2002 - 2008

Armenia’s public financial management (PFM) reform agenda aims to improve fiscal discipline and allocative and operational efficiency. This goal is reflected in Government’s own documents, like the Medium Term Expenditure Framework (MTEF). The Government’s reform agenda covers activities across the PFM system, including MTEF and program budgeting reforms, treasury reforms, internal and external audit reforms, accounting reforms, and others.  These reforms cannot be seen to stand alone, but rather as specific but interconnected interventions at different points within one PFM system including its critical elements: national and sectoral policy review and development process; strategic budgeting (policy-budget connection, resource envelope, ceilings); budget preparation; resource management; internal controls, internal audit and monitoring; accounting and reporting; external audit and accountability. Reform effectiveness in this system derives from implementing appropriate initiatives in all six processes and establishing connections between reforms in the various process areas.

The ICHD has been one of the key institutions in Armenia both advocating for the PFM reforms and providing policy advice and technical inputs in the process of the reforms since 2002. ICHD engaged all critical processes of the PFM system through 2002-2008.

In consortium with Atos KPMG Consulting, London, under the funding of the UK Department for International Development (DFID), the ICHD helped the Government to improve the effectiveness of public spending to meet the social priorities of Armenia. Through their project for 2002-2005, the partners strengthened the capacities of the Ministry of Finance and Economy (MFE) of Armenia in planning and managing public expenditures in the mid-term framework, as well as improved the capacity of the Ministry of Social Security (MoSS) to engage in the process of medium-term budget planning through policy analysis and professional assessment of the costs and priorities associated with policy choices.

Through the four-tier work-stream the partners have enhanced the Government’s institutional and technical capacities in four critical processes. In policy formulation and strategic budgeting processes the partners addressed the need for consistent and realistic policies at the sector level with the MoSS as a pilot. In budget preparation the partners focused on strengthening the processes through which resources are allocated. In resource management process the partners focused on strengthening both technical capability and processes in revenue forecasting. Through the project the partners also strengthened budget execution and control processes.

Building on the successes of this project in cooperation with the UK based Atos Consulting, its partner in Consortium, the ICHD supported improvements in the effectiveness of public spending in achieving government priorities, in particular, the public policy priorities defined by Armenia’s Poverty Reduction Strategy Paper (PRSP). The Consortium partners assisted the Government to roll out the program budgeting element of its PFM reforms to move to a results oriented budgeting system in 2005-2008.  Through this project funded by the DFID, the partners have improved the impact and effectiveness of Government’s policies aiming to reduce poverty, strengthened the capacities of budget agencies and improved the effectiveness of public spending at large.

The partners have strengthened the capacity of budget agencies to implement program budgeting and a MTEF and enhanced the link between the PRSP, MTEF and Annual budget processes. The project also supported the Ministry of Labour and Social Affairs (MLSA) to plan public expenditure on the basis of policy priorities and cost benefits. The ICHD have provided local expertise and advice through forging and leading a team of local experts (the local implementation team of full- and short-time consultants) and managing the work-streams.

Supported by the World Bank, in cooperation with United Financial Services (UFS) in 2007, the ICHD developed the regulatory framework for the system of monitoring for the State Non Commercial Organizations (SNCOs) as a part of Government’s PFM reforms and contributing into enhanced fiduciary framework in Armenia.