The “Public Expenditure and Financial Accountability (PEFA) Assessment for Yemen” provides a detailed analysis of Yemen’s Public Financial Management (PFM) systems based on the PEFA Performance Measurement Framework. It evaluates the strengths and weaknesses of the PFM system, setting a baseline for reforms and supporting improved fiscal discipline, resource allocation, and service delivery.
Key Findings:
- Budget Credibility:
- The budget shows significant deviations, with actual expenditures frequently exceeding approved allocations, undermining fiscal discipline.
- Conservative revenue projections helped mitigate oil price volatility, but excess revenues were often allocated to recurrent expenditures like subsidies.
- Comprehensiveness and Transparency:
- Yemen’s budget process is comprehensive, but transparency is limited by inconsistent public access to budget documentation and fiscal reports.
- There are notable challenges in integrating donor-funded activities into the government’s budget processes.
- Predictability and Control:
- Weaknesses in cash management, procurement processes, and commitment controls negatively affect budget execution.
- Payroll systems and procurement management were identified as areas requiring significant reform.
- Accounting and Reporting:
- While financial reports are prepared regularly, delays and inconsistencies reduce their effectiveness as management tools.
- External audit functions need enhanced independence and follow-up mechanisms.
- Reform Challenges:
- Capacity constraints and high dependency on oil revenues present long-term risks.
- Decentralization reforms have increased fiscal responsibilities for local authorities, highlighting the need for improved capacity at the subnational level.
Recommendations:
- Strengthen budget credibility through realistic fiscal planning and stricter expenditure controls.
- Improve public access to fiscal information to promote transparency and accountability.
- Address gaps in procurement and payroll systems to enhance efficiency and value-for-money.
- Develop capacity-building initiatives for local governments and spending units to support decentralization.
Note on Preparation
This PEFA Assessment was conducted by a World Bank team led by Mr. Arun Arya, Senior Public Sector Management Specialist and Task Team Leader. The team included Ronald Quist, Consultant; Franck Bessette, Public Sector Specialist (PEFA Secretariat); Pierre Prosper Messali, Senior Financial Management Specialist; David Biggs, Senior Public Sector Specialist; Mikael Mengesha, Senior Procurement Specialist; Akram Al Shorbagi, Senior Financial Management Specialist; and Saad Al Geradi, Consultant.