sector-wide approaches for agriculture and rural
TRANSCRIPT
SECTOR-WIDE APPROACHESFOR AGRICULTURE
AND RURAL DEVELOPMENT
POLICY
SECTOR-WIDE APPROACHESFOR AGRICULTURE
AND RURAL DEVELOPMENT
POLICY
BACKGROUND AND RATIONALE 1Sector-wide approaches 2Agricultural and rural SWAps 3Why an IFAD policy on agricultural and rural SWAps? 4
EXPERIENCES AND LESSONS LEARNED 7The link between PRSPs and SWAps 8The special challenges of the agricultural sector 8Ownership of agricultural/rural SWAps 9Agricultural/rural SWAps and decentralization 10Monitoring the impact of agricultural/rural SWAps 11The financing of agricultural/rural SWAps 11Agricultural/rural SWAps and aid effectiveness 12
IMPLICATIONS FOR IFAD’S ENGAGEMENT IN AGRICULTURAL/RURAL SWAPS 15The context 16What IFAD can bring to agricultural/rural SWAps 16How IFAD will participate in agricultural/rural SWAps 18IFAD policy 21
RECOMMENDATION 23
TABLE OF CONTENTS
ANNEXES 25I. Arrangements for the monitoring and evaluation and review
of SWAp implementation and impact 26II. Pooled Funding: fiduciary arrangements for the use and reporting of funds 28III. Executive Board clarification and approval 32
ABBREVIATIONS AND ACRONYMS 34
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BACKGROUND AND RATIONALE
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Sector-wide approaches
Introduction. The last decade has witnessed atransformation in international developmentassistance. This has involved both anunprecedented consensus on developmentobjectives at the international and nationallevels, and a commitment on the part of alarge number of development assistancestakeholders as to how those objectives maybe pursued more effectively. It is atransformation that has been driven by anumber of factors. Chief among these havebeen, at the global level, the MillenniumDevelopment Goals, to which in September2000 the world’s governments committedthemselves; at the national level, povertyreduction strategy papers (PRSPs) or otherforms of strategies for poverty reduction,which in most of the world’s poorest countriesprovide a national point of reference fordevelopment efforts; and, within theinternational development community, theharmonization, alignment and results agendathat, following the Paris Declaration on AidEffectiveness of February 2005, seeks toreform the way that the internationaldevelopment community – donors andpartners alike – works and to enhance theimpact of development assistance throughimproved alignment at the country levelcombined with strengthened countryownership of development efforts.
Sector-wide approaches (SWAps) generally,and agricultural/rural SWAps in particular, liesquarely within the new internationaldevelopment architecture that has emergedfrom this transformation. In certain situations,SWAps – nationally-owned and executedsectoral programmes for the achievement ofkey objectives for broad-based growth andpoverty reduction – are held to be the mosteffective platforms for the pursuit of commonsectoral objectives. There is no singleuniversally-accepted definition of what
constitutes a SWAp and, indeed, the terms‘sector approach’, ‘sector support’, ‘sector-wide programmes’, ‘sector investmentprogramme’, and ‘SWAp’ are frequently usedinterchangeably. However the followingdefinition is widely quoted: “... all significantfunding for the sector supports a single sectorpolicy and expenditure programme, undergovernment leadership, adopting commonapproaches across the sector, andprogressing towards relying on Governmentprocedures to disburse and account for allfunds”.1
While the form that individual SWAps takevaries considerably, they do share a number ofcommon characteristics. First, they representa partnership between the government, whichis expected to provide leadership; theirinternational development partners, who arethemselves expected to adopt commonpositions and, to the extent possible,harmonize their support; and otherstakeholders, including civil society and theprivate sector. Second, SWAps are explicitlynot expected to provide a blueprint for action;rather, the partnerships established aredesigned to provide a framework for a processof dialogue and action relative to a sharedsectoral vision and objectives. Third, and incontrast to earlier approaches, SWAps areintended to focus not only on the financing of acomprehensive investment programme, butalso on policy dialogue and change, and on theprovision of support to, and reform of, nationalinstitutions.
Funding arrangements. As an investmentprogramme, a SWAp aims to embrace allpublic funding for the sector in question. Thishas two important implications: first, that allfunding to the sector should support thepolicies, strategies and investment activitiesassociated with the SWAp; and, second, thatall funding – including that of the developmentpartners – should be considered ‘on-budget’,that is to say, a part of the national budget and
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1 The Status of SectorWide Approaches, A.Brown, A. Norton, F.Naschold; January 2001.Overseas DevelopmentInstitute (ODI), WorkingPaper 142. London: ODI.
reflected as such in the Medium-termExpenditure Framework (MTEF)2 and annualallocations. Yet a SWAp is not in itself an aidinstrument: there is no automatic associationbetween a SWAp and a specific type offinancing mechanism. Thus there are anumber of ways that development partners’funds can be made available to support aSWAp. These include:n Budget support. General budget support
consists of untied funds made available insupport of the PRSP and the MTEF, anddisbursed to the ministry of finance toallocate across sectors according tonational priorities. With sector budgetsupport the funds are tied to the specificsector in question.
n Basket funding, or pooled funding. Anarrangement whereby the developmentpartners deposit their funds into, anddisburse from, a single dedicated account,either within the ministry of finance or atthe level of the sector ministry itself,established specifically to finance thedefined and agreed investment activities ofthe SWAp or specific elements withinthe SWAp.
n Non-pooled funding. Funding madeavailable either to finance specificactivities of the SWAp or to financediscrete projects that fall under the overallSWAp umbrella.
Fiduciary arrangements. The fiduciaryarrangements used in SWAps include systemsand procedures for planning and budgeting;disbursement of funds; procurement; andaccounting and external audits. Theestablishment of such arrangements,accepted by all stakeholders in the SWAp, isintended both to reduce the transaction coststo the government by minimizing the use ofseparate financier requirements and tocontribute to strengthening governmentprocurement and financial managementcapacity.
The status of SWAps to date. The SWAp modelwas first developed for the social sectors –principally health and education – and,according to the most recent aggregation(from 2000), the majority (56%) were in thesetwo sectors. They have also been appliedwidely in the roads/transport sector.Agricultural/rural SWAps represented only arelatively small subset of the total SWAppopulation at that time (13%) – a proportionwhich is probably even lower today. Of the totalpopulation of 90 SWAps in 2000 (assumed to beconsiderably higher today) some 85% were insub-Saharan Africa (with the majority inEastern and Southern Africa) and a further 9%in Asia.3
Agricultural and rural SWAps
Within the limited number of agricultural/rural sector programmes to date, there hasbeen a discernible evolution in the approachfollowed. The agricultural sector investmentprogrammes (ASIPs) of the early 1990s,characterized by their policy preconditionalitiesand their focus on investment, gave way to thefirst SWAps, which sought to establishpartnerships between the government andtheir development partners as a basis forpromoting a process of sectoral policydialogue and investment.4 These in turn pavedthe way for the more recent SWAps, which indefining ‘the sector’ go beyond the mandate ofthe ministry of agriculture and adopt a broaderinter-sectoral approach.
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2 The MTEF is amechanism for publicexpenditure management,designed to enhance theability of the ministry offinance to manage theeconomy by allocatinggovernment expenditures,including those financedthrough internationaldevelopment assistance,between and withinministries over a rollingthree-year period.3 Foster, Brown andNaschold (2000). What’sdifferent aboutagricultural SWAps?Paper presented at theDepartment forInternational Development(DFID) Natural ResourcesAdvisers’ Conference.London: ODI.4 Bazeley (2001). SIPs,SWAps, and Livelihoods.Report to DFID-Malawi.Crewkerne: the IDL Group.
