Trust Fund Details - as of June 2008

 What is the Palestinian Reform Development Plan Trust Fund? [2]

 Establishment of the PRDP-TF and the TF Legal Agreement [3]

 PRDP Policy Agenda supported by the PRDP-TF [4]

 Management and Administration of the PRDP-TF [5]

 Arrangements for Donor Contributions to the PRDP-TF [6]

 Arrangements for Disbursement of funds from the TF [7]

 Controls, Audit and Reporting [8]

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What is the Palestinian Reform Development Plan Trust Fund?

The Palestinian Reform and Development Plan (PRDP 2008-2010) presented by the PA to the December 2007 Paris Donor Conference, includes a 3-year fiscal framework, on the basis of which donors committed substantial budget and development support at the  Conference. The purpose of the PRDP-TF is to help donors support the PA policy agenda expressed in the PRDP by channeling budget support for its implementation over the three year period of 2008 - 2010. The budgetary support is provided directly to the Central Treasury Account of the Ministry of Finance.   Funds provided by donors are  untied, un-earmarked funds linked to the execution of the policy agenda in the PRDP. The funds come under the modernized budget allocation and expenditure system recently introduced by the PA which has been evaluated positively by the IMF, and the movement of funds from the TF is audited by external auditors (see audit arrangements in section vii below). The PRDP-TF pools different donor funds into one administrative mechanism that reduces the transactions costs for the PA and for the participating donors, clearly links support to reform progress and provides regular and reliable disbursements to support priority recurrent and project expenditures in the budget.

Establishment of the PRDP-TF and the TF Legal Agreement

The PRDP-TF (TF 071011) was established by the World Bank in March 2008 at the request of the PA and several donors who wanted an independent supervised mechanism for channeling budget support funds to Palestine.  A Trust Fund Legal Agreement governing the arrangements for the transfer of the funds from the Trust Fund to the PA and use of funds from this Trust Fund was signed by the PA and the World Bank in Washington on April 11 2008.  Mr David Craig, the World Bank Country Director for WBG signed on behalf of the World Bank and Mr Mazen Jadallah, the Director of International Relations in the PA Ministry of Finance, signed on behalf of the PA. (see press release [9]).

PRDP Policy Agenda supported by the PRDP-TF

The release of funds from the PRDP-TF is concurrent with the implementation of key aspects of the PRDP (2008-2010) relating to budget execution and the maintenance of an sound macroeconomic framework, with the aim of strengthening the PA’s fiscal position as laid out in the PA’s PRDP.  Key policy items include expenditure containment (particularly wages, and net lending) and progressive strengthening of public finance management while maintaining an acceptable level of social expenditures and social protection.

The PA has prepared a Letter of Development Policy (LDP) which lays out the key economic targets to be achieved in 2008 within the overall 3-year macro framework of the PRDP.  The LDP was updated in early 2009 with detailed targets for 2009; and is planned to be again updated in 2010.

The World Bank will closely monitor the implementation of the policy agenda.  The PA will provide quarterly reports on their progress a towards the PRDP goals.  The Bank, in consultation with the IMF, will review these reports and based upon satisfactory progress, will make disbursement decisions.

Management and Administration of the PRDP-TF

The PRDP-TF is managed by the World Bank West Bank & Gaza Unit in the Washington office of the World Bank. The PRDP Trust Fund Manager in that office is Mr. Fabrizio Zarcone as described in the following section "Arrangements for Donor Contributions". The main contact for the PRDP-TF in the Country Office located in Al-Ram (Tel 00 972 (0)2 2366500) is Mr. John Nasir. Mr. Nasir is also the Senior Economist in that office for the World Bank operations in WBG.  Mr Nasir is responsible on a day to day basis for monitoring the progress of the PRDP and  assessing the opportunity for quarterly tranche releases in consultation with the IMF staff.

In order to keep donors and government informed on progress of the PRDP-TF activities the Bank calls regular briefing/consultation meetings, in East Jerusalem, Ramallah or Gaza, of local representatives of: (a) Participating Donors; (b) the PA; (c) the IMF; and (d) Donors financing recurrent expenditure (including those contributing directly to the CTA or through PEGASE). These arrangements rely as far as possible on existing donor coordination structures, such as the existing Fiscal Working Group, and emphasize the  PA ownership and leadership of the process.

