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ELEMENTS OF AN EFFECTIVE POVERTY-REDUCTION STRATEGY

Draft Background Brief for East Asia Forum on National Plans as Poverty Reduction Strategies

Rosa Alonso i Terme (WB-EASPR), Elliott Harris (IMF-PDR), Erika Jorgensen (WB-OPCS), Eva Natali (WB-EASPR), Linda Van Gelder (WB-PREM) and Jan Walliser (WB-OPCS)

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The main challenge in effectively mainstreaming the PRSP process is to ensure that the core principles that have led to improved plans, budgets, and policies are preserved and continue to be strengthened. If the challenge is met, countries in the region will produce and implement stronger government-owned plans that can be a sufficient basis for the alignment of donor support—hence incorporating the best characteristics of both plans and PRSPs. Streamlined reporting procedures and alignment of donor cycles around country-specific timetables should also contribute to reducing the transaction costs of aid for recipient countries. In order for this result to be achieved, however, a minimum level of consensus among key stakeholders in the region is needed regarding the critical elements of a plan and process that can function as a credible poverty-reduction strategy.1 This brief aims to present the critical elements of such a plan and process as well as streamlined donor procedures to support it. The brief is focused around the four critical principles of: a) transparency and participation; b) poverty focus; c) results orientation; and d) donor alignment and harmonization. In each of these areas, the brief seeks to identify critical elements of each principle, illustrate them with good practices from the region and spell out a list of suggested critical markers to monitor progress. 1.A Transparency Wide information availability is important for bettering governance and can help improve the effectiveness of government policies, particularly in the context of weak institutions. Information, however, needs to be relevant, readable, timely and accessible in order to play this role. In this section, we outline four key areas where information ought to be available and we stress the importance of actively disseminating this information, along with illustrations of good practices. The section ends with a list of the critical actions governments can take to improve transparency. Increasing public understanding of policy-making processes Access to information on each country’s constitution, law-making process and on the processes involved in elaborating national plans and budgets is particularly important. This information provides citizens and organizations with knowledge on how their government works and what the windows of opportunity for participating in that process are. This enhances accountability as well as overall ownership of government policies by society. Countries in our region have some good practices in this area. Cambodia, for example, has a website2 where the constitution and the procedures on how to adopt and amend laws are posted while the website of the Ministry of Finance of Timor-Leste3 includes a summary of the budget elaboration process. Both countries, moreover, have ongoing programs to increase the public understanding of their basic laws and other legal texts. Most PRSPs outline the consultation process followed in their elaboration, as does the draft national plan of Lao P.D.R. General information about the process to be followed in the elaboration of national plans, however, is often not available on government websites and the participation action plan for new national plans are often not specified and publicized in a timely

1 In this paper, poverty reduction strategy will be used as a generic term when referring to both PRSPs and poverty-focused national plans. 2 http://www.cambodian-parliament.org/ 3 http://www.mopf.gov.tp/

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fashion. Sharing information on government-donor coordination processes and their results is also a good practice. For example, Cambodia’s donor coordination committee has a website4 including minutes of meetings, technical working groups’ progress reports, the government’s action plan on harmonization and alignment and the corresponding declaration by development partners. Ensuring Public Availability of Key Policy Documents Broad publicity of poverty reduction strategies is an important tool in the hands of Governments to communicate to their populations their goals, policy priorities, results achieved and challenges ahead. It is also a means to increasing demand and accountability for results. The Government of Vietnam, for example, has a comprehensive website on the CPRGS (its PRSP).5 This website includes the strategy itself, progress reports, supporting legal documents, related activities with corresponding minutes, information on critical programs underpinning the strategy and a wide range of cross-links to resource materials. Similarly, Governments should make publicly available other key policy documents such as public investment programs, sector strategies and donor programs and projects. All these documents should be available to Parliament and to the public at large. Publicizing Readable, Timely Budgets Information on budgets is just as critical for good governance and the achievement of development results. As the OECD’s “Best practice on budget transparency” document6 points out, governments ought to aim to publish: a) a pre-budget statement; b) the executive’s budget proposal; c) the budget; d) a mid-year review; e) a year-end report; and f) the audited final accounts and auditor report. This data, moreover, should aim to fulfill the standards laid out in the IMF’s Fiscal Transparency Code. In particular, budget data should follow GFS economic and functional classifications and, when possible, program classifications should be pursued as a means to improve policy planning, monitoring and evaluation. Budget data should be timely and comprehensive and should include coverage of local Government, state-owned enterprises, state-owned banks, quasi-fiscal operations and contingent liabilities. For example, Timor-Leste publishes a budget document with outturns from the previous year, the current year budget, a three year forward budget estimate, a statement of policy intentions and an increasingly detailed breakdown of expenditures by province. Moreover, the budget is a “combined sources budget,” also including donor financing. For the past two years, Vietnam has published its audited final accounts, as does Timor-Leste. However, no country in the region yet publishes either a pre-budget statement or the executive’s budget proposal. Compared to other regions, such as Latin America, East Asian countries still publish budgets that are insufficiently disaggregated, with problems in timeliness and comprehensiveness and budget execution reports are rarely published. Fiscal transparency, therefore, is an area where progress is needed. Ensuring availability of key poverty surveys, studies, and statistics Information on studies and surveys can improve the effectiveness of policy-making directly through the use of good information by policy-makers and, indirectly, through the demand for

4 http://www.cdc-crdb.gov.kh/ 5 http://cprgs.org/home/index.jsp 6 http://www.oecd.org/dataoecd/33/13/1905258.pdf