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Features of these more recent SWAps includethe following. First, they are intended to beoutcome-focused and driven by therequirements of their clients and other actorswithin the sector, rather than by the existingconfiguration of organizations in the sector.Second, they consequently seek to define theagriculture sector broadly, to encompass therange of factors that affect the success ofagriculture-based livelihood; and as such theymay engage other ministries that cancontribute to this agenda. Coordination ofthese various actors, including an involvementof the private sector, is a key role for anagricultural/ rural SWAp (and it is for preciselythis reason that such an approach may not besuitable in a country with weak mechanismsfor inter-sectoral coordination). Third, theircross-sectoral approach means that they maymore accurately be considered to be rurallivelihood or rural development SWAps, andthey are often constructed to be the ‘ruralpillars’ of PRSPs. This is important, given theimportance of the sector for overall povertyreduction and growth in many countries. Thisapproach is to be found in, for example,Uganda, where the Plan for Modernisation ofAgriculture (PMA) is generally considered tobe one of the most mature rural SWAps.
Overall, less than a dozen countries have hadexperience with, or are currently planning,agricultural/rural sector programmes of theASIP/SWAp type. These include Lesotho,Malawi, Mozambique, Rwanda, Uganda, theUnited Republic of Tanzania and Zambia inEastern and Southern Africa; Benin and Ghanain West and Central Africa; and Honduras andNicaragua in Latin America. The majority ofthese countries are in Eastern and SouthernAfrica. The reason for this geographicalconcentration is probably to be found in acombination of the high levels of aiddependency in the countries of the region, thespecific nature of government-donor relationsthere, and the particular relation betweenagriculture, rural development and poverty
reduction. In countries in which agriculturerepresents a relatively small share of grossdomestic product, or in which there arestronger institutions and policies, rural povertyreduction may be more effectively addressedthrough targeted projects and programmes.5
Equally, in countries and regions in whichexternal assistance represents a much lowerpercentage of public expenditure, or wheredonor perspectives are more varied, theincidence and possibility of comprehensiveapproaches may be different.6
Why an IFAD policy onagricultural and rural SWAps?
Agricultural/rural SWAps represent a centralstrategic choice made by a number of IFAD’spartner governments concerned with ruralpoverty reduction, and, where wellconstructed, they offer important prospects forreducing rural poverty. They are also stronglyendorsed by the Paris Declaration on AidEffectiveness of 2005, to which IFAD is acommitted signatory.7 Participation – not onlyin their implementation but also in theirdevelopment – provides IFAD with a uniqueopportunity for promoting national-levelpolicies and investments that respond to thereal needs of poor rural people. The questionfacing IFAD, therefore, is not whether it shouldsupport SWAp development andimplementation, but rather, how it should doso. That is the question this paper seeks toanswer. It aims to present a policy andassociated strategy for IFAD on how to engagein agricultural/rural SWAps in a way that, onthe one hand, is wholly consistent with itsmandate and the financial and othermechanisms at its disposal; and, on the other,uses its comparative advantage andexperience to best effect, so as to contribute tomaximizing the impact of the SWAps in terms
5 Thus, in Asia, IFADtargets the poorest ruralareas and marginalizedpopulations (frequentlyethnic minorities), while inLatin America, a territorialapproach is used to linkthe rural poor of a givenregion to dynamic marketsand to (non-poor) socialagents and sectors thatare essential to the poor.6 This seems to be thecase in West and CentralAfrica where there is littleactive support foragricultural SWAps amongeither governments ormost donors.7 Within the Declaration,Indicator of Progress No.9refers to “Use of commonprocedures”, and targetsthe percentage of aidprovided as programme-based approaches. In thisregard, SWAps areexplicitly included in thedefinition of programme-based approaches.8 Looking to broaden itsexperience, IFAD ispresently planning toparticipate in a SWAp in Nicaragua.
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of rural poverty reduction. This last point iscritical: the objective is not to focus on theimpact of the IFAD funds alone, but rather touse IFAD’s engagement as a catalyst formaking SWAps an effective vehicle forreducing rural poverty at the national level.
In recent years, IFAD has participated in anumber of agricultural/rural SWAps inEastern and Southern Africa.8 It has done so indifferent ways in different countries: itsexperience includes supporting the process ofdeveloping the sector strategies upon whichthe SWAps are to be based, contributing totheir conceptualization and planning,supporting the development of subsectorpolicies within the SWAp framework, andcontributing to their financing and supportingtheir implementation. An important purpose ofthis policy paper, therefore, is to synthesize theknowledge gained and promote its sharing andinstitutionalization across the Fund. In thisway, it is also expected to provide direction andguidance to all those IFAD staff working oncountries where SWAps are underconsideration. Not only: clarifying IFAD’sposition relative to SWAps will ensure commonexpectations both on the part of IFAD’s partnergovernments and other members of thedevelopment community. Overall, the policypaper is expected to provide a platform forIFAD to make more informed investmentoperations, engage in more substantive policydialogue, and form more effectivepartnerships with governments and otherdevelopment partners.
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EXPERIENCES AND LESSONS LEARNED
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9 Foster et al (2000). (op. cit.)
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Not surprisingly perhaps, given the verylimited number of agricultural/rural SWApsthat have been implemented to date, there is alack of systematic analysis of theirexperiences. Nevertheless, drawing upon on acombination of country reviews, limited IFADexperience and literature on SWAps in othersectors, it is possible to identify a number ofkey issues and lessons associated withagricultural/rural SWAps as effective vehiclesfor rural poverty reduction.
The link between PRSPs and SWAps
The PRSP or equivalent represents the overallpolicy framework for the country: it providesthe basis for the agricultural/rural sectorpolicy framework for poverty reduction; andthis in turn provides the framework for theSWAp. In some countries these linkages havebeen firmly established, and the rural SWAphas been regarded as one of the ‘pillars’ of thePRSP. However, some SWAps have not beenfocused on reducing rural poverty as their keygoal and in many PRSPs the agriculture andrural development sections are weak and inneed of further analysis and reformulation;this is perhaps the result of the rushedprocess by which many of the first PRSPs weredeveloped.
Today, the linkages between PRSP, sectorpolicy framework and SWAp are betterunderstood, both by governments and theirdevelopment partners, than was the case evena few years ago. Two specific lessons emerge.The first is the need to ensure both a strongfocus on poverty reduction at all levels of policyand strategy, and a coherence and consistencyin the goals, objectives and outputs sought,and the approaches adopted, at the differentlevels. The second is to recognize the iterative
nature of policy and strategy developmentprocesses, and to use the lessons learned atone level to inform understanding and futurepriorities at all levels with a view to ensuringconstant improvement. Thus future SWApsmust be derived from the higher-levelelements in the hierarchy of poverty reductionstrategies; while the next iteration of povertyreduction strategies should draw moresubstantively upon the agricultural/ruralSWAps and their experience – so as to bebetter targeted, prioritized and focused, yetmore holistic in scope, than the first round.
