projects, key projects, and reserve projects. The total cost of active projects and key projects is GNF 438,437 billion, of which GNF 245 billion for key projects. Only 30 percent of key project have reached a sufficient degree of maturity according to the PNDES definition of maturity recalled in Box 3;44 but the results of socioeconomic studies of those projects and the level of socioeconomic benefits are not specified. The total cost of active and key project represents over 11 times the total amount of domestically and externally financed government investments planned for the PNDES (GNF 37,686 billion).45 The number and cost of key projects are excessive. Key projects include projects for which studies have not been completed or the economic and social returns have not been carefully examined. Capacities are insufficient to identify a group of major projects with high economic and social impact based on feasibility studies. A World Bank report identifies significant difficulties on the part of ministerial BSDs and technical directorates in monitoring the preparation of feasibility studies by external consultants and evaluating those studies.46

Table 9.

PNDES Projects by Category

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Source: PNDES Volume 2 (MPCI), September 2017.

Project Selection in the PNDES National Investment Plan Project (or program) selection criteria

  • Alignment on the PNDES. In practical terms, alignment examines whether the project is consistent with the narrative content of the domain or pillar with which it is associated or with the strategic objectives of the PNDES.

  • Relevance. The aspects considered in applying this criterion are as follows: (1) the project’s assumed or demonstrated multiplier effect (based on feasibility studies) in terms of intrasectoral value chains or multisectoral spillover effects; (2) the project’s assumed or demonstrated capacity (based on feasibility studies) to generate high added value in terms of government revenue, foreign currency, job creation, and/or income redistribution; and (3) the project’s contribution to the strategic results of the PNDES.

  • Maturity. The criteria applied include the following: (1) the status of feasibility and/or technical studies; (2) the availability of contract files or documents; (3) the status of financing; and (4) the project or program implementation status.

Categorization of a National Investment Plan (PNI) project.

  • A key project meets the following criteria: (1) it is relevant from the standpoint of the PNDES; (2) it is of the very highest priority; and (3) financing is either to be identified, partially arranged, or under negotiation.

  • An active project is a project meets the following criteria: (1) it is relevant from the standpoint of the PNDES; (2) it is a priority; (3) it is in the implementation phase, completed, or being completed; and (4) all or part of the financing has been arranged.

  • A reserve project is a project that is neither a key project nor an active project and its degree of maturity is quite low.

Source: Box 1, “Programming Criteria,” PNDES Volume 2. MPCI (September 2017).

65. Sound procedures for selecting and prioritizing projects are essential to ensure effective and efficient implementation of the investment program. The criteria of project alignment with strategies are an essential but insufficient basis for prioritizing, selecting, and budgeting projects. The results of economic studies (cost-benefits or cost-effectiveness, depending on the sector) should be used to compare projects—at least for projects of significant scope. For each significant project, alternative solutions should be evaluated to select the option offering the greatest socioeconomic benefits. Recurrent costs following project completion should be estimated and compared to the recurrent expenditures of the ministry concerned. The post-completion project management provisions, cost recovery mechanisms, and reasonableness of cost recovery projections should also be analyzed. A guide should define the approach to be used to prioritize and select projects to develop a pipeline of fundable projects. This general guide should gradually be supplemented by sectoral selection and prioritization guides.

Recommendations:

Problem. Most of the budgeted priority investment projects funded from domestic resources lack feasibility, economic, and financial studies, adversely affecting implementation of the PIP in terms of costs, schedule, and anticipated impact.

Recommendation 5. Implement a process of independent review and validation of studies, and develop stricter selection criteria.

  • Prepare and adopt a manual for the preparation, appraisal, and selection of priority investment projects that clarifies the following; (1) the method and standards for the pre-identification; components of a feasibility assessment; calculation of costs; and economic, financial, and risk analyses; (2) the administrative processes within the cycle of preparing, prioritizing, and selecting projects for inclusion in the PIP; and (3) the project selection criteria and methods for the review of recurrent costs.

