Making budget support work for development

European parliament hearing

Lucy Hayes, Policy and Advocacy Officer, European Network on Debt and Development

Brussels, 5th November 2008

Structure of presentation

• What is Eurodad?

• Some facts about budget support

• Budget support and accountability

• Budget support and conditionality

• Improving budget support

What is Eurodad?• A network of 54 organisations from 17 countries (including Norway

and Switzerland)

• A platform for joint research and advocacy on development finance – aid, IFIs, debt, capital flight, etc.

• A specialist tracker of influential institutions – the World Bank, IMF, Paris Club, OECD DAC, European Union institutions, etc

• An office of 8 people in Brussels

• An NGO funded by its members (1/3), the Dutch, Swedish and British governments and some private foundations.

• A link between European NGOs and relevant coalitions in other regions

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TOTAL AID OFFICIAL AID to 54 DEVELOPING COUNTRIES BUDGET SUPPORT

How much aid spent as budget support?

• Only 5% of all ODA is provided as budget support (OECD/DAC)

• Paris Monitoring Survey on Aid Effectiveness finds that of official aid actually disbursed to 54 developing countries, 22% of aid disbursed to those countries delivered as budget support– Excludes aid through northern NGOs– Excludes “Non-aid” items (debt cancellation, support for

refugees and students in Europe)

• The European Commission has agreed to channel 50% of EC ODA through budget support by 2010.

Aid and accountability

• All aid needs to be both transparent and accountable in order to be effective.

• Parliaments both north and south should have oversight over

aid.

• In the south, when aid is “on budget” there is greater potential for parliamentary oversight and for citizens to see how aid flows are being used to support national policies– Budget support is the easiest way to put aid “on budget” – so

that it is reflected in the budget, is overseen by the parliament, and goes through the treasury and accounting systems

Budget support and accountability

• Improved transparency from donors regarding flows and clear aid contracts setting out reporting and accountability terms are critical for accountability to citizens north and south.

• Budget support contracts should also be underpinned by core human rights principles and should set out the steps that donors will take if there is a breach of these principles.

Budget support and ownership

• Aid is more likely to be successful when it is “owned” by the developing country. It needs to be aligned to a recipient government’s strategies and systems if recipient governments are to be “in the driving seat”

• Budget support is a clear way of supporting a recipient governments own policies

Budget support and conditionality

- Eurodad supports the shift from the EC towards more “outcome based” conditions, but these should be over a longer a period

Outcome-based allocations or conditions refer to:

(a) disbursements linked to performance measured by indicators at the outcome level;

(b) which refrain from spelling out concrete policy measures that should be adopted in order to obtain certain results; and

(c) which refer to outcomes in areas clearly linked to human development and poverty reduction.

“Donors should agree to reform, streamline and harmonise the design and implementation of conditionality with a view to increasing ownership, predictability, transparency and democratic scrutiny of conditions for the use of aid resources” European Council, July 2008

Upwards and downwards accountability

Improving parliamentary and citizen oversight of aid requires more donor transparency

• Information on aid not disaggregated or accessible enough

• New donor commitment in Accra: “Donors will publicly disclose regular, detailed and timely information on volume, allocation and, when available, results of development expenditure to enable more accurate budget, accounting and audit by developing countries.”

“Donors would tell you the information If you went and knocked on their

door, but you have to be in their world in order to

get access in the first place”, Sierra Leone CSO

representative

“How can you handle local accountability which is so

important – if aid is not even visible to the organisations of

scrutiny in the country” Richard Manning

Improving accountability of budget support

- Making the process of deciding about budget support contracts more inclusive. Consult citizens, parliamentarians, other Ministries

- Indicators for improving PFM should also consider whether information is being produced in a way that is useful for parliamentary budget committees, citizens groups etc

- Proactive communication by donors of their activities, and support for building capacity for citizens to hold governments to account very important- Support for independent media groups, citizens groups engaged in

monitoring and advocating on budgets and local and national level

Improving ownership and predictability of budget

support

• Improve the predictability of budget support– Streamlining conditionality practices and

reducing the “collage of conditions” that European donors bring to the table

– Roll out MDG contracts which will mean aid is committed over a 6 year period, with a mid-term review.

What to avoid…

Contacts

By Lucy Hayes, Policy and Advocacy OfficerEuropean Network on Debt and Development

lhayes@eurodad.orgwww.eurodad.org

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