The special challenges of theagricultural sector
Sector-wide programmes are most commonlyfound in the social sectors – health andeducation – and it was the model developed forthose sectors that provided the basis for thefirst agricultural SWAps. Yet there are anumber of features of the agricultural sectorthat make it fundamentally different fromothers, and that make developing andimplementing a SWAp in this sector perhapsinherently more difficult.9
n The role of the state in agriculture isdifferent to its role in the social sectors.Governments are not directly responsiblefor bringing about agricultural growth;rather, in an environment characterized bywidespread and deep market failure, theyare required to create the conditions,through both their investments and theirpolicies, that enable private sectorproducers and market intermediaries toexpand their economic activities andmarket relations. Their role is thusindirect: addressing market failure in therural economy and assisting their clientsto engage effectively in the new marketenvironment – rather than direct:
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implementing policies for service delivery.This is a difficult role to play and, perhaps,agricultural policies and services may nothave adapted easily to the newrequirements imposed upon them.
n In each country the agricultural sectorcomprises millions of producers andmarket intermediaries operating underextremely varied conditions according tothe agro-ecological environment, levelsand combinations of assets, productionobjectives, and access to technical andfinancial services and markets. Perhapsmore than in health or education,agricultural technologies need to bedeveloped locally and in closecollaboration with the rural producers whowill seek to fit them within their broadereconomic livelihoods. In addition, becauseagricultural technologies tend to be targetgroup-specific, if close attention is notgiven to the targeting issue, the benefitscan easily be captured by local rural elitesrather than by the rural poor.
n It appears to be more difficult to arrive atbroad consensus on the key issues in theagricultural/rural sector than it is in thesocial sectors. Donors do not always agreewith governments, nor indeed amongthemselves, either as to what constitutesan appropriate role for the state – and, inparticular, what should be the limits of itsrole in the agricultural sector; or to whatextent the SWAp should be broadly cross-sectoral (and thus interagency) ratherthan agricultural (and thus the preserve ofthat ministry alone). In a number ofcountries there has been vigorous, and ina few cases unresolved, debate as to theappropriate scope of the agricultural/ruralSWAp.
These features of the agricultural sector meanthat it is inappropriate to uncritically apply aninstitutional model developed for othersectors. The agricultural/rural SWAp modelthus needs to be developed pragmatically on
2the basis of an understanding of the key issuesfacing poor agricultural producers in specificenvironments (rather than from any a priorimodels), building upon a coherent vision forthe development of the sector and its role inrural poverty reduction, and taking intoaccount the policy and institutional constraintsfaced by the country.
Ownership of agricultural/rural SWAps
The initial impetus for sector investmentprogrammes (SIPs) and, more recently,SWAps, came from the internationaldevelopment community rather than fromgovernments; and partly as a consequence,the SIPs and some of the early SWAps sufferedfrom a lack of government ownership of thefundamental ideas. In Mozambique, forexample, the design process for theAgricultural Sector Public ExpenditureProgramme – PROAGRI was heavily donor-influenced and resulted in a set of basicprinciples that were contended by governmentfor the duration of its implementation.However, the evolution of sector programmesfrom SIPs to SWAps, with their focus onpartnerships, has gradually had the effect ofmaking national ownership of sector policiesand strategies a reality. Certainly this is thecase in Uganda, where there is high ownershipof key arguments and policies, and to a lesserextent in Nicaragua.
On the other hand, among some line ministrystaff a sense remains that SWAps have beenimposed upon them: not only by the donors butalso by the ministries of finance, whichappreciate the budgetary logic of SWAps. Morefundamentally, in a significant number ofcountries, ministry of agriculture staff – andparticularly field staff away from the capital –
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have only a weak understanding of the SWApconcept and limited commitment to it, andthey typically consider the SWAp as ‘businessas usual’. Beyond government, most SWApsseek to promote the involvement of privatesector investors and service providers in thesector, and envisage a strong role for civilsociety organizations – both organizations ofproducers and NGOs. Yet the institutionalarchitecture established for SWAps hascertainly not always engaged these groups aspartners in their development, and not allSWAps have sought to build their capacity toengage in the sector in a meaningful andeffective manner.10 The lesson is evident:ensuring ownership of all of these parties –government staff, private sector players andcivil society organizations – is a critical task towhich both ongoing and future SWAps mustaddress themselves in a more structuredmanner than in the past11, and as a criticalelement of the decentralization process.
Agricultural/rural SWAps and decentralization
Decentralization is an issue of particularimportance to the agricultural sector, whichrequires locally adapted strategies andapproaches to respond to local characteristics;yet it presents a complex political, technicaland administrative challenge to governmentsand demands strong management capacity toguide the process forward. Most countries withagricultural/rural SWAps have engaged insome form of national decentralizationprocess as part of wider public service reform.
Whatever the decentralization model adopted,there is need for the SWAp to contribute tostrengthening local capacity. Support needs tobe given to local level government staff – onthe one hand to build their understanding of,
and commitment to, the SWAp process, and,on the other hand, to strengthen their capacityfor (participatory) planning, budgeting,financial management and reporting.Experience from a number of countriessuggests that efforts to promote non-government provision of agricultural supportservices are severely constrained by the weakcapacity of the private sector and NGOs inrural areas. Building their capacity to respondto farmer requirements should be anotherelement in a SWAp-based strategy forstrengthening decentralization processes.
Yet decentralization is not an end in itself; itshould rather be a means to developingeffective, responsive, demand-led servicesand, in particular, to making governmentservices more locally accountable to poor ruralpeople. Taken in isolation, however, there is noparticular reason why decentralization shouldenhance accountability; on the contrary, it maywell entrench the influence and power of localelites. The key issue therefore is one ofempowering poor rural people: enabling themto develop the skills, the knowledge, theconfidence and the organization that theyrequire to participate in local politicalprocesses and to hold government and privateservice providers accountable to them.Agricultural/rural SWAps have tended to focuson decentralizing from the top down; much ofIFAD’s engagement to date has been to buildthe capacity from the bottom up in order topromote real accountability to poor ruralpeople. This must continue to be among itstop priorities.
10 In both Nicaragua andHonduras, civil societyorganizations are not fullysatisfied with the SWApsand they have asked forgreater consultation andthe use of participatorymethods; while one reasonfor the non-emergence ofthe Senegal ASIP was thestrong opposition of civilsociety.11 This is a point broughtout vividly in the ongoingAgricultural SectorDevelopment Programme(ASDP) Process Review,conducted for the Ministryof Agriculture and FoodSecurity in the UnitedRepublic of Tanzania.
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Monitoring the impact of agricultural/rural SWAps
In order for agricultural/rural SWAps tocontribute effectively to rural povertyreduction, processes and mechanisms mustbe put in place to identify and respond to thereal economic problems of poor ruralproducers, and to monitor the effect andimpact of the investment activities financed.Experience suggests that targeting of SWApshas not been automatic – though it is an issuethat IFAD has sought to emphasize – and thatmore attention has been given to financialmanagement systems and financial reportingthan to physical reporting and impactmonitoring. Indeed, despite increasingrecognition of the need for SWAps to haveeffective monitoring frames and indicators, todate none of them have monitoring systemsthat work effectively at all levels. On the onehand, this weakens the capacity of themanagers of the SWAps to assess whether theactivities being implemented are appropriateand on course; while on the other, it makes itdifficult to know to what extentagricultural/rural SWAps have had a positiveimpact on rural poverty reduction. In theabsence of reliable data, it is possible only toassert that neither the original ASIPs nor thefirst generation SWAps have probably hadmuch impact on the poor. By contrast,Uganda’s PMA – the most advanced of the nextgeneration of SWAps – underwent its secondjoint review in 2003. This concluded thatalthough there was a danger of the poormissing out on the benefits of PMA, if certainactions were taken then its chances of successin reducing poverty were high.12
Establishing an effective monitoring andevaluation system for a SWAp is clearly amajor challenge and, given the difficultiesfaced in doing this within projects, the scale ofthe task required to carry this out at thenational scale should not be underestimated.
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12 The mid-term review ofPMA scheduled forApril/May 2005 isexpected to focus squarelyon the issue of impact.13 In Mozambique, forexample, the EuropeanUnion contributes to thepooled fund but alsoprovides General BudgetSupport (GBS) to theTreasury and supportsindividual projects.
Yet it is an area that needs more consistentattention and support by the donors: indeed, itis critical if SWAps are to have their intendedimpact as vehicles for rural poverty reduction.