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good policies by the population at large. Cambodia, Timor-Leste and Vietnam all have information on the latest census and household surveys available on the websites of their national statistics offices.7 Cambodia also has posted its statistical master plan for 2002-2007. Macro-economic data for all countries is available on the IMF and WB websites8 and reports on progress toward achieving the MDGs can be found on the UNDP website.9 However, they do not all make their PRS annual progress reports publicly available. Mongolia and Vietnam’s PRSP websites are a good example of poverty sites with links to numerous diagnostic studies, progress reports, and relevant statistics. No country posts information on its debt profile and debt sustainability analyses. Elaborating and implementing an effective communications strategy Pro-active distribution of readable versions of information on plans and policies is also essential to its wide accessibility and, in particular, to reaching outside the capital city. In Timor-Leste and Vietnam, summary versions of their National Development Plan/CPRGS respectively were widely distributed while, in Cambodia, versions of the NPRS in English and Khmer were distributed to civil servants at central and local government levels as well as more widely through workshops. A high level of transparency and ensuring public knowledge about particularly important policy actions or programs is also a good practice, especially in the area of natural resource management. In Timor-Leste, a wide-ranging public information and consultation campaign was carried out on the government’s petroleum law before its approval by Parliament, the government adhered to the Extractive Industries Transparency Initiative and it publishes quarterly reports on the management of its petroleum fund. Similarly, Lao P.D.R has committed to work toward a high level of transparency in the management of its revenues and, in particular, of the revenues from the NT2 hydro-electric project and all key project-related documents are publicly available on the web. Good internal communication channels (IFMIS and proper intra-governmental coordination) are critical to the proper distribution of information across government and other state agencies such as Parliament. For example, availability of information on the status of budget execution across the various parts of government is essential to sound public expenditure management. This availability is best facilitated through integrated financial management systems. Many countries in the region including Mongolia, Timor-Leste and Vietnam, are well on their way to implementing such systems. Ensuring knowledge about central government strategies, policies and budgets at the local level is also critical and requires initiative and proper coordination. For example, as of this year, the budget of Timor-Leste is being made available to local governments so they can monitor the implementation of capital projects envisaged for their province. Awareness by the population of local government budgets is also an excellent means to improve accountability. In Vietnam, for example, communes are required to post their budgets and final accounts on notice boards as a means to inform the population of the promised actions and funds available for the year as well as their actual execution. Similarly, in Timor-Leste, an ongoing initiative aims to publicize budgets through public readings in churches.

7 http://www.nis.gov.kh/; http://dne.mopf.gov.tp/; http://www.gso.gov.vn/default_en.aspx?tabid=491 8 www.imf.org; www.worldbank.org 9 www.undp.org

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Availability of information through the web is a good means to reach non-governmental organizations, part of the private sector, the media, the donor community and the educated citizenry at large. Since these are critical agents in the demand for accountability, posting information on government websites is of utmost importance. The existence of a government information center where the same documents available through the web can be publicly consulted is another important step in improving transparency. These centers should exist in all capital cities, but can also be extended to the local level. In Vietnam, all communes have cultural centers with telephones, libraries, books, newspapers and meeting rooms to provide information directly relevant to the poor and disseminate information about relevant government policies. Reaching far into the local level and the grass-roots also requires alternate communication strategies, such as active information campaigns through the media (TV, community radios). A suggested transparency checklist Not all the good practices mentioned above can be replicated everywhere, at least in the short run. However, it would be desirable that the most critical could be integrated into national plans and their implementation policies in all countries. Publication and availability of the following documents (1 through 7) through the web are suggested as critical milestones in the process of improving transparency in the plan/policy formulation and implementation process:

Box 1. Transparency Checklist

1. Budget/Financial Management Law

2. Government budget published at start of fiscal year

3. Executed budget numbers published (3 months after year-end)

4. Final audited accounts and auditor’s report (1 year after year-end)

5. Annual progress reports and progress to achieving MDGs reports

6. Poverty diagnostics (poverty assessments, HHSs, census, social data)

7. Key macro-economic data including debt profile/DSA

8. Distribution of central government budget to local governments and publication and posting of local government budgets

9. Government information centers stocking all of the above information

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1.B Participation

Openness and broad participation in policy-making processes fosters country ownership, enhances the likelihood of sustainable implementation of national plans and leads to increased domestic accountability. This section will identify good principles in the area of participation in the development, implementation, monitoring and evaluation of national plans/Poverty reduction strategies and present some good practices from the region. It will end by proposing some critical areas where participation can be of particular value.

Broad participation in the elaboration of PRSs builds country ownership

Broad consultation allows Governments to draw on the first-hand knowledge and experiences of the poor. When properly carried out, these consultations provide important qualitative information on the causes of poverty and the priorities of the poor. Similarly, participation of external stakeholders such as non-governmental organizations and research institutes in policy-making processes can significantly increase the pro-poor focus of public policies, strengthen accountability and enhance the alignment of external actors with Government policies.

In order for participation to be effective, however, the process needs to be properly structured and transparently laid out. Transparency on the role of consultations helps ensure popular expectations are in line with Government intentions. One way of improving the transparency and effectiveness of consultations is through the formulation of a participatory action plan. This plan could spell out the stakeholders to be consulted, the objective of consultations, the process to be followed in aggregating consultation results and the mechanism to report back to those consulted on the final output. For the elaboration of the NPRS, for example, Cambodia developed such a participatory action plan. A summary of consultation outcomes should also be drawn up. For example, in Mongolia, the Poverty Research Group in the MoF summarized the issues raised in the consultations by sectors and provided them to sector ministries as inputs to the development of their sector strategies and the PRSP. The national plan document should also detail the above-mentioned aspects of the participatory process. Timor-Leste’s National Development Plan includes a well-developed section detailing the process followed for its elaboration. All Poverty reduction strategies, to a greater or lesser extent, describe the consultation process underlining their elaboration. They do not always, however, detail what the outputs and outcomes of popular consultations were and how they were combined with diagnostics and governmental processes in the final document. Greater clarity in the form of a participatory action plan and the description of the key aspects of the process in the final document are areas where further progress in national planning processes would be desirable. The carrying out of diagnostics and the identification of policy priorities are two critical areas where participation is desirable. The elaboration of participatory poverty assessments, including at the province level in Vietnam, and of a participatory living standards assessment survey in Mongolia, for example, were critical in bringing in the perspectives of the poor on the causes of poverty and emphasizing some of its more intangible dimensions, such as vulnerability. In all countries in the region, PRSP participatory processes involved consultations on priority-setting, but the methodology followed in consultations, their result and how that result was incorporated into the national plans was often not clear. A good practice in this area consists in carrying out priority ranking exercises, as it provides clear guidance on the priorities of those consulted.

