Budget support and managing for results

Presentation by Bodo EllmersAction for Global Health Roundtable

Madrid, 7 June 2010

• More recipient country ownership• Better alignment to development plans • Less Transaction costs• Funds recurrent costs (e.g. wages) rather than

just investment (e.g. for hospital construction)• Funds “systems” rather than “islands” of

development

Budget Support – The Advantages

• Leads to more local spending ( job creation, income generation, economic development);

• Uses and thereby strengthens country systems• More domestic accountability (to citizens in

recipient countries)• Avoids brain drain from public sector to

donors’ projects Sustainable and broad-based results

• Focus on MDGs and poverty depends on recipient governments’ will and/or domestic power relations

• Problems of attribution and fungibility of money• Very “central government” focused Need to strengthen parliaments, watchdogs and

citizen groups• Less accountability to citizens in donor countries• Can be diverted to currency reserves

Budget Support – The challenges

Tax incomeUK

Spain

Health

Education Defense

Administration

France

European Commission

Budget Support: Fungibility and Attribution

Pro: Improves attribution, reduces fungibilityContra: Reduced ownership and alignment

Sector Budget Support The better option?

EU Development Commissioner Piebalgs (Brussels, May 2011): Move from project-based to budget-based development policy: “Budget support is the best modality of development policy, but it is also the politically most demanding”

ACP-EU Joint Parliamentary Assembly (Budapest, May 2011): Members of Parliament demand to :• increase the amount of budget support as promised to 50% of the total

aid• set a collective EU target.• ensure more parliamentary oversight . Provide their parliaments with the

necessary information to hold the executive to account.

EU Budget Support - Positions

• Paris Declaration: „Managing for results means managing and implementing aid in a way that focuses on the desired results and uses information to improve decision-making”

Partners: • Strengthen the link between development plans and budget process• Establish results-oriented reporting and assessment frameworks that

monitor progressDonors: • Link country programming and resources to results and align them with

partner country performance assessment frameworks,• Harmonise their monitoring and reporting requirements until they can

rely more extensively on partner country systems

Managing for results?

MfR can improve aid allocation, and thus aid effectiveness but ... • Choosing the right targets and indicators is difficult and “political”• Pro-cyclical financing (results and progress depend on many factors,

many of which beyond control of donors and recipients, e.g. Financial crisis)

• Results monitoring and measurement boosts transactions costs use country systems

• Attribution of results is difficult for budget support need to “show the development movie, not the picture”

• Aid works best in countries that don’t need aid “Ensure that managing for results is linked to progress and not just results performance.” (AfGH)

Managing for results – the challenges