USAID DOMESTIC RESOURCE MOBILIZATION PROJECT 22TH Monthly Report February 2019

The project's development hypothesis is that strengthening financial management capabilities will lead to greater resource inflows and effective management of these resources by national and local government entities. This, in turn, will increase net tax revenue and improve public financial management, augmenting public investment and leading to increased economic growth and employment generation. El Salvador is the third largest economy in Central America and the most densely populated. However, the country faces significant challenges, including political polarization, a breach between the government and private sector, crime and insecurity, weak competitiveness, low educational levels, and low public and private investment. Economic growth has been the weakest in Central America since the international financial crisis in 2008. The country's economic growth has averaged 2.4% since 2015, with a public debt of 66.9% of GDP and a fiscal deficit of 3.6% of GDP in 2015. The project is working closely with the Government of El Salvador to adopt a new system of multi-year results-oriented budgeting with a Medium-Term Fiscal Framework (MTFF) and the associated Medium-Term Expenditure Framework (MTEF). The MTFF will provide aggregate multi-year projections of fiscal expenditures, revenues, and financing based on macroeconomic scenarios and an analysis of risks. The MTEF will provide multi-year expenditure projections disaggregated programmatically, including a public investment program. During the reporting period, the project developed several activities that contribute to reaching the expected results. The project met with the Minister of Finance to address important issues related to the implementation of the Resulted Oriented Budget (ROB) and the Minister agreed on the importance of reviewing the project's programmatic proposal for the Ministry of Health and the Ministry of Education. The project also developed a programmatic budget definition for the Ministry of Education together with the Inter-American Development Bank. The project is reviewing the methodology, findings, and recommendations of the Assessment of Health Information Systems in the Ministry of Health to improve and broaden its content. The project continued working on a proposal of ROB guideline for GOES institutions, which seeks to establish guidelines for Plan-Budget articulation in GOES institutions implementing ROB. The document compiles much of the work previously developed with the Ministry of Health and is expected to standardize the process for other ministries. The project also met with the Ministry of Finance to explain the current status of SAFI II, the challenges facing the project, and the efforts needed for SAFI II implementation in 2020. The project presented a viable scenario to finish SAFI II and COMPRASAL II development for them to be implemented in 2020. The Minister supported the project's proposal and asked all Directors and managers to commit to the project's proposal. The project met with IT personnel from the General Treasury Directorate to review the changes needed in the communications mechanisms for Central Bank payments. The Central Bank will implement a new LBTR mechanism called "Massive Payment System" to process the payments submitted by the Ministry of Finance and sent to the banking system. SAFI II is expected to be fully operating in January 2020. The project recommended to the General Treasury Directorate to negotiate with the Central Bank the implementation of the system by July 2020. The Director and Ministry of Finance concurred with the proposal. The project is working closely with the National Unit for Procurement and Acquisitions from the Ministry of Finance and the Court of Accounts to overcome the number of institutions publishing their Annual Procurement Plan (PAAC) in 2018. The project is looking forward to increasing the number of government institutions submitting or publishing their PAAC to work properly with the Electronic Purchase System (COMPRASAL II).