The financing ofagricultural/rural SWAps
A variety of mechanisms are currently used tofinance agricultural/rural sector programmes:general budget support (GBS); basket orpooled funding at the level of the sector; andearmarked or project funding. In practice,none of these options is as distinct as itappears and most agricultural/rural SWApsare actually financed through all threemechanisms. Many donors use more than oneof these mechanisms in the same country, andindeed there are cases of donors using allthree simultaneously.13
So, does it matter how SWAps are funded? Akey justification for SWAps is the desire toreduce the transaction costs of dealing withnumerous donor planning and accountabilityrequirements. The example of the healthsector in Mozambique – which, prior to theSWAp there, was supported by more than 20different donors – certainly provides acompelling argument for harmonized fundingarrangements of some kind. Some havefurther argued that, in the context of efforts toimprove national public expendituremanagement, sector programmes shouldideally be financed through GBS. Basket orpooled funding, it is suggested, has thepotential to distort financial allocationsbetween sectors, and as such is only a second-best solution. Yet the argument for GBSassumes that intersectoral budgetaryallocations are made according to transparentand technocratic procedures linked to thePRSP or similar. In fact, the agricultural sector
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is poorly represented both within the PRSPand in the political processes associated withbudget negotiations; and in many countriesthe ministry of agriculture is unable to ensurean allocation consistent with its importance forpoverty reduction. In addition, when donorsswitch from pooled funding at the sector levelto GBS they may also withdraw from theongoing process of sector-level policydialogue, and so potentially weaken theSWAp.14 Thus the issue of financing modality isnot a simple one and, ideally, the appropriatemode of support to be provided by an individualdevelopment partner is a decision that shouldbe pragmatic, impact-oriented and made inconsultation with the government.
A different issue related to the financing ofSWAps concerns the ministry of agriculture’sbudgetary allocation (or ‘budget ceiling’).Reflecting the weak political leverage ofministries of agriculture in the budgetnegotiation process, in many instances theceilings set for them are considered to be toolow. This has meant that, in Uganda forexample, the only element of its PMA to haveeffectively taken off is the National AgriculturalAdvisory Services (NAADS) Programme; andeven this has had to be scaled down in orderfor the ministry to remain within its ceiling,despite donor funds being available to financeadditional expenditures.15 In essence, there isfrequently a mismatch between the povertyreduction objectives for the sector and theresources made available to achieve theseobjectives. The issue is clear: particularly forthose development partners engaged in policydialogue at the macro level, there is need toemphasize the importance of a budgetallocation process that is transparent, pro-rural and pro-poor. IFAD must work with themto pursue this agenda.
Agricultural/rural SWAps andaid effectiveness
Part of the aid effectiveness agenda is topromote reliable medium-term fundingcommitments on the part of internationaldevelopment organizations. In practice, thereis a major issue of donor reliability relative tofinancing: PROAGRI in particular has beenbadly affected by confirmed financingcommitments by the donors not being fullyrealized: in 2003, as much as 33% ofcommitments were not made available – afailure which led to a donor apology “… forbroken promises and for delays indisbursement”.16 In this particular case, IFADfunds in support of PROAGRI played a criticalrole in ensuring a continuous flow of funds tothe sector at a time when those of otherdonors were not forthcoming.17
An assumption made is that adoptingincreasingly harmonized approaches such assector programmes reduces governments’transaction costs associated with dealing withmultiple funding partners. However, accordingto one study (in the education sector),governments actually found that transactioncosts increase with a SWAp until the newarrangements fully replace the old.18 It hasalso been observed that the regular ‘policydialogue’ associated with the SWAp betweenthe donor group and government may actuallytake up as much time of government staff asproject-specific meetings did formerly. In theUnited Republic of Tanzania, a particularconcern expressed is that many developmentpartners “… have a tendency to focus on minoradministrative issues. They offer littlestrategic value added in helping [theGovernment of the United Republic ofTanzania] to resolve other more fundamentalissues ... ”.19
14 In Mozambique, wherePROAGRI II is shortly tostart up, a number of keydevelopment partners aredisengaging from basketfunding and providing theirsupport instead throughprojects and GBS. Whilethis is in theory entirelyconsistent with support forthe SWAp, the concern isthat they are alsowithdrawing from thePROAGRI Working Groupand Consultative Forum,which provide the mainfora for policy dialogue atthe sector level.15 Interestingly, theproliferation of ministriesin the United Republic ofTanzania (six dealing withagriculture/ruraldevelopment in one way oranother) appears to ensurethat each subsectorreceives a ring fencedbudget ceiling rather thanhaving to fight for fundswithin a largeragricultural/ruraldevelopment pool.16 Strategic Partnershipwith Africa: SectorProgrammes WorkingGroup, mission report(December 2003).17 IFAD funds have both theadvantage to governmentsof predictability – they donot require annual approval– and the disadvantage ofbeing predominantly loan-rather than grant-based. Inthe case of Uganda’sNAADS Programme, IFADfunds have been the last tobe drawn down bygovernment as it has –understandably – sought tomaximize the use of grant,rather than loan, funds.18 Brown et al (2001).(op. cit.)19 ASDP Process Review.(op. cit.)
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There are many examples of productivedialogue leading to policy change on key issuesfacing the agricultural sector in general andpoor rural people in particular. However, it isevident that not all donors’ in-countryrepresentatives have a strong technicalunderstanding of the critical issues facing theagricultural sector, or are able to engage asclosely as is necessary. Where this is the case,it is not only policy dialogue that suffers; it isalso the ability of donors to provide effectiveimplementation support for agricultural/ruralSWAps that is weakened. Ultimately,ineffective and unreliable engagement inagricultural/rural SWAps by governments’development partners must be considered areal concern for the success of the SWApmodel. Yet, conversely, it provides a strongargument for full participation by IFAD in theSWAp process, and, in particular, it suggeststhat there is an important opportunity for it toplay an active and substantive role, not only asa reliable financier but also as an informedand experienced player both in policy dialoguerelative to poverty reduction issues and in theimplementation support processes.
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IMPLICATIONS FOR IFAD’S ENGAGEMENT IN AGRICULTURAL/RURAL SWAPS
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The context
IFAD is dedicated to reducing rural poverty. Itsgoal is to contribute to the long-termdevelopment of opportunities for poor ruralpeople and so to the achievement of theMillennium Development Goals – andparticularly to the eradication of extremepoverty and hunger. At the country level, itsprogrammes are guided by, and seek tocontribute to the development of, the policies,strategies and programmes of its partnergovernments – in many cases presented withina PRSP framework, but in many others undersome other form of national poverty reductionstrategy. The Fund is a signatory to the ParisDeclaration on Aid Effectiveness of 2005, and itis actively committed to the agenda definedtherein.
The determinants of how IFAD resources areused must be, on the one hand, the availableoptions and their expected impact on povertyreduction and, on the other hand, the positionand priorities of its partner governments. Insome cases, these may point IFAD towardsengagement in an agricultural/rural SWAp. Yetit is evident that while SWAps generically maybe relatively widespread, the SWApphenomenon in the agricultural/rural sector isextremely limited. This means that IFAD isunlikely to be overwhelmingly engaged inSWAp processes, except in the limited numberof countries where they are embraced by allstakeholders as the way forward. In thesecountries, however, where the scope exists forIFAD to add value to the process, it will activelysupport both the emergence of SWAps andtheir operationalization. Where it does so,engagement will provide a major opportunityfor IFAD to have substantial influence on policyand strategy development for rural povertyreduction at the national level.
On the other hand, it is important not to over-state the difference between countries with anagricultural/rural SWAp and those without: inall countries, IFAD will be looking to contributeto the achievement of the MDGs and inparticular seeking to enable the rural poor toovercome their poverty. In many countries, itwill be supporting governments as they seekto develop national, sectoral and subsectoralpolicies and strategies for poverty reduction,and promoting the participation of ruralpeople’s organizations in processes associatedwith their development. In all countries itsprogrammes will be supportive of suchpolicies and strategies. In all countries, IFADwill aim to work in a way that reduces thetransaction costs to the government andcontributes to an enhancing of overall aideffectiveness. And in all countries, it will notonly be bringing to the table loan and grantresources for financing investments within thesector, it will also be seeking to expand itseffectiveness everywhere in policy dialogue,knowledge management, management forimpact, and partnership development.
