This report is the second volume of theprogrammatic Public Expenditure Review (PER) in Belarus. In2010 the Ministry of Finance requested that the Bank providesequenced and targeted advice on the fiscal reform optionsacross priority areas of the budget. Responding to thisrequest, a programmatic PER was agreed upon. The firstvolume was delivered in November 2011 and focused onproviding policy options for a sustainable pension system,better targeted social assistance and rationalization ofenergy and agricultural subsidies. The objective of thisvolume is to identify reform opportunities to enhance thequality of key public services in a fiscally constrainedenvironment. Specifically, the second PER will analyze threekey areas of the budget: intergovernmental fiscal relationsand public spending in the education and health sectors.These three areas were chosen because they are significantfrom a fiscal perspective. More than half of governmentspending is channeled through sub-national governments,while education and health spending together account for aquarter of government spending (largely at the sub-nationallevel). Beyond their fiscal importance, enhancing thequality and efficiency of spending in these sectors iscritical for improving living standards and human capital inBelarus. However, since public finances are expected toremain tight for some years to come, expenditures, even inpriority sectors such as health and education, will remainconstrained. Therefore, the focus of this report is on theproductivity of public spending. The primary thrust is toenhance the allocated and operational efficiency ofresources to allow for improved quality of services andsocial outcomes while containing overall costs. The reportalso examines the impact of Belaruschanging demographicprofile, which will have a significant and lasting impact ondemand for both health and education services. The reporthas four chapters. The first chapter reviews recentmacro-economic and fiscal developments, and in particularthe impact of the macro-economic crises on public financesand its implications for fiscal policy choices goingforward. The second chapter examines intergovernmentalfiscal relations and the fiscal incentives they create forsub-national governments. The third chapter looks at healthsector outcomes and expenditures to identify opportunitiesfor improved spending efficiency and sustainable health carefinancing. The fourth chapter is focused on resourceallocation and utilization in the education sector toprovide options for improved efficiency and effectiveness ofeducation spending.
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