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Participation across government agencies in PRS elaboration builds broad government ownership

Broad participation of line ministries and local Government is critical to the elaboration of national plans that build on previous policy expertise and enjoy strong ownership by implementation agencies. In particular, line ministries should be thoroughly involved in the elaboration of national plans. This involvement is best ensured through the leadership of the plan elaboration process by an inter-ministerial unit. In Cambodia and Vietnam, for example, the coordination of the PRSP elaboration process by an inter-ministerial working group strengthened the role of line ministries in the process and facilitated coherence with sector strategies. This is an area, however, where much remains to be done, both at the level of coordination among units within line ministries as well as between central and line ministries. In decentralized countries, it is also critical to involve local Government –as was done in Vietnam. Depending on the degree of decentralization, it may even be useful to develop poverty reduction strategies at the regional level –as was done in Indonesia. In that case, care needs to be taken to ensure proper consistency between national and sub-national objectives and policy interventions. In Vietnam, consistency of principles is sought by a process through which the donor community is assisting provincial governments in incorporating PRS principles into their mainstream planning processes.

Parliamentary involvement in PRS elaboration enhances consistency with implementation policies Ownership by Parliament of the strategic priorities expressed in a national plan is important to ensure proper monitoring as well as consistency with resource allocation through the budget process. The role of Parliaments in national planning processes in East Asia, however, has often been weak and it could usefully be strengthened. A good practice in Mongolia was the organization by the Ministry of Finance of a round-table discussion with Cabinet and members of Parliament on policy priorities. Ideally, it would be desirable for representatives from Parliamentary committees to be involved in the respective sectoral working groups in order to ensure a synergy between their views and those of other stakeholders consulted. At least, national plans/Poverty reduction strategies should be approved by Parliaments, as was the case for the Poverty reduction strategies of Mongolia and Lao. Finally, it is also desirable to involve development partners in a process with clear Government leadership, as was the case in Vietnam’s CPRGS and its new national plan (SEDP, 2006-2010). Participation in PRS implementation can improve the effectiveness and accountability of public policies The continuation of participation in the plan implementation phase is critical to the consistency between plans and policies. Broad Government participation in the budgetary process is of particular importance. At least, budget processes should provide room for strong participation from within Government and enough time and space for Parliamentary discussion. In particular, budget processes ought to allow enough time for line ministries to prepare budget submissions for their respective sectors once provided with aggregate envelopes by the Ministry of Finance. In Timor-Leste, for instance, the budget calendar was brought forward to increase the time allowed for line ministries to prepare their submissions to the MoF and to ensure adequate time for Parliamentary discussions. Over the past few years, in Vietnam, the National Assembly has played an increasingly important role in the budget process, with the result of increasing the Government’s focus on such issues as HIV-AIDS.

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Broader stakeholder participation in the budget preparation process can improve its quality and accountability. In Mongolia, for example, the Poverty Research Unit of the Ministry of Finance and Economy prepared a study which assessed the role of citizen participation in the budget process –in planning, discussing, approving and reporting—and proposed suggestions to improve the openness and participatory nature of the process. Similarly, in Timor-Leste, a citizen’s guide to the budget was prepared and published. Participation in the elaboration of key plan implementation policies and programs can also enhance policy quality and coherence. In Cambodia, for example, Government elicits the views of the private sector through regular Government-Private Sector forums and a Steering Committee for Private Sector Development is in charge of proposing specific measures to improve the investment climate, trade facilitation and private sector development. A similar process is under way in Timor-Leste through Government-business forums. In Lao P.D.R., the Government’s strategic vision for the agriculture and forestry sector is based on a bottom-up participatory planning process and the development of the NT2 hydro-power project was also accompanied by thorough local, national and international-level consultations. In Vietnam, the education for all national action plan also underwent extensive consultations including civil society organizations and research institutes. Finally, it is a good practice to carry out popular consultations on major legal initiatives. For example, Timor-Leste carried out extensive consultations on its petroleum law while Vietnam engaged in a similar process regarding its land law. Ideally, all major legal initiatives would include a period for public dissemination and consultation before a bill is submitted to Parliament. The existence of a legal framework regulating when and how the population is to be consulted in the legislative process is also desirable. Participatory Monitoring and Evaluation Enhance Accountability Line ministries and local governments should play an important role in monitoring implementation progress. In addition to supplying administrative data, they should provide inputs into annual progress reports and participate in the elaboration of any other poverty monitoring and evaluation reports. Parliament and civil society should also be involved in the monitoring and evaluation process. It is part of the role of the legislative to monitor the implementation of national plans and associated policies. This is a role that needs to be significantly strengthened across the region. It would be particularly useful for Parliaments to discuss and approve annual progress reports, possibly by including APRs as part of the background paper for the annual budget bill. This would foster the executive’s incentives to spell out the links between plans, budgets and results as well as ensure the review of those links by Parliament. It is also desirable for poverty monitoring systems to include an avenue for input from the grassroots and, more broadly, from civil society. In Mongolia, for instance, civil society participation was included in the Policy Councils and Sub-Councils, as part of the structure for monitoring and evaluating PRSP implementation. It is also desirable for the development community to be consulted in the elaboration of annual progress reports. For example, Cambodia’s NPRS Advisory Group –which includes representation from both development partners and civil society—provides inputs into annual progress reports and the Government of Vietnam made a number of important changes to its annual progress reports as a result of comments from development partners and civil society.

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A suggested participation checklist Not all the good practices mentioned above can be replicated everywhere, at least in the short run. However, it would be desirable that the most critical could be integrated into national plans and their implementation policies in all countries.

Box 2. Participation Checklist

1. Existence of a participation action plan for national plans

2. PRS consultation includes line ministries, local Government, civil society and donors

3. PRS is discussed and approved by Parliament

4. Budget process starts at least 9 months before the start of fiscal year and allows at least 1 month for Parliamentary discussion

5. Sector strategies and major policy and legal initiatives undergo consultation inside and outside government

6. Government-private sector dialogue process on investment climate in place

7. PRS monitoring system (including annual progress reports) allow for input from civil society and development partners and is discussed and approved by Parliament

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Section 2.A. Poverty Focus What sectors and cross-sectoral policy interventions are most effective at achieving poverty reduction is seldom clear. Benefit incidence analysis provides robust results on the poverty focus of some sub-sectors such as primary education, basic health or rural roads. On the other hand, the indirect poverty impact –especially in the long run-- of other interventions, such as those focused on improving infrastructure and strengthening institutions can be significant, but are more difficult to assess and vary from country to country. Therefore, the identification of the most appropriate poverty-reducing interventions in each country should build on the objective evidence produced through cross-country and country-specific diagnostics and on the subjective input of the population provided through consultative processes.