  • Optimize institutional arrangements among the different units supporting evaluation (DNIP, BCEP, BTAP, BSD) to ensure the coordination and effectiveness of each unit’s actions.

  • Protect funding for project appraisals (for the operations of units in charge of appraisals, especially the BSDs, DNIP, and BCEP) and for feasibility, technical, economic, and financial studies.

  • Issue a directive that does the following: (1) creates a bank of mature projects and prescribes the preparation process and access to financing for feasibility studies, (2) stipulates that the presentation of any project at the PIP preparation conference is subject to the production of feasibility, technical, economic, and financial studies, and, for major projects, prior verification of project maturity by an expert independent of the project’s sponsoring entity; and (3) requires that investment projects be prioritized by sector as a prerequisite to inclusion in the PIP and the budget.

Problem. Financing of major ongoing projects may be affected by the introduction of new projects; the recurrent costs of project and maintenance of existing projects do not receive adequate consideration.

Recommendation 6. Strengthen investment budgeting, and increase funding for maintenance activities:

  • Implement multiyear commitment authorizations and appropriations carryovers for investment.

  • Hold single budget conferences addressing both recurrent and investment budgets, beginning with the proposed 2020 budget law.

  • Prepare guides for estimating and budgeting maintenance costs and estimating the future recurrent costs of investment projects (2019–20).

  • Introduce a specific line item for projected maintenance expenses in the MTEF (2019).

D. Provide Productive and Durable Public Assets

66. The implementation of public investment projects should deliver productive and durable public assets. The economically profitable and timely implementation of investment projects requires comprehensive financing, effective management, and detailed, transparent monitoring. This third pillar of the PIMA assessment aims to determine whether the Guinean authorities:

  • Have in place an effective mechanism for procurement and monitoring public contracts, assessed in terms of: (1) open, competitive procedures; (2) an appropriate system of monitoring contracts; and (3) equitable procedures for timely review of disputes.

  • Make financing available for capital expenditures on a timely basis, assessed in terms of: (1) the capacity of ministries and institutions to plan their investment expenditures and commit them in advance, based on reliable cash flow forecasts; (2) the timely disbursement of funds allocated to the expenditures concerned; and (3) the incorporation of external financing in the Treasury single account (TSA).

  • Adequately oversee and monitor the implementation of the entire investment portfolio, evaluated in terms of mechanisms for: (1) physical-financial monitoring of major projects during implementation; (2) transfer of appropriations from one project to another; and (3) ex post review of projects following the implementation phase.

  • Manage and oversee investment projects during execution, assessed in terms of: (1) the existence of an effective project management system; (2) the issuance and application of rules, procedures, and directive governing project adjustments; and (3) the completion of external ex post audits.

  • Monitor public assets by correctly accounting for and reporting the value of assets in the financial statements, measured in terms of: (1) regular updating of asset records, based on an analysis of inventory, value, and condition; (2) accounting for the value of nonfinancial assets in the government’s financial statements; and (3) recording of fixed asset depreciation in the government operating statement.

67. Most of the five institutions of the pillar on providing productive and durable public assets received a low score in the evaluation of institutional strength and effectiveness. This weak performance highlights the difficulties faced by the Guinean authorities in implementing an institutional framework that remains to be deepened.

11. Procurement (institutional strength: medium; effectiveness: medium; reform priority: medium)

68. The legal and regulatory framework provided by the Procurement Code and implementing decrees promotes open and transparent procedures and rigorous oversight of public contracts, but PPPs are addressed in a specific framework that has not been finalized.

  • The procurement code47 defines the institutional framework in place for the functions of awarding, overseeing, and regulating public contracts and delegations of public services, its scope of application, and the principle of transparency of procedures.48 Under the provisions of the code,49 public contracts and delegations of public services are awarded pursuant to competition among potential candidates, conducted by means of transparent procedures. Accordingly, calls for tenders are the default mode of procurement. The decree50 provides that on an exceptional basis, public contracts may be awarded by mutual agreement or direct negotiation.

