Post on 30-Dec-2015
description
What do we mean by “governance”?
• Greek, kubernao, “to steer”• World Bank: exercise of political authority and
use of institutional resources to manage society’s problems and affairs
• Wikepedia: decisions that define expectations, grant power and verify performance
• European Commission: the rules, processes and behaviour that affect the way in which powers are exercised … particularly as regards openness, participation, accountability, effectiveness and coherence.
Or define by activities supported
• World Bank: public sector management and rule of law
• UNDP: elections, human rights, justice, public sector reform, decentralization, e governance, parliamentary development
Governance IS important for development
• Many development experts believe governance weaknesses are the main cause of poor development performance– Paul Collier: One of four main reasons why the Bottom
Billion remain in poverty– Knack and Keefer, 1996: highly significant partial
correlation between institutional quality and 25 year average economic growth rates across countries
– Acemoglu, Johnson and Robinson, 2001: institutional quality strong causal effect on per capita incomes
Our focus today: goverance and budget support
1. Ownership is vital for development effectiveness
2. Budget support helps to build ownership3. Good governance is a necessary condition for
effective budget support 4. Nationally owned governance assessments
provide the basis for effective budget implementation
Paris Declaration on Development Effectiveness: Principles
• Ownership: Partner countries exercise effective leadership over their development policies and strategies, and coordinate development actions
• Alignment: Donors base their overall support on partner countries’ national development strategies, institutions and procedures
• Harmonization: Donors’ actions are more harmonized, transparent and collectively effective
• Management for results: Managing resources and improving decision-making for results and long-term sustainability
• Mutual accountability: Donors and partners, at all levels, are accountable for development results
Importance of Ownership
• Ownership means:– National commitment to national development
plans– Plans such as PRSPs fully mainstreamed into the
national policy process– Donors prepared to base support on the
nationally owned plans
• Ownership, alignment and harmonization linked:
Simplification of procedures
Alignment with government’s
agenda
Common arrangements
Sharing of information
Reliance on government’s systems
Governments set the agenda
OWNERSHIP
ALIGNMENT
HARMONISATION
MainstreamingMainstreaming means:• Widespread consultation in the preparation of national
development plan or PRSP• PRSP or national plan converted into MTEF• PRSP and MTEF approved by the president, cabinet and
parliament as part of normal policy process• MTEF a multi-year statement of results to be achieved and
funding allocated to those results, with the available resources
• MTEF is the basis for the annual budget• Institutions have the capacity to implement the policies
programs
Country PRSP costed
PRSP linked to budget
PRSP linked to MTEF
Cabinet approve PRSP priorities
Cabinet review progress in the implementation of the PRSP
Special unit set up to manage preparation /implementation of the PRSP
Unit location
Benin Y Y Y Y Y Y Min. of state
Burkina Faso Y Y Y N N N
Cameroon N Y N N N N
Cape Verde Y N N N Y Y National planning
CAR N N N N N Y Econ. plann
Chad N Y Y Y Y N
DRC N N N N N N
Ethiopia Y Y Y N N Y Finance
Gambia Y Y Y Y Finance
Ghana Y Y Y N Y Y Econ. Planning
Guinea Y Y Y Y Y N
Guinea-B N N N N N Y Social Solidarity
Kenya Y Y Y Y N Y Office President
Lesotho N N N Y N Y Devlp. Planning
Madagascar Y Y N N N Y Prime Minister
Malawi Y N N N N Y Finance, Econ Plan
Mali Y Y Y N N Y Finance
Mauritania Y Y Y N Y Y
Mozambique N N Y Y Y Y National Planning
Niger N N Y N N N
Rwanda N Y N Y N Y Finance
Sao Tome N N N N N N
Senegal
Sierra Leone Y Y Y Y N Y Development
Tanzania Y Y Y Y N Y
Uganda Y Y Y Y Y Y
Zambia Y Y Y Y N Y Finance
Leadership and mainstreaming
• Presidents and cabinets pay attention to implementation of policy as well as its formulation: often don’t
• Need to set up policy management capacity in cabinet office
• Policy management included monitoring implementation and evaluating impact
• President and cabinet prepared to adjust following monitoring
Defining budget support
• Sometimes called development policy lending or grants• Funding disbursed to government budget on basis of
agreement to achieve certain policy results, before or after results achieved
• Government manages funds and organizes the achievement of the results
• Can be sectoral or national (PRSCs, balance of payments support) policy results