Moreover, reducing poverty in its many dimensions requires policy interventions across many sectors. Indonesia’s PRSP (the SNPK) defines poverty as the failure to provide basic rights—access to adequate food, health, education, employment, housing, clean water, land, natural resource sand the environment, security from acts or threats of violence, as well as the right to participation in social-political life—which the national development plan must address. An effective national development plan must thus bring together sector interventions in a coherent manner that enhances their overall poverty impact.

Diagnostics, participation and supportive institutions help ensure public policies effectively focus on the poor

In particular, poverty reduction strategies should be built on the basis of solid diagnostics. In particular, a poverty assessment should be carried out in time to feed into the plan. The poverty assessment would help ascertain the country’s poverty profile, provide a diagnosis on the determinants of growth and poverty, and provide guidance on policy priorities for poverty reduction. A participatory poverty assessment should be carried out simultaneously in order to provide qualitative information on the views and preferences of the poor and complement the quantitative information included in the poverty assessment. This was the case in Mongolia in 2005-2006. Poverty maps can also provide invaluable information on the geographical distribution of poverty and hence analytical support to the design of geographically-targeted anti-poverty programs or formulas for regional transfers. Poverty maps, however, are quite data-intensive and rely on census data, which is typically only available every ten years. There are also alternative methods for geographical targeting. In Lao PDR, for instance, household, village, and district level indicators of basic minimum needs were used to identify the poorest 47 districts, which became the focus of the country’s PRSP (the NGPES) and its new national plan (the NSEDP 2006-2010). Although national plans do, by their nature, have a broad coverage, it is important that they also identify priority areas of intervention and that these areas be poverty-focused. International experience shows that the institutional set-up and the nature of policy-making processes are an important determinant of whether existing diagnostics and identified priorities are used for policy-making purposes. In China, for example, close ties between Government and research institutes contributes to generating feedback loops between diagnostics and policy-making. Government initiative and commitment to use diagnostics are critical and joint work between Government, donors and research institutes/civil society can be particularly fruitful. In Vietnam, the poverty diagnostics of the Government-led Poverty Working Group (which includes representatives of Government, donors and civil society) has elaborated high-quality research which reflects the joint views of its members and has had significant influence on the country’s PRSP (the CPRGS) and national plans. The carrying out of Public Expenditure Reviews jointly

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between Government and donors also enhances Government ownership and increases the chances that its diagnostics will be incorporated into policy-making. The 2005 Vietnam Public Expenditure Review-Integrated Fiduciary Assessment is a very good example of diagnostic work carried out jointly by the Government and the World Bank, with donor support. It has led to 117 concrete recommendations, with disagreements between Government and the World Bank on only four of them and with several of these recommendations already being followed up as part of the PRSC process. Poverty-Focused sector strategies and policies should also build on diagnostics and consultations. Poverty assessments provide information on the benefits of poverty-reduction policies. They do not, however, estimate costs and, hence, do not provide the full picture of the trade-offs among policy interventions given limited resources. The costs need to get estimated through the elaboration of sector strategies and policies and the budget process. The elaboration of full-fledged, poverty-focused sector strategies, therefore, is a critical linchpin between national plans and budgets and provides the needed guidance to implementing agencies, including at the local level. In-depth poverty diagnostics and a robust analytical framework can facilitate this effort. Moreover, formulating a sector-specific medium-term expenditure framework can be a useful underpinning for a sector strategy. Vietnam and Cambodia have examples of well-developed primary education strategies with coordinated donor support. The development of such policies outside the social sectors is more difficult, but nonetheless important. Cambodia plans to work on the development of such a strategy for the agriculture and water resources sector as a tool to implement its rurally-focused national plan. Once broad objectives and priorities have been identified, they need to be specified in policy terms –by sectors, sub-sectors and/or programs—and their consequences need to be spelled out for operational purposes. It is the identification of these pro-poor goals and priorities and the consistent application of policies to implement them that end up delivering results. For example, the Government of Vietnam set the elimination of illiteracy as one of its primary objectives and made large investments in literacy campaigns, placed a primary school in every community and, for most of the period from 1945 to 2000, provided primary education completely free of charge. As a result, illiteracy decreased from 95 to 10 percent. Focusing on preventive and primary health is also a good strategy for reaching the poor. In Timor-Leste, since independence in 2002, the Government has focused on the provision of free preventive and primary health care, particularly in rural areas, ensuring that health care benefits reach the poor. A rurally-focused strategy delivered strong results in Indonesia where, from the late 1960s to the mid-1980s, growth was strongly pro-poor in part because of productivity-enhancing agricultural technology available due to public investment.

Governments should also identify appropriate indicators for sector strategies and other planning documents to measure intermediate progress, so as to be able to assess the effectiveness of budgetary inputs and policy interventions in delivering the desired outputs and outcomes. For example, although each ministry in Timor Leste prepares an Annual Action Plan to inform budget preparation, these plans provide little of the information on the quality and quantity of services needed for monitoring progress.

While the issues and the overall objectives in a given sector may be clear (for example, in the education sector, improving literacy or female school enrolment rates), it is often difficult to define the right mix of sectoral interventions for bringing about the desired improvements in outcomes. Moreover, some policy interventions in specific sectors are obviously pro-poor, but it is often difficult to demonstrate as clearly the poverty reduction focus of an overall sector strategy, particularly as the impact of policies in one sector may be influenced by policies in other

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sectors. For example, Cambodia’s national poverty reduction strategy emphasizes that progress in rural development requires improvements in health, education, agriculture, water, sanitation, as well as other sectors.

Targeted programs can be an effective tool for reaching the poorest. Vietnam’s national targeted programs have led to significant improvements in access to schools and water, as well as contributing to cutting infant mortality in half over the past ten years. These improvements are particularly impressive because they were achieved in the country’s poorest and most remote areas. Another example of pro-poor targeting is the recent elimination of fuel subsidies in Indonesia and the re-allocation of the resulting savings to cash transfers targeted to the poor and to pro-poor expenditures in the social sectors. Similarly, in Mongolia, the originally untargeted child transfer program was re-defined, in terms of beneficiaries and in terms of implementation policies, so as to target the poor and ensure fiscal affordability.

Budgets and actual expenditures are the litmus test of the poverty-focus of Government programs.