What IFAD can bring toagricultural/rural SWAps
Stakeholders, including IFAD, understand theopportunities and constraints ofagricultural/rural SWAps much better todaythan when they were first launched. It isrecognized that SWAps are not blueprints towhich stakeholders simply subscribe; rather,they are the product of their collaboration.Stakeholders have to work together to createnew and comprehensive solutions, and what‘comes out’ can be no better than what is ‘putin’ the process. The task therefore is one ofworking together with governments and otherdevelopment partners to build them and thenconstantly strengthen them during the course
17
of implementation. Under such circumstances,IFAD can add value to SWAps by promoting thethemes and issues that, it has learnt from aquarter century of experience, are critical tothe lives of poor rural people. In this way,engagement offers IFAD a unique opportunityto have a catalytic impact on rural povertyreduction. It has a mandate to do so, and itdoes so armed with a strong conceptualframework for poverty reduction – asexpressed in its strategic framework 2002-2006 and its regional strategies – and substantial experience with working inrural poverty reduction.
Strengthening the poverty focus. While,increasingly, agricultural/rural SWAps have anexplicit focus on poverty reduction, by nomeans all governments or their developmentpartners have strong experience inoperationalizing this goal. As a consequence, itis by no means automatic that SWAps eitherhave a strong conceptual approach for povertyreduction or are able to promote the demand-driven agenda that underpins it. IFAD’sobjective in participating in agricultural/ruralSWAps, therefore, will be the sameeverywhere: to ensure that they work for thepoor. It has a critical and direct role to play,both in supporting the emergence of policiesthat respond directly to the requirements ofpoor rural people and in promoting practicalapproaches and instruments for implementingthose policies. These include building a sharedunderstanding of poor rural people as thetarget group for the SWAp; assisting thedevelopment of an understanding of the targetgroup’s livelihoods, and their economicconstraints and opportunities; encouraging aclient-oriented approach for research andextension; promoting the growth of ruraltrading networks; supporting the emergenceof farmers’ enterprise groups; and identifyingthe specific needs of women and developingapproaches for their empowerment.
3
20 With the support of IFADand other partners, theGovernment of Rwanda iscurrently experimentingwith a system of local-levelconsultation for theStrategic Plan forAgricultural Transformationthat is both relatively fastand comprehensive in areacoverage.21 In this context, IFAD hasbeen able to ensure that,in the Agricultural SupportServices Programme in theUnited Republic ofTanzania, the firstprogramme componentrelated to empowerment ofthe poor.
Ultimately, the most secure basis for makingSWAps work for the poor is to maximize theinput of the poor themselves into their designand implementation. IFAD will work with otherstakeholders to include representatives ofsmallholder producers in key consultationprocesses – and to strengthen the capacity ofthe smallholder community and theirrepresentatives to collectively analyse andarticulate their key requirements for sectoralchange.20 IFAD will also seek to build theirempowerment into the national and localmechanisms of SWAp implementation so as tostrengthen their capacity to effectively exercisecontrol relative to the service providers(government and private) with whom theyinteract, and so make the service providersaccountable to them as service choosers andusers.21 Effectively, therefore, IFAD mustpromote governance relative to the SWAp, andto every institution involved in it, the objectivebeing not only good governance but goodgovernance embracing an increased voice ofthe rural poor in decision-making.
Strengthening the focus on impact. SWApsrequire very broad and intensive engagementat the programme development stage,preceded by quite intensive policy and strategywork. Equally, they must be accompanied byclose attention to impact and results duringimplementation – not least because SWApsare considered processes of constantadjustment in which implementation andimpact feed-back is essential. As noted above,the current situation with regard to monitoringagricultural/rural SWAps is not satisfactory.On the one hand, they represent theconcentrated effort of stakeholders withregard to agricultural development and ruralpoverty reduction – and usually have quiteinnovative dimensions. On the other hand, verylittle effort is being expended on finding outwhether they are working – in terms ofachievement of anticipated impact on ruralpoverty. If SWAps are means, rather than ends,this must be considered a major shortcoming.
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Areas of particular focus for IFAD thereforemust be to: (a) ensure that agricultural/ruralSWAps have effective output and impactmonitoring systems; (b) assist in building anunderstanding of the value of monitoring andevaluation and a capacity to conductmonitoring and evaluation activities at thenational and local levels; and (c) above all,promote both a culture of management forimpact, and a demand for monitoring andevaluation data, among the managers of theSWAp.
Strengthening government ownership. Thenew development agenda in general, andSWAps specifically, explicitly aim to encouragegovernments to assume a stronger leadershiprole in the coordination of developmentassistance and to assist in building theircapacity to do so. They seek to ensure thatdevelopment assistance is delivered inaccordance with country priorities and insupport of their policies and institutions; andthey aim to promote the adoption by alldevelopment partners of the country’s keyfiduciary procedures. For IFAD, this is familiarground: as a multilateral financing institution,IFAD has always provided its loans togovernments to finance their programmes,managed according to their procedures; andthe importance of promoting governmentownership over the programmes has longbeen a mantra for the Fund. It is a role that hasbeen recognized and appreciated by manygovernments. What IFAD has not necessarilydone in the past is to address these issues inthe multi-stakeholder context of a SWAprather than a narrower bilateral relationship;future efforts in this area will be pursuedexplicitly within the broader collaborativeframework of the SWAp.
How IFAD will participate inagricultural/rural SWAps
Country strategic opportunities paper(COSOP). The COSOP is the starting point fordefining IFAD’s future operational engagementin a country, and the process of developing anin-house understanding of issues relative to anagricultural/rural SWAp must be initiated atthis stage. The COSOP should thus explicitlyfocus on issues such as governmentleadership relative to, for example, sectorpolicy and strategy formulation andinstitutional reform, and its willingness todeveloping a partnership with the developmentorganizations active in the sector. Equally, itshould assess the efforts being made by thedevelopment organizations to harmonize theirpractices and operations in the sector and,under its leadership, to align these withgovernment systems and procedures.Prospects for a sectoral SWAp should also behighlighted where this is under discussion.The strategic engagement proposed in theCOSOP would then be painted against thisbackground.
Early participation. One of the key lessons ofengagement to date in agricultural/ruralSWAps is that the earlier IFAD engages in theSWAp development process the better it is ableto influence its shape and content.22 On the onehand, good agricultural/rural SWAps shouldcertainly contribute to the emergence ofenhanced policies and institutions; but on theother, they should be built upon good nationalagricultural and rural development strategies,and on the institutional capacity to lead andmanage the preparation and implementationof a SWAp.23 In the future, IFAD will activelysupport the emergence of agricultural/ruralSWAps by pursuing further its engagementboth in upstream national strategydevelopment and in institutional capacitybuilding. To do so, it will use not only loan andgrant resources and engagement directly
22 It is significant that inUganda and the UnitedRepublic of Tanzania,where IFAD participatedearly on in the process, toa large extent the SWApdesigns respond to theneeds of poor rural producers.23 In Madagascar IFAD iscurrently supporting theemergence of a ruraldevelopment strategy fromthe very earliest stages;while in Rwanda, it willstrengthen the planningand operational capacity ofthe Ministry of Agricultureto enable it to develop andoperationalize anagricultural SWAp. Theseactivities are beingconducted in closecollaboration with other in-country developmentpartners.
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linked to the project/programme cycle, butalso stand-alone grants to Member States.