  • Regarding PPPs, the decree implementing the PPP law, which has not yet been adopted, promotes competition insofar as it establishes the call for tenders procedure as the rule. The use of direct negotiation is allowed only under exceptional conditions.

  • The Public Contracting Regulatory Authority (ARMP), an independent authority in charge of regulating the procurement system, exists, and its missions include administering the dispute resolution mechanism. The code51 prescribes the maximum time for the resolution of disputes and the terms of publication of the related decisions. The ARMP has a dispute resolution and sanctions committee that is required to issue its decisions within the regulatory time limit of seven days. The decisions are binding on all parties and are required to be published.

  • The National Directorate of Public Contracts (DNMP) is the office in charge of implementing the procedures for the award of contracts and delegations of public services. It is also responsible for regulating procurement and producing related statistics. It has developed a database that includes, in particular, information on acquisitions, contract values, and the identity of bidders to whom contracts are awarded.

  • The Large Projects and Contracts Management and Oversight Unit (ACGPMP), which reports directly to the Guinean president, is in charge of the oversight of contracting procedures and the implementation of projects, public contracts, and delegations of public services. The ACGPMP and DNMP are responsible for upholding the rules and principles of competition.

69. In practice, the principles of competition and transparency are observed to an extent.

  • As shown in Table 10, 80 percent of the contracts awarded by the five highest spending ministries (MTP, Ministry of Health and Public Sanitation, Ministry of Agriculture, MATD, and the Ministry of Energy and Water Supply) were awarded pursuant to calls for tenders in the past three years (2016 through 2018). However, they represented only 36 percent of the total volume of public contracts, which means that the limit of 10 percent on contracts awarded through direct negotiation was exceeded. It is important to note that these statistics include PPPs signed and recorded with the DNMP, most of which are awarded by direct negotiation and entail significant amounts.

  • In addition, public access to information is afforded primarily through the publication of calls for tenders and publication of contract awards in newspapers and on websites of the MEF, the ARMP, and individual contracting authorities. The publicly available information is not complete; in 2017, for example, the contracting authorities’ procurement plans were not always produced on time or fully disclosed to the public. A number of procurement plans is also posted on the MEF website. In addition, despite adherence to the time limits prescribed by law,52 decisions resolving procurement disputes are not published in full on the ARMP website. The mission was unable to analyze procurement time frames due to lack of information.

Table 10.

Summary of Approved Contracts Registered with the DNMP for the Five Spending Ministries (2016 2017, 1st Quarter 2018)

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Source: DNMP.Note: Includes one PPP contract in 2016 (GNF 225 billion) and six PPP contracts in 2017 (GNF 14.925 billion).

70. It is important to ensure that PPPs are adequately addressed in the legal and regulatory framework and to promote public access to information to uphold the principles of competition, efficiency, transparency, and, in particular, to open unsolicited proposals to competition. To promote competition and the effectiveness of investments made through PPPs, the procurement laws and regulations should addressed them adequately and should ensure a degree of competition and transparency. It is important to strengthen procurement planning and increase public access to information.

12. Availability of funding (institutional strength: medium; effectiveness: low; reform priority: high)

71. Programming and management tools are insufficiently correlated; no time limit is established for payment of expenses by the BCRG, but the TSA should incorporate donor funds. The institutional framework53 is inadequate to enable actors to plan and commit investment expenditure in advance based on cash flow forecasts. The text implementing the LORF54 establishes the principle of correlation of annual commitment plans, procurement plans,55 and cash flow plans, 56 but the mechanism by which to accomplish this is not clearly specified. The authorities have a manual on the commitment plan and a draft version of the cash flow plan, but there is no manual for the procurement plan. A commitment committee57 convenes periodically to prepare the quarterly update of the commitment plan. The legal framework also establishes intermediate deadlines for the phases of the expenditure cycle,58 but it makes no mention of a reference time limit for payments by the BCRG. Reports on payment periods are prepared on a regular basis. Finally, the LORF59 and the General Budget Management and Public Accounting Regulations (RGGBCP)60 mention the principle that external donor funding should be fully incorporated in the principal structure of government bank accounts.