If budgets reflect the planned implementation of pro-poor priorities and sector strategies, the result ought to be pro-poor expenditures. Hence, in a good policy environment, the budget is the reflection of overall country and government priorities and their key implementation tool. In some cases, countries find it useful to add specific expenditure rules to ensure the pro-poor nature of public expenditures. For example, in Timor-Leste, the Government commits to devoting over 30 percent of overall current expenditure on health and education, more than 45 percent of current education expenditure on primary education, less than 40 percent of health expenditure on hospitals and at least 4.4 percent of overall recurrent spending on agriculture. Similarly, in order to improve the pro-poor focus of its policies, the new Cambodian national plan (the NSDP 2006-2010) includes a commitment to spend 60 percent of Government expenditures in rural areas (where 85 percent of the population and more than 90 percent of the poor live).

In decentralized environments, it is important to ensure that inter-governmental fiscal relations take account of poverty differentials across regions. In Vietnam, for instance, equalization transfers from the central Government to the provinces are designed to improve the financial viability of poor provinces. These transfers are calculated for 3-5 year periods based on a formula which estimates the difference between the expenditure needs and revenue potential of each province, with adjustments to take account of geography and remoteness. Finally, Government revenues ought to be roughly sufficient to cover productive expenditure needs so as to avoid unsustainable increases in indebtedness or the monetization of fiscal deficits. The tax burden also ought to respect the basic principles of horizontal and vertical equity so as to avoid distortions and minimize income inequality.

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Suggested poverty focus checklist

The checklist below summarizes a few key elements that can enhance the poverty focus of PRS, sector strategies and budgets. The exact configuration of each element will depend on country circumstances.

Box 3. Poverty Focus Checklist

1. Poverty assessment and participatory poverty assessment feed into the PRS

2. The PRS identifies clear pro-poor priories, based on PA, PPA and popular consultations

3. Government works with research institutes, civil society organizations and donor community to carry out diagnostics

4. Pro-poor sector strategies are supported by diagnostics and joint Government-donor-civil society working groups

5. Budget devotes sufficient resources to pro-poor plan priorities and clearly identifies, monitors and reports on them in budget documents

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2.B Linking Plans, Sector Strategies and Budgets

Identifying pro-poor policy interventions is only the first step toward elaborating and implementing strategies/plans with a clear focus on poverty reduction. Ensuring consistency between pro-poor plans and sector strategies, and implementation policies (such as PIPs, MTEFs, budgets and actual expenditures) is the next critical step to achieving the desired poverty alleviation results. In all countries in the region, there is an increased expectation of consistency of, and a greater scrutiny of the links between plans, sector strategies, policies and budgets. Despite the fact that this issue raises challenges at several levels, however, there is relatively little discussion of how/whether these links are to be institutionalized. Ensuring consistency between plans and implementation policies requires a good level of consensus between architects and implementers.

Consensus is needed on objectives, policy priorities, and the most appropriate sequence of public interventions. Typically, this consensus is built by joint work during the policy formulation stage and good rules to enhance consistency and accountability for results in the policy implementation stage. Consistency between development plans and implementation policies, however, is not easily attained and, while it has increased over the past few years in most countries, important challenges remain. First, the officials responsible for formulating the development strategies are often different from those responsible for their implementation—for example, when planning ministries lead planning processes and finance ministries lead the preparation of budgets. Problems can also arise when line ministries and local governments are only weakly involved in the development of national plans, but take the lead in their implementation. Also, the mechanisms for ensuring transparency and participation can be stronger at the planning stage than at the implementation stage. This was the case at the early stages of the PRSP process. Now, however, this gap is narrowing with the strengthening of monitoring mechanisms and the increased focus on results supported by the stepped up role of budget support in the region.

Line ministries should be part of the secretariat in charge of leading the development planning process. In order to ensure ownership of the national plan by line ministries and coherence between national plans and sector strategies, line ministries need to be intimately involved in the plan development process. Similarly, ensuring effective coordination between the national and local levels of government at the planning stage is essential, in particular in decentralized environments. Moreover, the absence of clearly defined mechanisms for linking nationally-agreed poverty reduction objectives with bottom-up prioritization in decentralized countries can disrupt the link between strategies and implementation policies. It also raises questions of accountability, as it is difficult to hold central agencies responsible for implementation policies that are not under their purview. In those countries, the involvement of local government in the process of plan preparation is particularly important, as is the establishment of a system to ensure proper linkages between national and local level planning.

PRSs and sector strategies should build on each other in order to maximize policy coherence

When sector strategies already exist, the national plan should build on them while, in other cases, the plan should provide the guiding lines for sectoral strategies and policies. Even in cases when sector strategies already exist, a new national plan may provide new directions which the sector strategies can take on board to enhance their poverty focus. For example, Cambodia’s recent NSDP commits the Government to spend 60 percent of all outlays in rural areas, which may lead to adjustments in the focus of pre-existing sector strategies. The consistency of objectives and

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monitoring frameworks between national plans and sector strategies is particularly important. Although plans are typically less detailed than sector strategies, the objectives, targets and indicators in both monitoring frameworks should be entirely consistent and only vary by degree of detail. For example, Cambodia’s NDSP commits to harmonizing all of its various monitoring frameworks in order to ensure coherence of policy interventions. Formal public investment programs must be made consistent with the objectives of national plans and sector strategies, and should be accompanied by estimations of recurrent costs so as to allow for proper medium-term budgeting. National plans and PIPs can also be an effective tool to mobilize and coordinate donor support. Cambodia’s PIPs have been elaborated in a parallel manner with its national plan, and both planning instruments have been presented as the main government documents for the consultative group meeting in March 2006. Costing plans and prioritizing interventions is essential to macro-economic consistency

Translating specific policy interventions into budgetary outlays is difficult but important. Most plans include an estimate of implementation costs, which is a good practice, and it encourages donors to pledge assistance for implementation. Additionally, some countries have engaged in processes to carry out more detailed costing of national plans, such as Lao PDR and Vietnam. These detailed costing exercises can be particularly useful in the absence of a medium-term budgeting framework as is the case in Lao PDR. The information from these exercises can be a useful input into the elaboration of the macro-economic framework as well as into decisions on tax and revenue policy, and into the establishment or revision of plan and sector strategy targets. Equally important, the capacities and resources of the implementing authorities should play a critical role in deciding on the sequencing and timing of public interventions, and budgetary outlays should be made consistent with these. Budget allocation discussions among line ministries should also attempt to achieve a consistent prioritization of policies and expenditures across sectors, within the overall budget envelope established by the finance ministry.