Financing arrangements. SWAps areexplicitly intended to promote the use ofgovernment systems for the financialmanagement of programme resources. As afull and active partner in the SWAp, it isappropriate that IFAD seek to channel itsresources through the sector-level poolingarrangements established; even if, as aninstitution dedicated specifically to ruralpoverty reduction, budget support (either GBSor sector-level) is not a suitable financingmechanism for IFAD. Participation in pooledfunding arrangements not only enables IFADto contribute to the agenda of harmonization; italso strengthens the Fund’s reputation withboth governments and its developmentpartners, and permits it to play a more activerole in promoting the issues it considersessential for the SWAp’s success.
Central to the issue of pooled funding under aSWAp is the fact that while, of course, it ispossible to identify the full set of activities tobe financed under the SWAp, unlike in a‘traditional’ project, IFAD is not able to identifyfor what specific activity within the agreedworkplan of the SWAp its resources are used;nor as a consequence, is it able to attributeimpact specifically to its investment. Thismeans it is essential that IFAD actively engagein the establishment of the priorities,safeguards and evaluation framework for theSWAp as a whole. In collaboration with thegovernment and its other partners, therefore,IFAD will, on the one hand, review and approvethe objectives, the outputs and the sum of theinvestment activities to be financed under theSWAp (including IFAD’s contribution – throughthe appraisal of the programme plan and theex ante reviews of the SWAp annual workplansand budgets); while on the other, it willsupport the development of fiduciary andmonitoring and evaluation arrangements forthe SWAp. As and when, on the basis of a
3formal review, the arrangements developedare adjudged to meet the necessary standardsfor IFAD to participate, then it may channel itsresources through the pooled fundingmechanism established for the SWAp. Keyelements to be reviewed will include thesystems and procedures for planning andbudgeting, disbursement, procurement,accounting, and external auditing (see Annex I); and, although not strictly an elementof the fiduciary arrangements, for monitoringand evaluation (Annex II). In the event that theyare not all considered satisfactory, IFADsupport for the SWAp will follow standard IFADprocurement and financial managementprocedures until such time as the commonarrangements have been satisfactorilydeveloped.
Contributing to policy dialogue. IFAD can bestadd value to SWAps primarily through its directengagement in dialogue relative to the keypolicy and institutional issues, identified above,in which it has experience and expertise:typically, enhancing the poverty focus;strengthening the accountability ofgovernment and other service providers topoor rural people; ensuring an effective focuson impact; and promoting governmentownership. Key IFAD strategic documents, aswell as the experience and lessons learnedfrom its projects and programmes (in-countryand elsewhere), provide the basis for suchengagement. IFAD’s experience and expertiseis primarily at the micro level (a weak area inSWAps), and this is where it would be expectedto add most value. However, it will also workwith donors providing GBS, on macro-policyissues relevant to the rural sector and public-sector reform.
Policy dialogue is an extremely intensiveactivity and much of the work involved takesplace in-country. This has created particularchallenges for IFAD, whose current businessmodel focuses upon national programmeexecution and capacity building – with most
20
staff Rome-based. Part of IFAD’s response hasbeen the mobilization of local representatives(equivalent to the national programme officerswho are the sectoral advisers in many bilateraland multilateral representations) under theField Presence Pilot Initiative and similararrangements. Working in close collaborationwith the country programme managers, thesestaff have enabled IFAD to more effectivelyengage in SWAp and related processes and,increasingly, to play a substantive role in policydialogue. It has yet to be determined as towhether this arrangement will enable IFAD toplay this role to its maximum potential orwhether further IFAD field presence isrequired. In the meantime, however, in anycountry in which IFAD is planning to engage ina SWAp, it will ensure that it has some sort ofdirect field presence.
SWAp review and loan/grant administration.SWAps are generally subject to two forms ofjoint review: technical reviews ofimplementation based on field visits by thegovernment and its development partners;and a more formal annual review by all partiesof progress achieved in the previous year andof the annual workplan and budget for thefollowing year. IFAD (both headquarters staffand field presence) and its contractedcooperating institution will play an active rolein both sets of activities, bringing to bear theirconsiderable experience in supportinggovernment-owned and managed projectsand programmes, and focusing particularly onthe policy issues highlighted above. Thespecific role to be played by the cooperatinginstitution for IFAD in the context of a SWApmay be slightly different from its usual role ina traditional project, and this would be spelledout in the letter of appointment. This issue isspelled out further in Annex I.
Using projects to strengthen SWAps. There isbroad acceptance by governments and theirdevelopment partners alike that SWAps do notrequire the elimination of all projects in favour
of one monolithic ‘sectoral programme’. WhileSWAps represent efforts to systematize andsupport a robust general framework for ruraldevelopment, they are also supposed to beprocesses, and as such they need to be fedwith new information and perspectives to drivetheir own development. That innovation mustprincipally come from outside, and, arguably,project-type organization is the best way ofpromoting innovation.
In a sense therefore SWAps actually requireprojects for their continual renewal – providingthose projects meet certain important criteria.These include ensuring that they: (a) areprecisely focused on issues or themes notadequately dealt with by the existing system;(b) are supportive of principles broadlyconsistent with those of the SWAp (e.g. farmerempowerment, capacity building among thepoor, and partnership with the private sector);(c) do not depend for their success uponconditions that can not be replicated at thesector level; (d) have adequate internalsystems of measurement, analysis andreporting; (e) include pathways for theinjection of validated results into broaderinstitutional and policy systems; and (f) areeffectively coordinated within the SWApframework – promoting country leadership,using government systems, fitting within theMTEF and following best practice as defined bythe harmonization agenda. IFAD, then, will notforgo projects but, working with its in-countrypartners, it will ensure that it developsprojects of a certain sort – that innovate, add toknowledge and can tangibly influence theprocess of sectoral policy and institutionalchange. The projects developed in this contextwill be increasingly assessed against thesecriteria.
21
IFAD policy
In those countries where the government hasan interest in developing an agricultural/ruralSWAp as an approach for reducing ruralpoverty and where, through its engagementIFAD can influence the future shape anddirection of the proposed SWAp, the Fund willactively support the government and otherstakeholders to build the strategic andinstitutional basis for the SWAp. Once thatbasis for the SWAp has been built, and thegovernment and its development partners arecommitted to its operationalization, IFAD willparticipate in the SWAp and, through itsparticipation, it will seek to add value to it andmake it a more effective vehicle for ruralpoverty reduction.
IFAD’s participation in the SWAp will not be tothe exclusion of project-based activities,however; in all countries in which it doesparticipate in a SWAp, it is probable that at thesame time it will also be engaging in otherloan- and grant-financed activities supportiveof national and sectoral policies for ruralpoverty reduction. And in those countrieswhere there is no SWAp envisaged, and this inreality will be the case in the vast majority ofIFAD borrowing countries, then projects, andin some cases subsectoral programmes, willcontinue to represent the principal modusoperandi for the Fund.
In countries where IFAD does participate in anagricultural/rural SWAp, its greatest scope foradding value will be through its engagement inpolicy dialogue in areas of critical importancefor rural poverty reduction and its involvementin technical and other operational reviews ofprogress achieved and investment activitiesplanned. However, if it is to participate in theharmonized funding arrangements thatrepresent a critical element of all SWAps, thenit must also, on the one hand, review theobjectives, the outputs and the sum of the
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24 Upon approval of thispolicy, further work will beundertaken with the Officeof Evaluation in order todevelop the monitoringframe and indicators thatwill provide the basis forthe evaluation.
proposed investment activities to be financedunder the SWAp, and on the other hand, satisfyitself as to the adequacy of the government-managed fiduciary and monitoring andevaluation arrangements. In thosecircumstances where the arrangements areconsidered satisfactory (as defined in Annex II),it may choose to participate in the pooledfunding arrangements (though not in eithergeneral or sector budget support). In thoseother situations where the fiduciaryarrangements are not yet adequate, IFAD willprovide its support for the SWAp using its own(disbursement and other) systems andprocedures while at the same time supportingthe development of the government’s fiduciaryarrangements. Once IFAD has judged these tobe satisfactory, it will be authorized toparticipate in the pooled arrangements.