72. Commitment ceilings are not communicated on a timely basis, budget appropriations are subject to cash flow restrictions, and most external funding is managed separately from the BCRG. In practice, although cash flow projections are prepared61 and updated regularly, the ministries and institutions are not informed in a timely manner about decisions on commitment ceilings. Through the commitment committee’s decisions, actors are informed of the ceilings on major expenditure aggregates to be committed quarterly at the beginning of the quarter in question. Although each ministry and institution has its own annual procurement plan, the plan may have been prepared too late to be adequately considered in the breakdown of commitment ceilings by project. The methods used to prepare the quarterly commitment ceilings communicated to the ministries do not consider constraints for investment projects whose execution is subject to seasonal weather conditions. Moreover, the budget appropriations allocated to fund project expenditures are often subject to cash flow restrictions,62 which constrains project implementation. The mission was provided with a partial list of projects interrupted for lack of financing. Finally, most external financing is maintained in commercial bank accounts, separate from the BCRG,63 and the TSA has not been implemented.

73. Better coordination among actors and tools is indispensable to make financing available on a timely basis for investments. Any delay in payment of expenses for major investment projects affects implementation. The current situation points to the weak capacity of ministries and institutions to plan and commit their investment expenditures in advance, based on reliable cash flow projections. Inadequate correlation between the different tools, particularly the sectoral ministries and institutions’ procurement and commitment plans, justifies the priority of the recommendation 7 provided below to strengthen investment financing. Improved and timely disbursement of funds allocated to finance investment expenditure is a high priority among the reforms, in addition to the need to plan for the introduction of more appropriate instruments, such as Treasury notes, to finance investments over the medium term. The implementation of the TSA will be critical to optimizing cash flow management; the gradual incorporation of external financing for investment projects in the TSA is a low priority for reform.

13. Portfolio management and oversight (institutional strength: low; effectiveness: medium; reform priority: high)

74. Apart from donor procedures, Guinean regulations are inadequate for effective project monitoring and ex post review, but they do provide for transfer of appropriations between projects. Only the donor procedures systematically provide for a monitoring mechanism for externally funded projects. The national regulations64 only mention the general principle of project monitoring in the PNDES and in the provisions establishing the authorities of the DNIP and the BSDs.65 It follows that there is no procedures manual for monitoring major projects during implementation. The development of the IT platform plans within the DNIP is intended to support the physical and financial monitoring of projects. In addition, the regulatory framework66 provides for the ability to transfer funds between investment projects during the implementation phase, but no transparent, formal procedures have been established to review and evaluate such transfers. Finally, apart from donor procedures, the regulatory framework— specifically, the PNDES and the provisions establishing the authorities of the ACGPMP, several ministerial BSDs, and the DNIP,67—mentions only the general principles of ex post review of projects at the end of the construction phase. There is no procedural manual for conducting such reviews.

75. Although local physical and financial monitoring is conducted for most major projects, ex post reviews are not frequently conducted, and appropriations are transferred between projects. In practice, the annual costs and physical implementation status of most major projects is monitored during the implementation phase. Financial monitoring is conducted for projects funded under the National Development Budget (BND);68 physical monitoring, however, is divided among project managers, the BSDs, and the ACGPMP and needs more refined supporting tools. Furthermore, the DNIP lacks the resources needed to conduct physical monitoring of project on the ground. The ministries and institutions report to the Prime Minister’s Office on physical and financial monitoring based on information from the BSDs; however, the information is not consolidated at the DNIP, which is charged with consolidating this information to monitor implementation of the PNDES. Also, the ministries transfer funds from one investment project to another during the implementation phase69 without the use of a systematic monitoring mechanism70 or transparent procedures.71 Finally, ex post reviews of major projects funded through the BND are neither systematically required nor frequently conducted.72

76. Strengthened monitoring of the investment portfolio as a whole, combined with ex post review, will improve the effectiveness of public investment. The analysis of the current situation highlights weaknesses in terms of lengthy execution periods for ongoing projects that can lead to cost overruns; the reliability of physical monitoring of projects; and the ability to validate and consolidate information centrally. These weaknesses justify the priority level of the recommendation 8 provided below to strengthen the management of the entire investment portfolio. Improving the mechanisms for monitoring and the transparency of appropriations transfers during implementation of investment projects are also medium priorities among the reforms.