The development of an MTBF provides a particularly rigorous tool for checking the consistency of the national plan and its objectives with the macro-economic framework. Developing an MTBF strengthens links between sector objectives and resource outlays, introducing fiscal discipline into sector strategies and results-orientation into budgets. Sufficiency of resources is critical to the achievement of plan objectives and consistency between resource availability and the ambition of objectives and targets is essential to sound planning and budgeting. In case of insufficiency of resources, countries may wish to increase their revenue effort, or attempt to mobilize additional external financing. Conversely, if a country decides to take its revenue envelope as given, targets established should be achievable with existing resources. The elaboration of a sector MTEF is a valuable complement to a sector strategy. It tightens the links between the strategy and the budget by estimating needed current and capital expenditures. These estimates can significantly contribute to more informed and effective budgeting and greater predictability of resources made available to line ministries. The elaboration of sector MTEFs, however, is a labor-intensive process which should be implemented in a progressive manner, especially in the context of low Government capacity. It is a good practice to start by elaborating sector strategies in priority sectors, learn from the experience, and gradually move on to other sectors. Even in Vietnam, where Government capacity is significant, sector MTEFs are being built gradually, beginning with pilot exercises in four priority sectors.

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Consistency between planning and implementation also requires good intra-governmental coordination in the annual planning and budgeting process

This coordination begins within ministries. Planning and finance units of line ministries do not always work jointly. Sometimes, planning units work on the development of sector strategies while the finance units devote themselves to the development and implementation of budgets, with little connection between the two processes. This can lead to important disconnects between sector strategies and budgets. Therefore, proper coordination mechanisms and joint work between both units, particularly in the context of the development of sector strategies, MTEFs and budgets is essential to consistency between policy objectives and budgetary outlays. This coordination between units is also important in finance ministries so as to strengthen links between plans and budgets and to enhance the results-orientation of the latter. In Timor-Leste, for example, the development of annual action plans by the planning unit of the ministry of finance in collaboration with line ministries informs the work of the budget unit. The Ministry of Finance, moreover, uses the results of annual action plans as a monitoring tool of the achievements of various sectors. Another example of good practice is Mongolia’s fiscal reform package, which aims explicitly at strengthening the linkage between policy-making and budget allocations, by improving treasury management, budgeting, accounting and reporting, output-based management and auditing, with particular focus on pro-poor expenditures.

Similarly, coordination between central (planning and finance) and line ministries should be strengthened. To address this weakness, the process for the development of an MTBF should be structured to be a joint one between central and line ministries. Similarly, to ensure proper links in the annual budget, the budget elaboration process ought to allow for enough time for line ministries to properly develop their budget submissions. It is also important for the ministry of finance to provide feedback to line ministries on the changes made to their budget submissions, as a perception by line ministries that their budget submissions are not taken seriously can significantly undermine their efforts to elaborate quality products. This interaction between central and line ministries can also be facilitated by the presence of sector experts in the Ministry of Finance. In Vietnam, for example, sector experts provide a critical communication channel between the Ministry of Finance and line ministries. These experts also allow the Ministry of Finance to critically examine the budget submissions of line ministries and monitor effectiveness and value for money of sectoral interventions.

In cases of dual budgeting, the coordination between the ministries of planning and finance is critical to the consistency of the overall budget and, hence, to the ultimate effectiveness of government policies. To ensure this consistency, both budgeting exercises should take the same plan and sector strategy objectives as given, use the submissions from line ministries on both capital and current cost estimates to elaborate annual budgets, and work together throughout the budgeting process in the budget committee. Good coordination between central and local government is also critical, particularly in decentralized environments. In Vietnam, this cohesion is sought through the establishment of a common framework of objectives, expenditure norms and targets. Problems of cohesion, however, may also emerge because of absence of proper information flows across levels of government or weak capacity at the local level. To address these weaknesses, Timor Leste’s national development plan makes explicit provisions for strengthening capacity of district administrations in finance and management and has recently developed a planning and financial management capacity-building program. Similar steps are being undertaken in Cambodia.

Finally, the specific planned interventions must be prioritized, and their costs integrated into the budget at the appropriate level. The use of the medium-term budget framework (MTBF) can be an important link between the poverty reduction strategy and the budget process, and an effective

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tool for ensuring the pro-poor focus of budgets and their consistency with the poverty reduction strategy. Moreover, the discipline of putting the strategies and plans into an MTEF that is aligned with the expected resource availability fosters greater clarity of objectives, more comprehensive coverage and transparency in the use of resources, and greater predictability in the funding of critical interventions over time. Most importantly, however, effective implementation depends critically on good public expenditure and overall financial management.

Technical working groups are an excellent means of monitoring consistency between plans and implementation policies.

Technical working groups should be led by the relevant line ministry. They should also include representatives from the planning and finance ministries, any other concerned ministries and implementing agencies at lower levels of government, development partners and civil society organizations. These groups can play an important role in the plan implementation process by monitoring consistency between plans, sector strategies, PIPs, MTEFs, budgets and expenditures. As broad pro-poor plans and strategies are translated into concrete programs and specific interventions, ensuring the consistency of interventions in different sectors is critical to achieving the intended impact in each area. Technical working groups on specific sectors and cross-sectoral issues can again play a useful coordinating role in this area by taking into account cross-sectoral dependencies and synergies.

In Vietnam, the poverty group and its joint poverty and sector diagnostics help strengthen the links between plans and sector strategies. In Cambodia, TWGs are an important mechanism for communication among key stakeholders, building consensus on key policy interventions, and supporting the development of sector strategies. In particular, Cambodia’s education sector strategy was developed with support from the education TWG and the NSDP states that the upcoming agriculture and water resources sector strategy will use the respective TWG as a critical forum for the policy dialogue underlying its development. In Timor-Leste, sector working groups have been created with the twin goals of monitoring sector performance and raising and coordinating donor aid to the sector.

The role of sector working groups as a forum for consistently monitoring coherence between planning and implementation instruments, however, could usefully be strengthened across the region. They would also facilitate the increasing efforts governments are making to improve consistency between investment and current expenditures in the context of dual budgeting. These groups can also monitor results achieved in the sector and foster feedback loops into policy-making.

