To exchange and disseminate emerging lessons on budget support as an important mode of aid delivery, OPCS sponsored a forum on budget support in Cape Town, South Africa on May 5-6. The forum brought together 140 participants from 20 IDA countries, 15 bilateral donors, as well as the IMF, African Development Bank, European Commission, NEPAD, and the World Bank. The forum followed and built on a technical workshop conducted at the same venue by the budget support working group of the Strategic Partnership with Africa. The forum was structured around sessions with presentations addressing particular issues followed by open discussions. Among the important lessons drawn from the forum were: - Budget support is seen as an effective tool to provide predictable aid to well performing countries using the country’s own public financial management systems, and it addresses some disillusionment with traditional aid projects and traditional conditionality approaches. However, there is no clear consensus on the use of budget support in weak fiduciary environments.
- The leadership of the recipient governments plays a critical role in achieving programmatic alignment, and it is important that donors give sufficient room for governments to work within the local accountability mechanisms that force them to build consensus with parliament and population.
- Case studies show that the PRSP process has fostered improvements in budgetary programming. However, the challenge remains in many countries to link annual progress reports of PRSPs to donor processes and assessment frameworks that condition disbursements.
- Budget support requires predictability to be truly effective. Despite improvements in recent years, predictability remains a problem even in stable environments. Efforts need to be made by donors to improve both annual and within-year flows. At the same time, donors and recipients alike should recognize the potential economic consequences of large aid flows and should manage them carefully.
A number of issues were identified for further consideration: - Some participants argued that conditionality should be regarded as a contract, and the number of key actions should be kept to a minimum and evaluated in the medium term rather than on an annual basis.
- The trust that is developed between partners through policy signals, local presence and effective communication was the subject of extensive discussion and was seen as critical to successful donor – recipient relationships.
- Coordination between donors remains a hot topic of discussion as borrowing countries are still facing duplicity in conditionality across donors and high transaction costs. It was suggested that recipient governments should take the lead in addressing coordination issue both with the donors as well as between Finance ministry and sectoral ministries.
OPCS will draw together papers and contributions by forum participants in a book to be published during the 2006 fiscal year. For questions on this article, please contact Jan Walliser or Gero Verheyen. Papers Presented: Budget Support: Concept and Issues, Stefan Koeberle, Zoran Stavreski, World Bank Managing Fiduciary Issues in Budget Support Operations, David Shand, World Bank Joint Multi-Donor Evaluation of General Budget Support, Mike Hammond, OECD-DAC Reconciling Alignment and Performance in Budget-support Programmes: What Next?, David Booth, Karin Christiansen, and Paolo de Renzio, Overseas Development Institute Experiences with Alignment of Budget Support in South Asia, Shantayanan Devarajan, World Bank Budget Support and Aid Effectiveness, Experience in East Asia, Hiroto Arakawa, Japanese Bank for International Cooperation Budget Support, Budget Management, and Alignment with the PRSP: A Cross-Country Perspective, Rosa Alonso i Terme, World Bank Predictability of Budget Aid: Experiences in Eight African Countries, Jan Walliser, World Bank Improving the Dynamics of Aid: Towards More Predictable Budget Support, Alan Gelb, Benn Eifert, World Bank Budget Support, Aid Dependency, and Dutch Disease, Michael Atingi-Ego, Bank of Uganda
Budget Support, Conditionality and Impact Evaluation, Jan Willem Gunning, Free University, Netherlands Budget Support, Conditionality and Poverty, Paul Mosley, University of Sheffield Supplemental Papers: Fungibility, Prior Actions and Eligibility for Budget Support, Oliver Morrissey, CREDIT and School of Economics, University of Nottingham Useful Links >>Conference agenda >>Summary of forum proceedings
>>Strategic Partnership with Africa Budget Support Working Group Kigali Workshop, June 16-18, 2004
>>Policy paper by the Department for International Development (UK) on budget support as an effective means of providing funding to aid recipients. |
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