14. Project implementation management (institutional strength: medium; effectiveness: low; reform priority: medium)

77. Apart from donor procedures and contract amendments, national regulations do not adequately provide for the effective management, adjustment, and external ex post audit of projects. Although donor procedures consistently include mechanisms for effective investment project management, the national regulations are silent on this aspect and there is no project management manual. Moreover, apart from the traditional rules generally in place for the amendment of government contracts,73 the national regulatory framework contains no rules, procedures, or directives concerning project adjustments. Finally, the regulatory framework74 charges the Court of Audit with conducting ex post audits of investment projects. Furthermore, article 24 of the law creating the Court establishes the principle that the Court’s principal findings, recommendations, and conclusions are to be published in an annual report. Audit manuals have been developed with the support of Expertise France, but the external auditor has no manual for ex post audits of investment projects.

78. The management and implementation of projects are not uniform, adjustments to projects are not standardized, and ex post audits have not been implemented for major investment projects. According to the ministries with which the mission met, senior officials are assigned responsibility for major investment projects, but detailed implementation plans are not always prepared prior to budget approval. Most of the managers use project information forms to monitor projects. Moreover, the ministries interviewed may make adjustments to projects, but these are not standardized and do not include a fundamental reexamination and reconsideration of the reasons for the adjustments, associated costs, and expected results. Lastly, no major investment project has undergone an ex post audit. The Court of Audit has provided for future audits of ongoing investment projects in its programming, but none of the projects in question is a major investment project.

79. The standardization of project implementation management and the implementation of ex post audits support the necessary strengthening of investment governance. Given that the existing tools support project management despite lacking sufficient detail, strengthening the effectiveness of project management is a medium priority among the reforms. The difficulties observed in capitalizing on prior experience in implementation management hinder the ability to control costs. For this reason, the formalization of rules, procedures, and directives concerning project adjustments—separate from general provisions governing contract amendments—is a medium priority in the reforms. Finally, ex post audits of major investment projects are also a medium priority for reform, provided the necessary capacity development takes place beforehand.

15. Monitoring of public assets (institutional strength: low; effectiveness: low; reform priority: high)

80. The gradual implementation of asset accounting requires a more detailed and operation framework that has not been finalized. The general regulatory framework75 covers all aspects of materials accounting, but the texts also apply to the entities responsible for real property, the Directorate General of Public Buildings (DGPBP),76 and movable property, the National Directorate of Materials Accounting and Equipment (DNCMM).77 Only the DNCMM has a proper procedures manual and information system, but the aspects concerned with the methodology for inventorying assets remain to be developed with support planned from the European Union. In addition, the institutional framework78 establishes the general principle of accounting for the value of nonfinancial assets in the government financial statements, to be implemented by means of periodic asset inventories and resource utilization accounts for assets, goods, and inventories. However, the practical modalities of appraisal and recognition in the financial statements remain to be defined in technical information forms following the forthcoming implementation of asset accounting. In this regard, the aspects related to appraisal have yet to be developed, also with support from the European Union. Finally, the regulatory framework79 establishes the general principle of accounting for fixed asset depreciation in the government operating account, but the practical modalities also remain to be defined in technical information forms following the forthcoming implementation of asset accounting.

81. Asset records are incomplete and out of date, and the financial statements do not account for the value of nonfinancial assets or fixed asset depreciation. In practice, the materials accounting function is divided between the DGPBP, the DNCMM, and the sector ministries, which undermines the quality, completeness, and reliability of information. The DGPBP compiled a buildings inventory in 2007 covering 27,000 properties, which is being updated. Among the sector ministries interviewed by the mission, asset records are neither complete nor regularly updated, and they do not consistently include asset values. For example, the register of vehicles is compromised by the failure to systematically record vehicle sales. Infrastructures are monitored at the sectoral level, but the resultant information is not centralized. There is no register of Guinea’s abundant mineral deposits. In addition, the government financial statements do not present the value of nonfinancial assets, and fixed assets depreciation is not accounted for in the government operating statement.

