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| World Bank Headquarters in Washington, DC [PHOTO: Shiny Things/ Flickr/CC BY 2.0] |
Minsk, Belarus: Belarus
Public Expenditure Review: Enhancing Public Services in Times of Austerity.
Strengthening incentives for local and regional governments
and enhancing the quality and efficiency of public spending in the education
and health sectors is critical for improving living standards and human capital
in Belarus, says a new World Bank report
According to the report, productivity of public spending is of particular
importance, given fragile macroeconomic stability, tight public finances, and
constrained public expenditures, even in priority sectors such as health and
education.
“Belarus has
emerged from macroeconomic crises of the past years, but faces both formidable
challenges and unique opportunities to build the foundation for sustained and
shared prosperity,” said Qimiao
Fan, World Bank Director for Belarus, Moldova and Ukraine. “Enhancing the quality and efficiency of
spending in critical sectors will improve living standards and human capital in
Belarus. We hope our analytical program and partnership with the country will
contribute to creating consensus in important policy areas and building
capacity in the country.”
The report looks at macro-fiscal policy, intergovernmental
fiscal relations, and spending in health and education. More than half of
government spending in Belarus is channeled through sub-national governments,
while education and health spending together accounts for a quarter of
government spending, largely at the sub-national level. Proposed reform options
are oriented towards sustaining macroeconomic stability while addressing key
challenges in financing public services in health and education.
First, the
report underlines the need to sustain tight fiscal policies. A balanced budget
is key to securing macroeconomic stability. This means further moderation in
public sector wages and pensions to contain inflationary pressures. In
addition, there is space to further rationalize and reduce subsidies, while
further cuts to public investment should be avoided to ensure that Belarus
maintains and improves its infrastructure, which is needed for growth.
Second, in
light of significant spending commitments to the education and health sectors
and tight fiscal constraints, further efforts need to focus on raising spending
efficiency and containing costs at the national and sub-national levels over
the medium term. This is particularly important as both sectors are
characterized by large delivery systems (schools, hospitals, polyclinics) that
could become fiscally unaffordable if wages were to rise.
Third, the
health and education sectors need to adapt to an aging and declining
population, with fewer students and a greater burden of chronic and
degenerative diseases, which will change public service demand and have important
fiscal implications.
“The report is the
second volume of a two-phase Public Expenditure Review, offering fiscal reform
options available across priority areas of the budget,” said Sebastian Eckardt, World Bank Senior
Economist, and lead author of the report. “The policy recommendations aim to identify reform opportunities to
enhance the quality of key public services in a fiscally constrained
environment. The report
provides practical suggestions to improve the efficiency of public spending and
areas for alignment with international good practices.”
The first volume of the Public Expenditure Review was
delivered in November 2011 and focused on providing policy options for a
sustainable pension system, better targeted social assistance, and
rationalization of energy and agricultural subsidies. Together the sectors
studied under the first volume cover about 20 percent of consolidated general
government expenditure.
Belarus joined the World Bank in 1992. Since then, the
Bank’s lending commitments in Belarus have totaled US$865 million for 12
projects. About 30 national programs have received grant financing totaling
US$23.7 million. The World Bank’s analytical and advisory activity program addresses
main challenges and reform priorities of the country.