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Suggested checklist Although few developing countries already have in place comprehensive systems that would ensure the poverty focus of sector strategies, plans, and budgets, most of the countries reviewed here do have certain elements of such systems either in place or under preparation. Some aspects of the required systems are quite complex, however, and may only be able to be put in place gradually. The elements identified below would all foster more efficient and effective policy formulation and public financial management, beyond their contribution to defining and maintaining a poverty focus.

Box 4. Linking Plans, Sector Strategies and Budgets Checklist

1. Line ministries, the Ministry of Finance and local governments are part of the inter-ministerial group leading the plan development process

2. Monitoring frameworks in national plans and sector strategies are entirely consistent

3. Existence of an overall medium-term budget framework (3-year horizon)

4. Sectoral MTEFs are developed for the priority sectors

5. Functioning sector/technical working groups including membership from planning, finance and line ministries, donors and civil society

6. Existence of a mechanism for coordination between planning and finance units within ministries and between the Ministry of Plan, the Ministry of Finance and line ministries in budgeting processes

7. Existence of a mechanism for coordination between national and local levels of government, at both the planning and implementation stages

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3. A Results Orientation An explicit orientation of policy documents toward the attainment of results can make a significant contribution to effective policy-making. An orientation toward results focuses attention on the link between objectives to be achieved and policy choices and resource allocations. The need to spell out this link fosters greater responsiveness to popular consultations and evidence-based policy-making hence improving governance and the quality of public policy. An orientation toward results is particularly important at the plan/strategy level, where national objectives are being defined. Specificity in the identification of results allows for proper monitoring of the consistency of results sought between plans/strategies and policy implementation instruments. Finally, the availability of reliable data and sound monitoring and evaluation of results achieved is critical in fostering evidence-based policy-making.

This section focuses on two key elements for ensuring the results-orientation of a national development strategy:

• The development strategy is framed by clear, country-specific goals, indicators and targets that are linked to actions—informed by an understanding of the nature and determinants of poverty; and

• Implementation is supported by a monitoring and evaluation system that helps track progress and facilitates adjustments to programs and policies when needed.

Establishing targets and indicators is critical to government accountability Customizing the MDGs ensures poverty focus tailored to country circumstances. Setting clear development goals and targets helps to clarify the priorities of government, and helps to crystallize political commitment and accountability—both for countries themselves and for their development partners—for accelerating progress towards the MDGs.10 Most of the countries in the region have engaged in efforts to tailor development goals to country circumstances. Vietnam provides a good example of range of dimensions that can be customized. For example, in defining the Vietnam Development Goals (VDGs), priorities were identified that are not directly covered by the MDGs. For example, specific goals and targets are set on reducing vulnerability, improving governance, reducing ethnic inequality, and ensuring pro-poor infrastructure development. In other areas, Vietnam has revised targets or changed the strategic focus of the MDGs. For example, since poverty was already cut in half between 1990 and 2000, a more challenging target was identified. And since Vietnam performs well on some of the access targets that dominate the MDGs in the social sectors, it also included indicators on improving the quality of social services. Finally, targets were aligned with the country’s own strategic planning cycle, which has different start and endpoints from the MDGs.

Specifying a chain of indicators allows monitoring the whole policy implementation process. Monitoring indicators at the various stages of the policy implementation process is critical in order to understand the link between inputs, outputs, outcomes and impacts, and to be able to identify where changes or additional efforts might be needed. For example, how would a government form a policy response if it found that although expenditures on primary education increased, literacy was not improving over time as expected? There could be various reasons for such failure: was the money actually spent for the planned activities (did inputs translate into 10 While the MDGs have been agreed at the global level, the development agenda to reach these goals needs to be anchored in coherent, country-specific development strategies that respond to local conditions and priorities and are nationally owned and led.

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outputs)? Were schools built and textbooks made available but no additional children came to school (did outputs translate into outcomes)? Were the children in school but not learning (did outcomes translate into impact)? Only with a clear assessment of the progress made at the various stages can a diagnosis be made and better policies and programs designed, such as better public expenditure management, measures to promote attendance, quality of teaching, and good health of children.

Selecting good indicators

Good indicators share a number of features. These features can be used as a checklist in deciding which indicators to use: Indicators should:

• Be direct, unambiguous measure of progress, i.e. more (or less) is invariably better. For instance, immunization coverage is less ambiguous than household expenditure on health, because an increase in such expenditure could be a good thing – if it means that households have more resources to get healthcare – or a bad thing – if it means that households have fewer resources for other purposes or if disease incidence increases.

• Vary across group, areas, and over time. For instance, child malnutrition is more likely to vary quickly over time than life expectancy.

• Have a direct link with interventions. For instance, vehicle-operating costs depend on road quality but also on many other factors, such as international petrol prices. Therefore, these costs may not be a good indicator for progress in the roads sector.

• Be relevant for policy making, i.e. at the level of desegregation relevant for decision-making. For instance, if expenditures are decided at the regional level once a year, the indicator should be disaggregated at the regional level, and monitored on a yearly basis (see below for more on desegregation).

• Be consistent with the decision-making cycle. For instance, use indicators at intervals which match the decision making process, i.e. that can be available in time for budget discussions.

• Not be easily manipulated or blown off course by unrelated developments. Some indicators can be very sensitive to external or exogenous factors and should be avoided. Others can be easily manipulated (e.g. where there is self-reporting or where incentive structures are such that one might be tempted to under or over-estimate the result). For instance, some administrative data such as data on enrolment in schools or number of visits in health centers are sometimes used to allocate subsidies and budgets, and local authorities might have an incentive to over-report in order to obtain higher grants.

• Be easy and cost-efficient to measure. For instance, the number of deaths is typically easily recorded, while the number of cases of specific diseases is harder to track accurately. More costly data collection should only be undertaken when its benefits are worth it, such as in the case of census and household surveys.

• Be easy to understand. For instance, poverty incidence is easier to understand and to communicate than poverty depth.

• Be reliable. For instance, scientific, objective indicators are more reliable than indicators that depend on the interpretation of the user. This is related to the above discussion on “manipulation”.

• Consistent with data availability and data collection capacity. This ensures that indicators will be collectable and measurable at the times and level selected.

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Disaggregating indicators. Indicators should be chosen at the appropriate level of disaggregation, depending on the goals that a strategy aims to achieve, on the types of public policies and programs planned to achieve these goals, and on data availability. Indicators can be disaggregated along various dimensions, including geographic areas, demographic groups, income/consumption groups and social groups. Particular care should be taken to disaggregate in areas where vulnerabilities are likely to be disclosed, such as by gender, geographic location and ethnic group.