82. The implementation of accrual and asset accounting aims, in particular, to improve the quality and reliability of information on the assets produced by investments. At this point, the Guinean authorities are unable to properly monitor and manage government assets. The LORF provides for the gradual implementation of asset accounting in 2019. The register of government real property is being updated.80 Accordingly, the monitoring of public assets is a high priority for reform, justifying the priority level of the recommendation 9 provided below. In fact, the operational implementation of the principles established in the institutional framework is a prerequisite to improving the quality and reliability of information on the assets produced by investments.

Recommendations:

Problem. The actors in charge of implementing public investments and the programming and management tools used are inadequately correlated, which disrupts the timely availability of financing for investment expenditures. The delays observed in paying the expenses of major investment projects affect project implementation.

Recommendation 7. Increase available funding for investment through improved correlation of programming and management tools and rationalization of the time limits applicable to payments by the BCRG (ministries and institutions, DNB and DNTCP, 2019–21).

  • By incorporating additional information on projected contract implementation in the sectoral procurement plan (ministries and institutions, 2019);

  • By producing sectoral procurement plans at an earlier point in the budget calendar (ministries and institutions, 2019–21);

  • By better correlating procurement, commitment, and cash flow plans to adequately take account of particular aspects of investment expenditures (ministries and institutions, DNB and DNTCP, 2019–21);

  • By rationalizing the procedure and monitoring the time effectively taken for payment of investment expenses by the BCRG (DNTCP, DNB, 2019).

Problem. The sound management and monitoring of the public investment portfolio are disrupted by the lengthy project implementation times observed, which can generate cost overruns, compromise the reliability physical project monitoring, and limit the ability to validate and consolidate information centrally.

Recommendation 8. Implement the mechanism for the monitoring, management, and ex post review of investment projects (ACGPMP, DNIP, DNB, DNTCP, ministries and donors, 2019–21).

  • By immediately conducting a survey of all projects ongoing for 10 years or more before continuing to fund them in the budget law for 2020 (DNIP, DNB, DNTCP, ACGPMP, ministries and donors, 2019).

  • By preparing a semiannual or annual consolidated report on the physical and financial monitoring of the implementation of major projects (DNIP, ACGPMP, DNB, DNTCP, ministries and donors, 2020);

  • By clarifying the rules of the actors involved in the transfers of appropriations by establishing a systematic monitoring process and transparent procedures (DNB, DNIP, 2019);

  • By conducting ex post external audits of major investment projects, programmed according to financial stakes and risks and focused on costs, deliverables and outputs, and by publishing the reports (ACGPMP, ministries and donors, 2019–21).

Problem. The Guinean authorities are unable to conduct comprehensive and reliable monitoring of public assets, which adversely impacts the management of government assets and decision making with respect to public investment.

Recommendation 9. Strengthen the monitoring of public assets (DGPBP, DNCMM, ministries and institutions, and DNTCP, 2019–21):

  • By continuing the efforts underway to update the government real property records (DGPBP, ministries and institutions, 2019);

  • By preparing technical information forms on the applicable governmental accounting standards in preparation for the appraisal of asset, reporting in the financial statements, and accounting for fixed assets (DNTCP, 2019–20);

  • By pooling the information available from the different actors involved in managing real and movable assets (DGPBP, DNCMM, ministries and institutions, and DNTCP, 2019–21).

E. Cross-Cutting Issues

IT support

83. There are no legal or regulatory texts in Guinea governing the automation of public investment project management, nor is there a dedicated IT system. Guinea has no master plan for an integrated information system to support the management of public investment projects. The PNDES81 mentions the principle of automating the financial management system but does not address the modalities. An automated system dedicated to investment project management will add value if it covers all phases of the project life cycle, from planning to accounting for assets.

