Ethiopia Amhara Region 2019

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 Amhara regional government since the last assessment in 2015. 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 developing a PFM reform strategy 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 Amhara regional assessment covered regional government budgeted units, extra-budgetary units (EBUs), the Office of the Regional Auditor General (ORAG), the regional council, Amhara Chamber of Commerce, and public enterprises. The list of stakeholders met is presented in Annex 3B.
  3. The fiscal years for the assessments are Ethiopian Calendar (EC) 2008, 2009, and 2010 (Gregorian Calendar FY2015/2016, 2016/2017, and 2017/2018). The assessment shows the current state of PFM performance of the region as at the time of the fieldwork (March 25, 2019, is the cutoff date). The period covered for each of the 94 dimensions (summarized into 31 performance indicators [PIs]) depends on the dimension and is in accordance with the PEFA measurement framework. Some dimensions were assessed at the time of assessment (March 2019 is the cutoff 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 the parliament.
  4. The assessment management framework, oversight, and quality assurance are summarized in Box 1.1. The assessment was funded by the World Bank, Irish Aid, the U.K. Department for International Development (DFID), the European Union (EU), the United Nations Children’s Fund (UNICEF), and the United Nations Entity for Gender Equality and the Empowerment of Women (UN Women). It was managed by the World Bank.

Impact of PFM systems on the main budgetary and fiscal outcomes

Aggregate fiscal discipline

  1. The aggregate expenditure of the Regional Government of Amhara for the last three completed fiscal years was reliable. It was 5 percent in EFY 2008, 1 percent in EFY 2009, and 4 percent in EFY 2010. As a result, aggregate expenditure outturn was between 95 percent and 105 percent of the approved aggregate budgeted expenditure in all three fiscal years. Variance in expenditure composition by administrative classification was 10.1 percent, 27.0 percent, and 9.4 percent in EFY 2008, 2009, and 2010, respectively. Variance in expenditure composition by economic classification was 10.3 percent, 11.7 percent, and 7.3 percent for EFY 2008, 2009, and 2010, respectively. In all the past three completed fiscal years, actual expenditure charged to the contingency vote was 0 percent.
  2. Variation in the budget composition indicates inability to spend the budget according to the plan (originally approved budget). The same is not true for revenue, as revenue outturn was close to the budgeted figures in all three years and above the budget in two out of three years. It was 101 percent, 103 percent, and 97 percent in EFY 2008, 2009, and 2010, respectively. Similarly, the level of the stock of arrears is not a cause for concern, as it was less than 1 percent of total expenditure on average for the three years of assessment. In addition, the risks to attaining fiscal discipline are limited due to several factors. Although there are no off-budget operations (PI-6), the fiscal risks are not monitored (PI-10) by the regional government, especially with regard to guarantees and contingent liabilities arising from public-private partnerships (PPPs). The Public Enterprises Supervision and Follow-up Authority has been set up to support, monitor, and evaluate the performance of state-owned enterprises (SoEs) and is operational. That said, there is no debt and thus no need to develop a debt management strategy.
  3. The total amount of revenue arrears is limited (PI-19). The actual stock of revenue arrears for the EFY 2010 year-end is 1.7 percent of total revenue. Internal controls of the system concerned with budget execution (PI-23 and PI-25) are well functioning, even though they are not using the best practices of risk-based internal audit. The procurement domain (PI-24) performs very poorly. Overall, the performance of the indicators relevant to aggregate fiscal discipline positively contributes to its attainment.

Strategic allocation of resources

  1. Four of the five indicators concerned with policy-based fiscal strategy and budgeting (PI-14, PI-15, PI-16, PI-17, and PI-18) did not receive good overall ratings, which demonstrates that the process to allocate budgetary resources is not in accordance with the regional government’s strategic objectives.
  2. Although the Regional Planning Commission prepares a Macroeconomic and Fiscal Framework (MEFF), which is developed for the budget year and two outer years, the budget does not have a medium-term focus (PI-16). The quality of the budget preparation process is impaired by the fact that the Cabinet only approves the budget allocations at the end of the preparation process and by the late submission of the draft budget proclamation to the regional council (8–10 days before fiscal year-end for the past three years). Budget scrutiny (PI-18) fares better, but the procedures for budget scrutiny do not include arrangements for public consultation, technical support, or negotiation procedures. The regional council has approved the annual budget rather late, within one month of the start of the fiscal year in all the last three fiscal years.
  3. Other indicators, such as budget classification, that contribute to the strategic allocation of resources function, which meets international standards, perform relatively better, though they still exhibit certain weaknesses. The indicators related to revenue collection (PI-19 and PI-20) are performing very well. That said, the exhaustiveness of budget documentation (PI-5) is extremely poor, as it fulfills none of the elements required by the PEFA Framework. Moreover, regarding public investment management (PI-11), project selection for inclusion into the annual budget is largely based on regional government priorities (which include water, irrigation, health, education, animal grazing, and rural roads) and not purely on the results of the feasibility studies conducted.

