Improving the Public Investment Management System in Honduras
The Honduran Government has been working to develop capacity to effectively monitor public policy results and improve public spending effectiveness in a tight fiscal context. In this effort, it has moved toward consolidating reforms in key areas such as public financial management. It has begun the development of a second phase of its comprehensive National Public Investment System to support the planning, monitoring, and evaluation of the public investment portfolio. However, while progress had been made in the design of the system’s functionalities, a structured strategic approach was required for its fine-tuning and implementation. A South-South exchange with Colombia and Peru provided valuable expertise, knowledge, and advice on the institutionalization of public investment systems.
Public investment in Honduras is limited by a lack of fiscal space and is highly dependent on international loans and donations. The country’s current fiscal situation is managed with IMF support and includes actions geared toward achieving fiscal consolidation and lowering debt. As part of this effort, the country is enhancing project prioritization and reinforcing public investment management.
In recent years, Honduras has made advances on various elements of its public investment system, including enforcement of the legal framework, pre-investment and appraisal methodologies, technical assistance to executing units, and the ICT platform. The new government in Honduras has created new cabinet departments to support public investment and improve its strategy for project prioritization, programming, and evaluation of results. However, the system is still characterized by weak linkage between planning and project formulation.
One of the country’s major challenges in the area of public investment is to improve its level of project execution, which has averaged 78 percent in previous years. Execution is to some extent curbed by poor-quality appraisal information at the project formulation stage and by frequent staff rotation. Additionally, local governments’ investment takes place outside the scope of the National Public Investment System, monitoring and evaluation of national investment.
Since 2014, the Government of Honduras has been taking actions to improve public investment management, aiming to improve project prioritization, appraisal at pre-investment stage, execution, monitoring, and ex post evaluation. As such, Honduras was interested in learning from Colombia and Peru, two countries noted for having the most consolidated public investment systems in the region.
A South-South knowledge exchange was devised to provide Honduras with access to valuable lessons regarding the challenges involved in implementation of such systems as well as technological, methodological, and strategic insights that could feed into a strategic master plan for a comprehensive strengthening of the country public investment system.
In preparation for the exchange, the World Bank task team facilitated dialogue between the Hondurans and their Colombian and Peruvian peers through a series of videoconferences to establish the scope and focus of the exchange and agree upon an agenda based on Honduras’ interests and the comparative advantage of each knowledge provider. The exchange was organized in three phases comprised of two visits of Honduran technical and managerial officials to Colombia and Peru, and a final workshop in Tegucigalpa with the participation of the two knowledge-providing countries.
Between January and February 2016, field visits by top Honduran officials to Lima and Bogotá were organized, and technical working sessions held in order to gain insights into specific critical areas of the systems governed by the General Directorate of Public Investment in Peru and the National Planning Department in Colombia. In particular, the General Directorate of Public Investment of Peru presented the institutional mechanisms to enforce project formulation and execution, and the National Planning Department of Colombia presented the monitoring strategy and policy impact evaluation.
Finally, top officials from Peru and Colombia visited Honduras on March 14-16, 2016, to conduct roundtable technical discussions covering strategic planning, pre-investment, ICT platform, project management, and project implementation and monitoring aimed at identifying areas of opportunity, risks, and challenges in Honduras’s National Public Investment System. During these interactions, the Peruvian and Colombian participants provided specific guidance, opinions, and advice regarding current and future challenges.
The core of the exchange was conducted through workshops and roundtables that promoted proactive and technical discussions between participants. The exchange achieved satisfactory results as follows:
- Enhanced knowledge and skills. Honduras identified weaknesses and areas of opportunity for improving the ICT platform such as considering projects as the unit of analysis, and gained insights on impact evaluation and project formulation. In particular, Honduras identified logical frameworks and institutional mechanisms to link result-oriented budgeting to public investment planning.
- New implementation know-how. Honduras took away knowledge on tools to refine project formulation and facilitate the monitoring of project execution. Specifically, Honduras learned to use the “value-chain” approach applied by Colombia to determine the basis for impact evaluation, as well as institutional mechanisms to enhance project formulation and execution from Peru.
- Enhanced networks. As a result of the exchange, the three countries agreed to continue their cooperation and knowledge exchange. The Colombian International Cooperation Agency has expressed its interest in supporting a bilateral program with Honduras, and other international donors have also expressed an interest in supporting parts of the action plan identified at the end of the exchange.
As a result of the exchange, three practice notes about the current public investment systems in Colombia, Peru, and Honduras were also elaborated, drawing upon interactions between practitioners, top officials, and the World Bank team during the South-South exchange.
- The exchange was enriched with the incorporation of experiences from project managers, academics, and a mix of stakeholders. In Colombia, for example, Honduran participants visited the University of The Andes to learn about development of methodologies for ex post evaluation and visited the planning office of the Ministry of Information Technology to discuss challenges of project implementation such as the flagship program, Vive Digital, aiming to increase connectivity across the country.
- Since study tours are attended by a limited number of participants, internal discussions within the knowledge-recipient departments will assure extended dissemination of experiences from the exchange.
The exchange was financed by a grant of US$49,000 from the South-South Experience Exchange Trust Fund. In addition, the World Bank contributed through technical expertise in workshop moderation as well as advice to the Honduran counterparts on issues of punctual public investment management. Overall the South-South knowledge exchange resulted from roundtable discussions with the Secretaría de Finanzas as part of the Improving Public Sector Performance project and the Systematic Country Diagnosis (SCD), which identified a series of challenges on public investment management in order to strengthen the effectiveness of public expenditure. This articulation with the Improving Public Sector Performance project also allowed the team to pool resources to enhance the workshop discussions with participation of a World Bank senior technical specialist in the field.
In addition to the Honduran Ministry of Finance, key partners included:
- National Planning Department,
- Budget Office of the Ministry of Finance and Public Credit,
- Planning Office of the Ministry of Information Technologies,
- The University of the Andes.
- National Directorate of Public Investment at the Ministry of Economy and Finance,
- Private Investment Promotion Unit at the Ministry of Economy and Finance.
The exchange helped Honduras to identify weaknesses and opportunities to enhance its current public investment system. In the final workshop, an action plan was elaborated, and the countries committed to exploring further international cooperation mechanisms. The World Bank intends to continue supporting Honduras to strengthen its public sector management and to explore possible funding mechanisms to continue this effort and in the implementation of the action plan. The Bank also contributed in leveraging resources with potential donors to follow-up on implementation of the roadmap produced by with the Secretaría de Finanzas.
Participants from Honduras were directly involved in Honduras’s public investment national system:
- Vice minister of Public Investment and Public Credit,
- Head of the General Directorate of Public Investment, and
- Technical professionals supporting the development and implementation of public investment system.
Participants from Columbia and Peru at roundtable discussion:
- Colombia’s National Planning Department and the Budget Office,
- Peru’s General Directorate for Public Investment.
Instrumentos metodológicos de la Dirección General de Inversión Pública del Perú
Lecciones del sistema de monitoreo y evaluación de Colombia