84. In practice, the authorities have used an Access application—in the form of a project information form sent to the ministries—to support investment programming. The ministries complete the form either in Excel format (MTP) or on paper (Ministry of Health), but not all the project forms are consolidated by the DNIP in a comprehensive database.

85. Several ministries have developed databases and applications that could serve as inputs to a potential integrated investment project management system. By way of illustration, the Ministry of Budget has an automated expenditure management system that includes expenditures according to the phases of authorization, commitment, validation, and payment authorization (that is, the expenditure cycle). The MTP has a regularly updated database on road infrastructures that could support the assessment of road conditions, locations, and estimated maintenance costs. The Ministry of Health uses the District Health Information System 2, which maintains information on health infrastructures and a potential module supporting the management of local healthcare centers. The MATD has developed an Access database of subnational jurisdictions that includes basic data on communal infrastructures. In addition, the DNMP maintains a database of contract awards and contracts, and it plans to develop the scope of work for the public procurement management system (SIGMAP) in 2018.

86. Finally, the African Development Bank (AfDB) is supporting the MPCI in the development of an Integrated Project and Results Management System (SIGEPRE). The system incorporates functionalities supporting: (1) administrative management; (2) PIP programming, including the capability for sectoral ministries to enter the information required to submit a project for analysis by the DNIP; (3) project implementation management to establish links with financial execution; and (4) project monitoring and evaluation. The SIGEPRE is not designed to incorporate budget and accounting management, which is already operational in the expenditure cycle.

Legal framework

87. There is no specific regulatory framework applicable to PIM, and the fragmentation of the entities involved leads to overlapping authorities. The legal and regulatory texts governing public financial management apply to all expenditure, including investment expenditure. The LORF and implementing regulations introduce important innovations in line with good international practices to enhance transparency and effectiveness in public financial management, including the programming, execution, and oversight of investment expenditure. The procurement code and implementing regulations establish rules to ensure the transparency and effectiveness of project implementation. The regulatory framework for PPPs has yet to be finalized based on the existing draft texts. There is real fragmentation of the different entities in charge of public investment; for example, the DNIP, the MPCI (through the BTAP), and the Presidency of the Republic (through the BCEP) are all responsible for project studies and reviews, which results in an overlap of authorities.

88. There is still no legislative or regulatory framework specifically applicable to public investments that addresses all phases of PIM. A draft text on project governance has been prepared, but it focuses mainly on public contracts, delegations of public service, and PPPs. As such, it cannot be considered applicable to the overall governance of public investment in Guinea.

89. Effective PIM calls for a legal and regulatory framework formally defining the institutional mechanisms, responsibilities, procedures, standards, and responsibilities of the different actors involved. An overall framework would define and govern the terms, conditions, and modalities of PIM, from project definition and planning to monitoring implementation and accounting for the public assets produced, including the intermediate phases of appraisal, selection, programming, budgeting, implementation, physical and financial monitoring, and ex post evaluation. Considering the current fragmentation of the entities in place, formalization of the PIM framework is a high priority among the reforms.

Staff capacities

90. The legal and regulatory provisions clearly identify the government entities responsible for the planning and management of public investments. Those entities generally have a sufficient number of staff. Within the MPCI, the entities include: the DNPP (a staff of 86); the DNIP (about 225 staff members); and the BTAP (a staff of 7, which should be increased to 27). Within the ministries, the staffing of BSDs varies considerably: some have staffs of about 30, while others have only 10. Different entities in units such as those in charge of PPPs, the ACGPMP, and the persons responsible for public contracts (PRMPs) intervene in their areas of authority and project management.