At this stage, it is uncertain as to how manySWAps IFAD will engage in over the comingfew years. However, once it has gained furtherexperience, its engagement will be subject toindependent evaluation in order to assessissues such as: (a) the developmenteffectiveness of IFAD-supported SWAps; (b)the value-addition of IFAD’s engagement inthem; (c) the impact of participation on IFADhuman and other resources; (d) theappropriateness of this policy; and (e) theextent to which IFAD has adhered to the policyin its future engagements in SWAps.24 Thisevaluation will be conducted in 2008.
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23
RECOMMENDATION
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It is recommended that the Executive Boardapprove the proposed IFAD Policy on sectorwide approaches for Agriculture and RuralDevelopment, as presented in this documentand as defined in particular in paragraphs 47-50 above, and detailed in Annexes I and II.
24
25
annexes
Annex I
:: Arrangements for themonitoring and evaluationand review of SWApimplementation and impact
Annex II
:: Pooled funding:fiduciary arrangements forthe use and reporting offunds
Annex III
:: Executive Board clarification and approval
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1. Monitoring and evaluation. A well-defined impact and performance monitoring system, witha strong tracking system and interim and outcome indicators to measure against baselinedata, is considered essential as a framework for the implementation of the SWAp. Atappraisal, the government, IFAD and all participating financiers will agree on: (a) a set of(logframe-derived, and thus measurable) programme impact, output and outcome indicatorswith time-bound targets and milestones; (b) the baseline data to be gathered and the entityresponsible for its collection; and (c) the performance monitoring and reporting system to beused, and the budget to be used for this purpose. To the extent possible, the monitoring andevaluation systems in place at the sectoral agencies will be used.25
2. During implementation, IFAD will, as necessary, assist in building up an understanding of thevalue of monitoring and evaluation and a capacity to conduct monitoring and evaluationactivities at the national and local levels. At all times, its value-added will be to promote afocus on assessing the impact of the SWAp on the livelihoods of poor rural producers. It willalso play an active role in promoting a culture of management for impact within the SWAp asa whole: encouraging the managers of the SWAp as a whole and its components to demandmonitoring and evaluation data and to constantly reassess and adjust as necessary theinvestment activities supported in the light of the information and understanding gained.
3. Progress on the agreed performance indicators will be assessed by all parties as part of theSWAp review process and adjustments will be made to the programme as necessary. Atcompletion, a final evaluation of the SWAp will be undertaken, as established in agreementamong all partners.
4. Joint reviews. SWAps are generally subject to two forms of review, jointly conducted by thegovernment and its development partners. The first are the technical reviews ofimplementation, based on field visits by both parties; the second are more formal annualreviews of progress achieved in the past year and the annual workplan and budget for the nextyear. The former should play a critical role in facilitating a common understanding of keyimplementation issues on the ground and of programme impact; the latter provides the mainforum for discussing and resolving policy and operational issues, for adjusting the programmeas needed on the basis of the experiences gained, and for reviewing and approving the annualworkplan and budget – including proposed investment activities, the expenditure andfinancing plans, the procurement plan and the performance indicators to be tracked. In bothof these reviews, IFAD and/or its cooperating institution will play an active role, drawing upontheir considerable experience in providing implementation support to, and supervising,government-owned and -managed projects and programmes.
25 In this context, specificissues to note are that (a)evidently, it will not bepossible to attributeimpact to IFAD fundsalone; and (b) as such, itmay not be possible forIFAD to ensure that thecommon reportingmechanism developed andapproved by all parties isin full conformity with theResults and ImpactManagement System, ascurrently configured.
ANNEX IARRANGEMENTS FOR THE MONITORING AND EVALUATION AND REVIEW OF SWAP IMPLEMENTATION AND IMPACT
5. The role of IFAD’s cooperating institution. IFAD’s cooperating institution has an importantrole to play within the context of a SWAp even if the tasks that IFAD will expect it to undertakewill differ from those it would charge it with in a more traditional project. In particular, bothits technical/implementation support and (in those cases where IFAD enters a pooled fundingarrangement) its fiduciary roles will be played within the broader framework of the overallpartnership between government and its development partners. As such it will be required towork closely with other members of the donor group and to participate in partnership-wideprocesses. In cases where IFAD funds are disbursed through a pooled funding arrangement,its financial administration role, too, will differ from that which it usually plays, with financialmanagement reports for the pooled account as a whole providing the basis for approvingdisbursement requests from the government.
27
annex I
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1. SWAps are explicitly intended to promote the use of government systems for the financialmanagement of programme resources. As a full and active partner in agricultural/ruralSWAps, it is appropriate that IFAD seek to channel its resources through the sector-levelpooling arrangements established; even if, as an institution dedicated specifically to ruralpoverty reduction, budget support (either GBS or sector-level) is not a suitable financingmechanism for IFAD participation.
2. Prior to IFAD engaging in a pooled funding arrangement for a SWAp, it will need to satisfyitself that all the main elements of the fiduciary arrangements for the effective managementof the SWAp are in place. This will normally be done prior to, and during, the appraisal of theSWAp, thereby enabling IFAD to disburse its funds through the pooled funding arrangementsfrom the start of the SWAp. However, in some countries a situation may arise where, in ordernot to excessively delay the start-up of a SWAp to which all stakeholders are committed, thedevelopment partners will start off by disbursing their funds according to their ownmechanisms, while at the same time – and during the course of SWAp implementation –assisting the government to establish its fiduciary arrangements. Under these circumstances,IFAD will start to disburse its funds in support of the SWAp using traditional project fundingmechanisms (and following its own standard procedures for disbursement, procurement andexternal audit), and may switch to the use of the pooled funding arrangements during thecourse of implementation once it has satisfied itself that adequate fiduciary arrangements arein place.
3. In all cases, the fiduciary arrangements associated with pooled funding will be explained in adocument presented for the Executive Board’s approval. In those cases where it is proposed,at the time of Executive Board approval of the financing, to enter the pooled funding uponeffectiveness of the financing agreement, these arrangements will be described in thePresident’s Report and Recommendation; in cases where it is intended to switch fromtraditional project funding to pooled funding during the course of SWAp implementation, theproposed arrangements will be explained in a President’s Memorandum submitted to theExecutive Board for approval.
4. The process of reviewing and approving the fiduciary arrangements will be a joint exercise,conducted by all of the development partners interested in engaging in the pooled fundingarrangements. From IFAD’s side, it will involve not only the regional divisions within theProgramme Management Department, but also the Office of the General Counsel and theOffice of the Controller, in order to cover all the likely issues involved. In practice, such reviewswill usually be led by the World Bank when it is a partner in the pooled financingarrangements; in all cases, World Bank endorsement of the financial management andprocurement arrangements will be a requirement for IFAD participation in the pooledarrangement.