Efficient use of resources for service delivery

  1. In this respect, the PFM system in the regional administration does not work particularly well. This is demonstrated by the low score for the processes that plan services in public investment management (PI-11), medium-term perspective in expenditure budgeting (PI-16), and a budget preparation process (PI-17) providing ceilings for budget estimates to the budget entities. Though the system of allocating transfers (PI-7) is good and determined by a transparent and rule-based transfer system, there are delays in the actual transfer of funds over the year.
  2. As a result, the rating related to the specific service delivery performance indicator, which can demonstrate the efficiency with which services are delivered (PI-8), is not good, which leaves room for improvement. Public asset management (PI-12) is rated even worse (D+), which indicates that there is too little transparency on what is effectively maintained by the Regional Government of Amhara.
  3. Nevertheless, the mechanisms in place to reduce possible leakages in the system, such as internal controls on expenditure (PI-23 and PI-25), are good. The internal audit (PI-26) and external audit function (PI-30) are adequate. Financial data integrity demonstrates good accounting controls (PI 27), but the public procurement function is still undeveloped and not transparent enough (PI-24). Lastly, oversight arrangements for legislative scrutiny of audit reports (PI-31) are not effective. The Budget and Finance Standing Committee does not conduct hearings in the presence of the executive of the audited officers and does not directly issue recommendations to each audited entity. Recommendations and hearings are not published.

Performance changes since last assessment

  1. Based on the 2011 method, between the 2015 and the 2018 PEFA assessments, performance has slightly improved. Performance has improved for 9 PIs and deteriorated for 3 PIs. Still, the majority of PIs (17 out of 28, as the donor practices indicators have not been assessed) show no change in performance. This is shown in Table 0.1, and Annex 4 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-11, PI-24


HLG-1, PI-4, PI-5, PI-6, PI-7, PI-9, PI-10, PI-13, PI-15, PI-17, PI- 18, PI-19, PI-20, PI-22, PI-23, PI-27, PI-28


PI-1, PI-2, PI-3, PI-12, PI-14, PI-16, PI-21, PI-25, PI-26


Aggregate fiscal discipline

  1. Aggregate fiscal discipline has improved as the budget credibility indicators PI-1, PI-2, and PI-3 are three of the seven PIs that have improved. The stock of arrears (PI-22.1) is low in both PEFA assessments.

Strategic resource allocation

  1. The strategic allocation of resources has improved owing to the improvement of multiyear forecasting under PI-12. Besides, there is also improvement in PI-14.3, with a sound system of tax audits now performed and managed, which was not the case in the 2015 assessment. The strategic allocation of resources is also supported by a lower frequency and an increased transparency of adjustments to budget allocations above the level of management of Ministries, Departments, and Agencies (MDAs). On the downside, the fact that the Cabinet does not approve the ceilings in the budget call circular (BCC) (PI-11.2) negatively affects the strategic allocation of resources.

Efficient use of resources for service delivery

  1. The performance of public services is not better managed, monitored, and controlled than during the previous assessment. Performance is unchanged under the availability of information on resources received by service delivery units (PI-23), though good, as well as under procurement (PI-19), which on the contrary displays poor performance.

Overview of ongoing and planned PFM reforms and main weaknesses identified

  1. The regional government's PFM reform initiatives over the years have largely been anchored on the federal government's overall reform program. In 2019 (EFY 2011), the regional government developed a standalone PFM reform program in line with the federal government’s overall reform plan, which is yet to be approved. The new regional PFM reform strategy, at an estimated cost of ETB 3.6 billion over a five-year period has nine components:
  • Strengthen fiscal/tax policy to maximize domestic (regional) revenue mobilization and collection
  • Implement program-based budgeting (PBB) in line with federal government policy
  • Improve cash management and overall payment systems for efficient service delivery
  • Monitor and report on loans and guarantees issued to public institutions
  • Strengthen financial accountability and reporting framework
  • Strengthen internal control functions to reduce wastage
  • Improve public procurement and property management systems
  • Develop a strong legal framework for PPP arrangements as well as monitor their implementation
  • Strengthen the overall government management information system (MIS)
  1. Currently, there are no ongoing PFM reform activities, except for the usual and continuous training and capacity-building programs on internal audit and controls, procurement, asset management, treasury management, and accounting and reporting across all regional sectors and woredas. Past PFM reforms have yielded some successes, some of which include 95 percent success rate about participation in internal audit forums and 93 percent success rate on procurement management training, among others.