Ethiopia SNNP Region 2020

Executive Summary

  1. The objective of the Public Expenditure and Financial Accountability (PEFA) assessment is to review the current performance of the public financial management (PFM) systems, processes, and institutions of the Southern Nations, Nationalities, and Peoples’ Region (SNNPR). The assessment is aimed at assisting the government in identifying PFM weaknesses that may inhibit effective delivery of services to its citizens and the realization of its development objectives in general. Furthermore, the findings of the PEFA assessment will assist the government in refining the PFM Reform Strategy that it has already developed and provide the basis for a coherent PFM reform program that can be supported by development partners (DPs), as well as through the government’s own initiatives.
  2. The regional PEFA assessment covered regional government budgeted units, the Office of Federal Auditor General (OFAG), and Parliament. Civil society organizations were also contacted to solicit their views on the general PFM environment, especially on issues relating to procurement and taxation.
  3. The fiscal years for the assessment are Ethiopian Calendar (EC) 2008, 2009, 2010 (Gregorian Calendar [GC] FY2015/2016, 2016/2017, and 2017/2018). The period covered for each of the 94 dimensions (summarized into 32 performance indicators [PIs]) depends on the dimension and in accordance with the PEFA measurement framework. Some dimensions were assessed at the time of assessment (October 21, 2019, to November 1, 2019) during the field missions. The cutoff date was November 30, 2019; the assessment reflects the status of PFM systems and processes as of that date. Other dimensions were assessed at the relevant period, which is the last completed fiscal year FY2017/2018 or FY2018/2019 for the last budget submitted to Parliament.

Impact of PFM systems on budgetary and fiscal outcomes

Aggregate fiscal discipline

  1. The good rating of PI-1 provides reasonable assurance of budget discipline at the aggregate level; this was however negatively affected by budget reallocations across functional and economic classifications (PI-2) over the last three completed fiscal years. Revenue outturn, both at the aggregate and composition levels, is not reliable. The level of the stock of arrears is not a cause for concern, as it was less than 2 percent of total expenditure on average for the three years of assessment (PI-22). Budget classification is good and this allows citizens to see how much has been committed to improve their socioeconomic status. There are no extra budgetary funds (EBFs) or extra budgetary units (EBUs) and all government revenue and expenditure are reported.
  2. Supervision of public corporations is weak and significant contingent liabilities are not reported. This made the regional government’s fiscal risk reporting to be weak, thereby indicating significant financial risk exposure to the government (PI-10). Public investment is mainly based on government priorities without proper economic analysis, except for investment projects planned by the federal government (PI-11). Weaknesses in public investment management leads to misallocation of funds which affect fiscal discipline. Though the regional government has legal powers to borrow, currently it has no debt. The lack of a medium-term perspective in expenditure budgeting (PI-16) limits the government’s option to exercise a longer than one-year horizon for its policies and make resources available to execute those policies. The low stock of expenditure arrears (PI-22) and tax arrears (PI-19) is indicative of strong fiscal discipline. The strong internal control on payroll and non-salary expenditures helps maintain strong fiscal discipline (PI-25 and PI-26).

Strategic allocation of resources

  1. Effective strategic allocation of resources is achieved when available resources are allocated and used in line with government priorities aimed at achieving policy objectives. A key issue in allocation of resources in the region, the horizontal allocation of transfers to lower level government structures (woredas, zones, and towns), is transparent and rule based (PI-7). Macroeconomic and fiscal forecasting score well (PI-14), providing an indication of the government’s intention to allocate its scarce resources for the benefit of the ordinary citizen through improved service delivery. However, the budget is not prepared on a medium-term basis, and the lack of medium-term perspective in expenditure framework negatively affects the strategic allocation of resources (PI-16). The allocation of resources to strategic priorities is impaired by the lack of a fiscal strategy which is a policy document that outlines government revenue and expenditure framework in terms of how it wants to generate revenue and for what expenditure; there is thus no guarantee that the government could make resources available to fund its policies (PI-15). The legislature’s review of fiscal policies, medium-term fiscal forecasts, and medium-term priorities improves the alignment of resource allocation to regional priorities (PI-18).
  2. Budget classification that contributes to the strategic allocation of resources function, which meets international standards, performs relatively better, albeit with certain weaknesses (PI-4). However, the budget documentation still lacks basic elements (PI-5). The other indicators that contribute to the strategic allocation of resources are related to revenue collection and administration and are overall functioning well (PI-19 and PI-20). Investment project selection is largely based on regional government priorities as per Growth and Transformation Plan (GTP) II and not purely on the basis of the results of the feasibility studies conducted, except for federal government-planned projects such as industrial parks (PI-11).