• Contrast with project lending or grants where funds are earmarked for particular uses and expenditure requires pre-approval by donor(s) before funds disbursed
Donors and budget support
• OECD/DAC: one third total flows will be budget support “in near future”
• EC objective: 50% by 2010• Strong supporters: UK, Sweden, Netherlands,
Denmark, Norway, Finland, Germany, EC and World Bank
• In 2004 30-40 % in Tanzania, Uganda, Zambia, Malawi, Ethiopia, Mozambique, Kenya
World Bank and budget supportFigure 1. Development Policy Lending Shares for IDA and IBRD Countries
38%
64%
37% 40%
32% 35% 28% 29%
47%
27% 30%
25% 19%
27% 26% 23% 24%
21%
33%
50%
33% 31% 30%
31% 26%
27% 40%
0%
10%
20%
30%
40%
50%
60%
70%
2001 2002 2003 2004 2005 2006 2007 2008 2009
IBRD DPL IDA DPL DPL % Total
Table 1. Policy-Based Lending Operations and Commitments, FY00-09
FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09
IDA Number of Operations 9 15 23 24 23 32 30 35 31 39 of which adjustment lending 9 15 23 24 23 23 1 0 0 0 Lending commitments (US$M) 682 1,826 2,443 1,831 1,698 2,301 2,425 2,645 2,672 3,028
IBRD Number of operations 14 15 21 21 18 23 21 22 16 34 of which adjustment lending 14 15 21 21 18 14 2 0 0 0 Lending commitments (US$M) 4,426 3,937 7,383 4,187 4,453 4,264 4,905 3,635 3,967 15,532
Total Number of operations 23 30 44 45 41 55 51 57 47 73 of which adjustment lending 23 30 44 45 41 37 3 0 0 0 Lending commitments (US$M) 5,108 5,763 9,826 6,018 6,151 6,565 7,330 6,280 6,639 18,560
Adjustment Lending Development Policy Lending
EC conditions for budget support
• National policy and strategy• Stability oriented macroeconomic framework• Program to improve public financial
management
Donors less enthusiastic about budget support
• Need to link their support to particular activities
• Don’t trust government systems• In particular public financial management:
allocation, expenditure, and accounting• Procurement weakest of all
Problems with budget support are governance problems
• Donor harmonization vs ownership• Weak public financial management capacity• Corruption
Donor harmonization vs ownership
• Effort to harmonize donors often leaves out government– Donor staff spend most time interacting with each
other rather than government (recent studies of implementation of Paris Declaration)
• Budget support works best if government leads harmonization– Eg Mozambique and Uganda
Weak public financial management capacity
• Three components of PFM: preparing the budget; executing the budget; accounting for the uses of funds
• Preparation improving: consultative plus more true MTEFs
• Weakest very often budget execution• Also “real” accountability: sanctions against
those responsible for misspending• All budget support accompanied by PFM reform
and capacity building
Procurement a particularly serious problem
• Studies of alignment objective of Paris Declaration show this to be the weakest link
• Main reason for some donors not favoring budget support
• Many continue to favor donor supervision of large procurement requiring international competitive bidding
• Problem not usually the procurement systems but their implementation
Corruption• In dollar value terms, public procurement the main source
of corruption• Many African countries at bottom of all the corruption
rankings• Anti-corruption agencies have succeeded in Asia: Hong
Kong 12th in TI ranking, ahead of UK, Germany, US, Norway and Ireland
• African country well up TI ranking all have good PFM and strong anti-corruption agencies
• Ownership again: has to be high level political commitment to fight corruption leading to adequate resources
• Hong Kong anti corruption authority has 900 highly trained investigators; no African country close
The story so far….
• Budget support enhances ownership• Ownership improves development effectiveness• Governance problems weaken effectiveness of budget
support• So, governance problems have to be addressed along
with budget support• Therefore we need to assess governance problems as
budget support programs are put together• And monitor progress in achieving good governance
objectives
Governance reform needs ownership too
• Government should build own capacity to assess governance issues (OGC objective)
• Governance reforms should be part of national plans and PRSPs (almost all do)
• Government should monitor and report progress with governance reforms (few do)
• Civil society should be involved in monitoring (some are, but independently)
• Monitoring should be part of the policy process (rare)
Importance of national ownership of governance assessments
• Governance assessments now popular with donors
• But for whom?• OECD: out of 37 donor supported assessment
tools, only four involve joint assessment• National ownership of assessment will lead to
ownership of reform