ANNEX IIPOOLED FUNDING: FIDUCIARY ARRANGEMENTS FOR THE USE AND REPORTING OF FUNDS
5. The review itself is likely to comprise three broad elements. First, it will need to be confirmedthat the necessary in-country preconditions for the development of a common fundingarrangement exist. Such preconditions will include macroeconomic stability; a strong countrycommitment and institutional capacity to manage the SWAp; a strong sectoral strategy; andthe existence of an effective donor coordination mechanism. Second, the review itself willbuild, wherever possible, upon other national and external tools and diagnostics that mayalready have been undertaken. These may include the MTEF and any recent publicexpenditure review (conducted at either the national or sector level), country procurementassessment report and country financial accountability assessment. Third, each element ofthe fiduciary arrangements will be reviewed in order to determine that they are satisfactory.These will include the systems and procedures for: (a) planning and budgeting; (b)disbursement of funds; (c) procurement; and (d) accounting and audits:
(a) Planning and budgeting. The goal, outcomes and outputs in the SWAp implementationplan will provide the starting point for developing the annual workplan and budget for theprogramme.26 IFAD will participate in the (government/development partners) joint reviewof the annual workplan and budget, looking particularly at (i) the proposed investmentactivities and expenditures, and their relevance for achieving the proposed outputs andoutcomes; and (ii) the process for developing the annual workplan and budget with a viewto ensuring that it is decentralized, bottom-up, and involves the effective participation ofrural community organizations.
(b) Disbursement of funds. At appraisal (or during a specific review conducted during thecourse of SWAp implementation) IFAD will join the government and its other financingpartners to identify investment activities to be financed from the pooled account, andagree on the proportion to be contributed to the pooled account by each financierparticipating in the arrangement. IFAD will disburse funds in advance into the pooledaccount as per the agreed proportion and, after the second disbursement, will releasefunds on the basis of consolidated (quarterly or semesterly) financial monitoring reports(FMR) prepared by the government and provided to all financiers in the pool. The FMRpresents the activities and resulting expenditures incurred in the previous period, as wellas a workplan and budget for the following period.
Supporting documentation for individual transactions financed from the pool would not besubmitted to IFAD (or its CI) or other financiers, although the government would berequired to maintain adequate records of the transactions, which could be reviewed ifdeemed necessary (along with the FMRs and audit reports) in order to determine whetherdisbursements made actually conformed to the financing framework agreed upon.
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annex II
26 This, in turn, providesthe basis for the bilateraldonors to pledge theirlevel of financial supportfor the coming year.
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(c) Procurement. The procurement procedures proposed by the government will be reviewedby IFAD and all other financing partners at appraisal (or during a specific review), and onlyif deemed satisfactory will they be used for expenditures financed from the pooledaccount. Each annual workplan and budget for the SWAp would include a procurementplan identifying the goods and services to be procured, the method of procurement andsource of funding (pooled account or otherwise); this would be subject to the priorapproval of IFAD and all other participating financiers. The procurements then financed bythe pooled funds would be subject to ex post review. The government, IFAD, and allpartners participating in the pool would agree on a plan specifying the frequency of thereviews, the procedure to be used, and the responsibility for undertaking the reviews. IFADand all other partners would receive copies of the reviews and, should these reveal thatany procurement failed to adhere to the agreed procedures, IFAD would reserve the rightto cancel from its loan (or grant), or request reimbursement of, the amount in question.
Given the fungibility of donor resources and the need both to avoid raising the transactioncosts to the government and to act in a way contrary to the harmonization agenda, IFADfinancing of eligible expenditures will not be restricted to the procurement of goods, worksand consulting services by member countries of IFAD.
(d) Accounting and audits. At appraisal, the government, IFAD, and all other financingpartners participating in the pooled arrangements will need to come to an agreement onthe adequacy of the government’s accounting procedures and practices at all levels, andon the frequency, form, and content of the consolidated financial monitoring reports. Theaccounts will be subject to external audits, conducted by either the government’s auditor-general or a private firm of auditors contracted by the government. Agreement will needto be reached regarding the auditing arrangements, including the frequency, format, andcontent of audit reports, eligibility criteria for auditor selection, and follow up of auditrecommendations. The cost of external audits may be covered by the pooled funds.
6. Agreements on all of the above elements, as well as the monitoring and evaluationframework, will be reflected in the SWAp’s memorandum of understanding, a formaldocument that sets out the framework through which the government and those of itsdevelopment parties which have entered the pooled funding arrangement will cooperate.27 Thememorandum of understanding will be signed by all parties.
27 The memorandum ofunderstanding may alsodefine expected standardsand procedures relative toenvironmental impactassessment. Whereverpossible, IFAD and otherpartners would rely ongovernment systems.These, too, would bereviewed prior to, or at,appraisal; wherenecessary, support wouldbe provided for thestrengthening of thegovernment’s proceduresfor environmental impactassessment prior to theiradoption by all parties.
32
1. The Executive Board approved the IFAD Policy on Sector-wide Approaches for Agriculture andRural Development. Clarifications were provided by IFAD staff on a number of key issues; andfollowing agreement that the points made would be annexed to the final version of the policypaper, all Executive Board members were able to support the policy.
2. In presenting the policy paper, it was confirmed that IFAD resources would be provided insupport of sector-wide programmes (rather than approaches): concrete initiatives aimed atpromoting a change agenda, built on both investment and policy dialogue, financing anaggregation of project-type activities, and focusing on the reduction of rural poverty. Suchprogrammes are considered wholly consistent with IFAD’s mandate and do not represent asubstantive departure from IFAD’s traditional way of doing business. They have goals,objectives, outcomes, activities with an associated expenditure plan and budget, and a clearmonitoring frame, indicators, targets, and milestones. In supporting sector-wideprogrammes, IFAD will know precisely what its funding will be contributing to; and in doing so,the investment activities it will finance will be exactly the same ones as those it supportsunder traditional projects, in pursuit of similar goals and objectives.
3. The policy does not permit IFAD to provide general or sector budget support to its MemberStates. IFAD has no wish to make its resources available in this manner: it has no comparativeadvantage in doing so. IFAD resources will be provided either within a pooled fundingarrangement – at the level either of the programme as a whole or of a subsectoral projectmaking up a part of the programme – or using traditional joint, or stand-alone, financingarrangements. This is all the more important given IFAD’s commitment to the ParisDeclaration on Aid Effectiveness which has been supported by all Members of IFAD’sExecutive Board. However, IFAD will enter a pooled funding arrangement only where itreceives the endorsement of the World Bank relative to the fiduciary arrangementsestablished for the programme; in practical terms, this is taken to mean that the World Bankwill either be a participant in the pooled funding arrangements or will be providing budgetsupport to the government, outside the sector-wide programme.
ANNEX IIIEXECUTIVE BOARD CLARIFICATION AND APPROVAL
4. The pooled account for the sector-wide programme to which IFAD will contribute (with itsdefined and agreed activities, budget and monitoring frames) will be made up of resourcesprovided both by the government and its development partners, some coming from the financeministry (including funds provided by some development partners as budget support) andsome disbursed by the development partners directly into the account. Once disbursed intothe pooled account, the IFAD and other resources will be used solely and exclusively tosupport the approved activities and expenditures of the sector-wide programme, as describedabove and excluding budget support of any kind.
5. On other issues, it was explained to the Executive Board members that work is ongoing interms of modifying the RIMS to accommodate IFAD funding in support of sector-wideprogrammes and it was confirmed that it is planned for the independent Office of Evaluationto undertake an evaluation of the policy in 2008.
annex III
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ABBREVIATIONS AND ACRONYMS
ASDP Agricultural Sector Development ProgrammeASIP Agricultural Sector Investment ProgrammeCOSOP country strategic opportunities paperGBS general budget supportMTEF Medium-term Expenditure FrameworkNAADS National Agricultural Advisory Services (Uganda)PMA Plan for Modernisation of Agriculture (Uganda)PROAGRI Agricultural Sector Public Expenditure ProgrammePRSP poverty reduction strategy paperSIP sector investment programmeSWAp sector-wide approach
All photographs by IFADG. Bizzarri, R. Chalasani, L. Dematteis, F. Mattioli, L. Taylor
Printed by: Quintily, Rome (Italy)April 2006
International Fund for Agricultural DevelopmentVia del Serafico, 10700142 Rome, ItalyTelephone: +39 06 54591Facsimile: +39 06 5043463E-mail: [email protected]