Consultation meetings will take place quarterly or on an exceptional basis more often and may be triggered by: (i) a review of the PA’s quarterly progress reports on implementation of the PRDP, (ii) significant events impacting the fiscal framework, or (iii) a request from the PA for a Disbursement from the PRDP-TF outside the normal quarterly framework.

Arrangements for Donor Contributions to the PRDP-TF.

Donors who are interested in supporting the PA through the PRDP-TF or who need more information, contact the World Bank office in Al-Ram (John Nasir tel: 00 972 (0)2 2366553) or the Country Office in Washington (Fabrizio Zarcone tel 00 1 202 473 2338 or Rory O’Sullivan tel: 00 1 202 250 1688).  Alternatively Email contacts can be made FZarcone@worldbank.org [10] cc to rosullivan@worldbank.org [11]. 

Participating Donors will be requested to sign a short Administration Agreement with the Bank which lays out the arrangements between the World Bank and the donor for the transfer of funds to the Bank TF and release of funds to the PA.  Upon the signature of this agreement by both sides (the donor and the World Bank) the donor transfers the funds to a World Bank TF Account.  The Administration Agreement is the same for all Participating Donors in terms of TF structure, reporting, and other requirements.

While funds can be transferred by donors to the PRDP-TF at any time during the year once the Administration Agreement has been signed, it is advantageous and more efficient if the Participating Donors can provide early indications on their funds and transfer them in one tranche. This greatly facilitates the World Bank’s and PA’s planning.

The Bank applies the same criteria to the management of the funds in the PRDP Trust Fund as to the Bank’s own funds committed for budgetary support of PRDP implementation. The specific arrangements for the release of funds from the PRDP-TF account are described in the Disbursement section below.

Arrangements for Disbursement of funds from the TF

In line with the Paris Declaration on Aid Effectiveness, the PRDP-TF disburses untied, un-earmarked donor funds to the PA’s Central Treasury Account.  However, disbursements are made only after (i) a rigorous assessment of the new public financial management  procedures adopted by the Ministry of Finance;  (ii) a satisfactory assessment of the viability and priorities of the annual PA budget; and (iii) a satisfactory assessment of the progress of implementation of the PRDP based on the Letter of Development Policy (LDP) addressed to the World Bank by the PA when the PRDP-TF was established.

The PRDP-TF aims to provide predictable budget support with regular disbursements. Funds are disbursed approximately every calendar quarter. Ideally, the expected size and timing of these disbursements will be announced at the beginning of each year, after the Bank has been able to assess donor intentions for financing during the year. The normal timing of disbursement tranches to the PA from the TF is February, May, August and November of each year. Exceptional disbursements may be made if it requested by the PA and approved by the World Bank.  This timing is linked to the review process. Within one month of the end of each  calendar quarter, the PA prepares a quarterly report on the progress of the budget and the PRDP.  This report is reviewed by the World Bank staff in consultation with IMF staff for consistency with budget objectives and the LDP.  After a positive Review, the TF funds can be disbursed to the PA Central Treasury Account.

In general, there is a presumption in favor of disbursement after a Review (normally quarterly). There are no benchmarks as such; the Review will simply determine whether overall progress towards commitments made in the LDP is sufficient to justify a disbursement at that time. Some key monitorable indicators are used to assist in making this judgment. (see: PRDP-TF Action Matrix capturing LDP objectives and related monitoring indicators)

Controls, Audit and Reporting

The PRDP-TF relies on the PA's own fiduciary systems for public finance management.  The IMF’s assessment of the PA’s Public Financial Management system is that the cash control procedures have been restored to their pre-2006 levels, meaning that the PA's Central Treasury Account (CTA) is again fit to receive donor transfers.

As described above, independently of whether there is a disbursement decision pending for the PRDP-TF, the PA issues quarterly progress reports on overall budget and PRDP implementation and the Bank will review these progress reports in consultation with the IMF.

The parent PRDP-TF is audited by the World Bank’s external auditors following normal World Bank TF management practice. In addition the PA has agreed that all funds transferred to the PA from the main PRDP-TF shall be placed in a Ministry of Finance Deposit Account and amounts shall be equally accounted for in the PA budget management system in a manner acceptable to the World Bank. The PA has further agreed that this whole process be audited annually by external auditors selected and paid for by the World Bank as part of the cost of administering the PRDP-TF.