PI-11. PUBLIC INVESTMENT MANAGEMENT

ABOUT THE INDICATOR

This indicator assesses the economic appraisal, selection, costing, and monitoring of public investment projects by the government, with emphasis on the largest and most significant projects. The indicator contains the following four dimensions and uses the M2 (AV) method for aggregating dimension scores:

  • Dimension 11.1. Economic analysis of investment projects
  • Dimension 11.2. Investment project selection
  • Dimension 11.3. Investment project costing
  • Dimension 11.4. Investment project monitoring

IMPACT ON BUDGETARY OUTCOMES

Public investments can serve as a key driver for economic growth. However, the effectiveness and efficiency of public investment is also a key determinant in maximizing its impact and helping to support government’s social and economic development objectives. Efficient management of public investment resources requires careful analysis to prioritize investments within sustainable fiscal limits to ensure that approved projects are implemented as planned. This can be achieved through rigorous economic analysis, meticulous project selection, effective management of investment expenditure, and monitoring of timely completion.

INDICATOR MEASUREMENT GUIDANCE

11:1. There is a variety of national approaches to public investment management. However, there are common features in terms of the functions they carry out. This indicator attempts to distill the four most critical dimensions: appraisal, selection, costing, and monitoring.

11:2. The indicator spans every type of PFM system, including those with separate recurrent and capital budget management processes and institutions.

11:3. For the purpose of this indicator, major investment projects are defined as projects meeting both of the following criteria:

  • The total investment cost of the project amounts to 1 percent or more of total annual budget expenditure; and
  • The project is among the largest 10 projects (by total investment cost) for each of the 5 largest central government units, measured by the units’ investment project expenditure.

11:4. The magnitude of both the total annual budget expenditure and the unit’s investment project expenditure refers to the current year’s budgeted expenditure, whereas the 10 largest projects included in the current year’s budget(s) are determined by the total investment cost of each project, irrespective of how much of the total investment is budgeted for the current year.

11:5. The term major investment project also includes investments implemented through structured financing instruments such as PPPs. If the government has a different definition of major investment projects that would at least meet these criteria and that would simplify collection of information, the assessor may use the government’s definition to identify major investment projects, but scoring should still be done using the definition in this guide. 1

1:6. Assessors should first identify which major investment projects are included in the assessment, i.e., which investment projects qualify as major in accordance with the definition for this indicator.

11:7. In order to assess the dimensions of this indicator, assessors should investigate whether a country’s public investment management function is centralized or decentralized. In a decentralized setting, assessors should seek information from the government agencies responsible for implementing most of the investments (e.g., the 10 largest projects

 

PEFA Handbook Volume 1: The PEFA Assessment Process – Planning, Managing and Using PEFA