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Title Page

FISCAL AFFAIRS

NOTES

How to Manage Public Investment during a

Postcrisis Recovery

NOTE 21/07

Title Page

Fiscal Affairs Department

How to Manage Public Investment during a Postcrisis Recovery

Prepared by Eivind Tandberg and Richard Allen

INTERNATIONAL MONETARY FUND

Copyright Page

©2021 International Monetary Fund

Cover Design: IMF Creative Services

Composition: The Grauel Group

HOW TO NOTE

Fiscal Affairs Department

How to Manage Public Investment during a Postcrisis Recovery

Prepared by Eivind Tandberg and Richard Allen

Names: Tandberg, E. | Allen, Richard, 1944 December 13- | International Monetary Fund. Fiscal Affairs Department, issuing body. | International Monetary Fund, publisher.

Title: How to manage public investment during a postcrisis recovery / prepared by Eivind Tandberg and Richard Allen.

Other titles: How to notes (International Monetary Fund)

Description: Washington, DC : International Monetary Fund, 2021. | Note 21/07. | July 2021. | Includes bibliographical references.

Identifiers: ISBN 9781513584416 (paper)

Subjects: LCSH: Public investments—Management. | Infrastructure (Economics). | COVID-19 Pandemic,

2020-—Economic aspects.

Classification: LCC HC79.P83 T36 2021

DISCLAIMER: Fiscal Affairs Department (FAD) How to Notes offer practical advice from IMF staff members to policymakers on important economic issues. The views expressed in FAD How to Notes are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

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Contents

  • Abbreviations

  • Executive Summary

  • 1. Introduction

  • 2. Challenges to Public Investment Management for Postcrisis Recovery

  • 3. How to Prepare Public Investment Management Institutions for Recovery

    • Institutional Arrangements

    • Project Appraisal

    • Project Selection

    • Medium-Term Investment Budgeting

    • Maintenance Projects

    • Public Procurement

    • Project Management

    • Portfolio Monitoring and Oversight

  • 4. Public Investment Management Must Be Consistent with Other Measures for Postcrisis Recovery

    • Avoiding Disruption of Ongoing Public Investment Projects

    • Coordinating Investments with Subnational Governments

    • Promoting Public Corporation Investment

    • Stimulating Private Sector Investment and Economic Development

  • References

Abbreviations

AE

Advanced Economy

B/C

Benefit/Cost

EME

Emerging Market Economy

GFC

Global Financial Crisis

LIDC

Low-Income Developing Country

MTBF

Medium-Term Budget Framework

OECD

Organisation for Economic Co-operation and Development

PIMA

Public Investment Management Assessment

PIP

Public Investment Plan

PPP

Public-Private Partnerships

SNG

Subnational Governments

Executive Summary

Public investment is likely to be an important component of any postcrisis recovery program. As countries work to ensure a smart, green, fair recovery, investing in modern, resilient, and efficient infrastructure assets will be key. This How to Note discusses how countries should manage public investments to recover from the COVID-19 pandemic and similar crises. It provides countries with guidance on making efficient use of public investment to support economic recovery on three different capacity levels: basic, medium, and advanced. The main advice of the note is as follows:

  • Countries should consolidate and accelerate existing project-planning and decision-making procedures.

  • The public investment plan (PIP) should be revisited, and possible changes made to the prioritization and phasing of projects, accelerating some and deferring or canceling others.

  • Project appraisals may need to be updated and supplemented with revised criteria.

  • The government should define clear selection criteria based on the targets for the overall recovery program.

  • The postcrisis investment program should be reflected in transparent medium-term budget decisions.

  • Maintenance and capital repairs can be very productive and should play important roles in postcrisis recovery.

  • Procurement processes may need accelerating but should be undertaken with necessary safeguards to support compliance and effective oversight.

  • Strong project management is necessary to ensure that projects are implemented according to the planned timetable and within the budget, as well as to produce the expected benefits.

  • Portfolio monitoring is essential for assessing progress and assuring the successful implementation of the overall project portfolio in the postcrisis recovery program.

Table 1 summarizes the approaches recommended in the note under defined basic, medium, and advanced capacities. The basic and medium practices reflect simplified approaches that can be applied quickly by countries with limited capacities, within existing legal and regulatory frameworks. This will contribute to long-term institutional improvement over time.

Table 1.

Recommendations for Boosting Public Investment in Postcrisis Recovery

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Source: Authors. Note: B/C = benefit/cost; PIP = public investment plan.
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How to Manage Public Investment during a Postcrisis Recovery
Author:
Mr. Richard I Allen
and
Mr. Eivind Tandberg