91. Capacities in the areas of planning, programming, and managing projects are generally inadequate, and the respective roles of actors in managing the investments are not clearly defined or delimited. A study by the BTAP82 identified weaknesses in DNPP capacities. The backgrounds of BSD staff are frequently unsuited to their tasks. In general, since many BSDs were recently created, the professionals are inadequately trained for the tasks of planning, directing studies, and appraising and programming projects, which are central to their activities. Within the DNIP, which was created by merging two directorates with similar missions, there are duplications of efforts and responsibilities, with two division chiefs for a single division and two section chiefs for the same section. There is also the risk of overlapping authorities between the MPCI directorates, such as the DNIP and the BTAP. The PNDES provides that specific arrangements should be formalized between the DNIP and the ACGPMP to define their interactions.83

92. To lay the groundwork for investment programming decisions, adequate technical expertise and clearly defined roles and responsibilities are critical. To this end, a training program should be developed and coordinated with the preparation of the guides recommended herein. The training should be provided to headquarters units of the MPCI and the BSDs and should cover the entire PIM process, from planning to monitoring and evaluation. Specialized training should also be provided to the other units and entities involved in PIM. In particular, the responsibilities for new tasks, such as the analysis and oversight of PPP contracts, call for personnel with appropriate expertise. The effectiveness of the training program will depend on the government’s capacity to rationalize organizations by clearly defining roles and responsibilities and avoiding duplication of tasks.

Recommendations:

Problem. The lack of an integrated information management system hinders the monitoring of the investment process and evaluation of the performance of public investment, and it results in higher transaction costs for data collection.

Recommendation 10. Finalize the design and implementation of SIGPRE and SIGMAP.

Problem. PIM is not supported by a specific legal and regulatory framework, and the fragmentation of the various entities involved in PIM results in overlap in the actors’ areas of authority.

Recommendation 11. Establish a legal and regulatory framework formally defining the institutional mechanisms, responsibilities, procedures, standards, and responsibilities for PIM, 2018–20:

  • By conducting discussions beforehand on the general organization of public investment governance (all public investment actors, 2019);

  • By adopting a general text formalizing the organization and authorities of the different actors and entities in PIM (all public investment actors, 2019);

  • By developing specific operational texts based on the general text (rules for project adjustments) and manuals on the different phases of PIM (procurement plans, physical‐financial monitoring, ex post review, ex post external audit), (all stakeholders)2020.

Problem. Capacities for planning and programming investment and managing the investment project life cycle are inadequate.

Recommendation 12. Define and implement a PIM capacity development program that includes:

  • Preparation, designed to strengthen the capacities of: (1) DNPP professionals in the area of planning, to enable them to fulfill their role of supporting the sectoral ministries; (2) DNIP professionals, to oversee the entire PIM cycle from programming to monitoring and evaluation; (3) BSD staff, in the areas of sector planning, project appraisal, and project implementation management; (4) ministerial PRMPs, in the planning, preparation, implementation, and monitoring of procurement plans; and (5) staff of the PPP unit of the DNPEIP, in monitoring PPPs, and, in particular, the use of the PPP Fiscal Risk Assessment Model (P-FRAM) developed jointly by the IMF and the World Bank, to serve as a point of departure in evaluating whether a project should be executed in the form of a PPP84 (2019).

  • Implementation of the training program (end-2019–22).

  • A review of the BSDs’ staffing requirements (2019).

  • The definition of each stakeholder in implementing the recommendations of this report, avoiding any duplication of tasks (2019–21).

Annex I. Mapping of PIMA Mission Priority Recommendations for Guinea to Technical Assistance from the TFPs

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Note:AFD : Agence Française de Développement or French Development AgencyAfDB : Banque Africaine de Développement or African Development BankAFRITAC : Regional Technical Assistance CenterDeMPA: Debt Management Performance AssessmentEGTACB-FA: Economic Governance Technical Assistance and Capacity Building–Additional Financing (2017–21)EU: European UnionPACV3: Village Community Support Project— phase 3 (2016–20)PARFIP: Public Finance Reform Support Program (2015–18)PFRAM: PPP Fiscal Risk Assessment ManagementSIGMAP: Système de gestion des marchés publics or Public Procurement Management System

Annex II. Detailed Action Plan

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Annex III. Details of Ratings by Component

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