Efficient use of resources for service delivery

  1. Performance plans for service delivery relating to the outputs or outcomes for the majority (88 percent) of bureaus are in place. The reporting of resources received by frontline service delivery units enables to control and evaluate the efficient use of resources deployed for service delivery. The majority of the service delivery units perform evaluations of the efficiency or effectiveness of service (PI-8). However, the poor coverage and publicity of performance plans and achievements made on the delivery does not promote improvements in the effectiveness and operational efficiency of those services (PI-8). Moreover, public access to fiscal information is limited where most of the information is not made available to the public (PI-9). Public access to procurement information is fair but is mainly hampered by the non-availability of a website dedicated for the agency (PI-24). The lack of medium-term perspective in expenditure framework limits the predictability in budget allocations that supports budget units to plan resource use more efficiently (PI-14). It is a good practice that five-year sector strategies are prepared, but only 32 percent (by value) are costed.
  2. Another fundamental element for efficient service delivery is related to effective procurement management. The fact that most procurements are done in a competitive manner enables the region to achieve the best value for money, and relevant inputs for service delivery are available on time and the programs and services targeted by the regional government are delivered (PI-24). But accuracy of procurement data is still a challenge. The strong internal control on payroll and non-salary expenditures, coupled with high coverage of internal audit, has significantly contributed to the efficient use of resources by reducing misappropriation of resources (PI-23, PI-25, and PI-26). Whereas both external audit functions and legislative scrutiny of these reports are good (PI-30 and PI-31), the continuous infractions by public officials and failure to fully implement audit and legislative recommendations are of serious concern, meaning scarce resources are wasted without any punishment.

Performance changes since last assessment

  1. Based on the 2011 method, between the 2015 and the 2018 PEFA assessments, performance has not shown an improvement. Performance has improved for nine PIs and deteriorated for eight PIs. Still, the majority of PIs (12 out of 28, as the donor practices indicators have not been assessed) show no change in performance. This is presented in Table 0.1, and Annex 3A gives the details of performance change for each PI and dimension.

Table 0.1: Changes in the ratings since 2015 using the 2011 framework

Deteriorations in performance

No change

Improvements in performance







PI-8, PI-9, PI-11, PI-16, PI-17, PI-18, PI-20, PI-27,


HLG-1, PI-5, PI-6, PI-7, PI-10, PI-13, PI-14, PI-15, PI-23, PI-24, PI-25, PI-28


PI-1, PI-2, PI-3, PI-4, PI-12, PI-19, PI-21, PI-22, PI-26



Aggregate fiscal discipline

  1. Compared to the previous assessment (PA), aggregate fiscal discipline has improved because of an improvement in aggregate expenditure outturn (PI-1 from B to A) and aggregate revenue outturn (PI-3 from D to C). The expenditure composition outturn has also improved (PI-2 from D+ to B+). There is no improvement in the budget documentation sent to the legislature where it does not fulfil any of the nine information benchmarks. Monitoring of public corporations significantly deteriorated (PI-9.1 from A to D). There is no change in multiyear fiscal forecasts and functional allocations (PI-12.1 is D in both assessments). The existence of costed sector strategies has improved (PI-12.3 from D to B).

Strategic resource allocation

  1. Expenditure composition outturn has improved (PI-2.1 from D to B), positively affecting strategic allocation of resources. The timeliness and reliable information to subnational governments (SNGs) on their allocations has deteriorated (PI-8.3 from B to D). A clear deterioration is noted on the guidance on the preparation of budget submissions (PI-11.2 from A to D) because the budget call circular (BCC) does not include ceilings for individual administrative units or functional areas, while it did during the PA.

Efficient use of resources for service delivery

  1. The improvement in composition of expenditure outturn (PI-2 from D+ to B+) shows utilization of resources for their originally intended purposes has improved. Deterioration on the timeliness of providing reliable information on allocated resources to zones, woredas, and towns affects timely planning (PI-8.2 from B to D). Public access to key fiscal information is still low (PI-10 is C in both assessments). Transparency on procurement has improved (PI-19.1 from B to A), but the complaint system has not shown an improvement (PI-19.4 is D in both assessments). Revenue management has not changed. The coverage and distribution of reports and extent of management response for internal audit have shown improvement (PI-21 from C+ to B+). The scope, nature, and follow-up of external audit have improved (PI-26 from D+ to B+).

Overview of ongoing and planned PFM reforms and main weaknesses identified

  1. The regional government has been implementing various PFM reform programs over the last years. The Expenditure Management and Control Program (EMCP) is one of the five subprograms of the civil service reform program, entrusted with the objectives of designing reform ideas for improved systems of financial management and control that can be used at the regional, zone, woredas, and city administration levels. The types of reforms under the EMCP that have been implemented in the region are
  1. Finance legal framework,
  2. Budget reform,
  3. Public procurement reform,
  4. Public property management reform,
  5. Cash and disbursements management reform,
  6. Account reform,
  7. Internal audit reforms,
  8. Integrated financial management information system (IFMIS), and
  9. Financial Transparency and Accountability (FTA).
  1. The reforms are led by regional and zonal PFM steering committee and PFM technical support committee teams. DPs have also been playing an important role in supporting the reforms activities implemented throughout the region. A new strategy is in place with an estimated cost of ETB 3.6 billion over the next five years. It is expected to be funded by the federal government in addition to DP support. Alternative funding source will be from the regional government's own resources. However, the current budget constraints both at the federal and regional government levels are likely to have repercussions on funding arrangements going forward.