In Lao, efforts are ongoing to establish a consistent national database on development indicators that provides easy access to quantitative data across sectors to inform and promote dialogue and discussion among stakeholders. In Cambodia, there have also been efforts to develop an indicator-oriented data base to monitor outcomes and an accompanying dissemination tool. In Mongolia, indicators are well-linked to the areas covered by the MDGs and also include monitoring indicators and targets for governance. Looking ahead, in most of these countries, the challenge is to better link the choice of indicators to the issues and priorities identified in the relevant sector. Link public actions to specific indicators and targets

Setting targets is a complex task requiring a careful analysis of causal linkages between policy interventions and results sought. Setting realistic targets is important to mobilize efforts towards a goal. On the other hand, mobilization would be weakened if targets were perceived as being too ambitious or too easy to attain. This means that targets need to be:

• Fiscally realistic and sustainable. The choice of a target needs to take into account fiscal resource availability, including medium term sustainability. Estimating the cost of reaching specific targets is a critical element in the setting of targets, the prioritization of policy interventions, and the resulting allocation of resources.

• In line with implementation capacity. Finally, implementation capacity in terms of human and physical resources also needs to be taken into account to ensure the realism of targets.

However, the need for realism does not preclude ambitious development strategies. One way to marry the need for a realistic framework, as the basis for day-to-day policy implementation, with an ambitious framework that maps out how a country would like to ramp up its efforts to attain more ambitious development goals, would be to use alternative scenarios. The alternative scenario could map out more ambitious assumptions on external assistance, domestic resource mobilization or economic growth and the improvement in results that can be expected. It would also need to lay out plans to address absorptive capacity constraints, whether they be related to macroeconomic management, human or physical capital, or policies and institutional capacity. Depending on the country and the sector, certain constraints are likely to be more binding than others, both in the short term and in the long term.

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A suggested checklist for setting and reporting on indicators and targets Establishing good targets and indicators that are customized to country circumstances and linked to priority actions, is an on-going process. New information about the determinants of poverty and the effects of specific programs, or major changes in country circumstances, may call for updating or refining indicators and targets. However, the items below provide a checklist of some of the features of indicators and targets that can help support a results-orientation in a national development plans.

Box 5. Targets and Indicators Checklist

1. Selective choice of good indicators and targets, in line with priority public actions

and capacity included in PRS

2. Choice of indicators includes MDG-based country-tailored indicators disaggregated by income quintile

3. Appropriate mix of input, output, outcome and impact indicators to monitor various stages included in PRS

4. Indicators and targets appropriately capture disparities by social group, gender, and region.

5. Regular, public reporting on progress towards a consistent set of indicators and targets.

6. Changes to targets and indicators follow a transparent process and are identified and explained.

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Section 3.b Monitoring and evaluation The objective of monitoring systems is to track progress towards the achievement of specific objectives and to inform decision-making. This allows improved policy/program design and implementation and greater accountability. Results-oriented implementation also calls for selective evaluations to assess the impact of poverty interventions that are key components of the strategy. Poverty monitoring systems are made up of a broad spectrum of activities involving numerous actors:

• Data/information producers: typically comprising the national statistical agency, service delivery agencies such as schools and hospitals, local government and other government and non-governmental data producers.

• Analysts: typically belonging to various government agencies, universities, consulting firms, think tanks, non-governmental organizations and donors.

• Users: range from government decision-makers, to parliamentarians, civil society groups, the donor community and researchers.

Institutional arrangements are the key elements that define the interaction between these actors and activities. Without sound institutional arrangements, information typically does not flow between the various actors and is not used for better interventions and greater accountability. For example, in the water sector in Indonesia, while various agencies collect and process data and information, the exchange of data and information among agencies still meets impediments. Similarly, in Timor-Leste, although the planning agency produces reports monitoring the implementation of annual action plans, those are not systematically used by the budget office. An effective interface is essential in order to avoid a cycle where the adequate information is not available for decision-making, and decision-making processes do not demand adequate information.

Identifying data gaps and sequencing a country-led plan to fill them

There are several findings and lessons that have emerged from international experience over the past five years in this area. In terms of data production and availability, there has been increased focus on the collection of survey data. In particular, all countries in the region produce household surveys and censuses at desirable time intervals. However, efforts often remain donor-driven and uncoordinated. Good practice includes countries assessing and defining their data collection requirements (and associated capacity development and related support), and encouraging donors to align their support around country plans. This is why many countries in the region are currently elaborating statistical master plans in order to strategically determine their data needs and elaborate a plan to make this data available.

Furthermore, less attention has been paid to improving the quality and use of budget and other routinely collected data. Budget and routine data collection activities can play a central role in monitoring poverty reduction strategies. These data sources could potentially provide the information needed to monitor input, output, and to a certain extent outcome indicators. However, to do so, efforts are needed to enhance the quality, timeliness, and comparability of these data, and to improve their dissemination and analysis. In terms of administrative data, issues of coverage and sustainability arise when activities are financed by donors or undertaken in partnership with civil society or the private sector. Therefore, the best approach to the systematic and sustainable collection of administrative data is one that, to the extent possible, is government-led and government-implemented.

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The collection of basic administrative data in priority sectors and, in particular, in primary education and in the health sector, is particularly critical to sound monitoring of poverty-reduction strategies. Countries should collect all indicators related to the MDGs. In addition, collecting data on primary and secondary school enrollment and primary completion rates disaggregated by income quintiles is particularly important to monitoring progress in the education of the more vulnerable groups. Given the increase in income inequality in much of the region over the past ten years, carefully monitoring and correcting for educational inequalities underlying income inequalities is of particular import.

Moreover, in exercising their monitoring function, governments should carefully analyze linkages between inputs --budget expenditures and other government policies--, outputs and outcomes –as tracked by administrative data from sectoral ministries. Examining this linkage can help determine, for example, the impact of a decline in public expenditure on schools built and books provided and, in turn, on school enrollment rates. As illustrated in the health sector in Timor-Leste, where a set of standard indicators has been developed and used to monitor progress toward the accomplishment of program, there is much to be gained from an improvement of the data already collected and a better use of the existing data.

Supporting sound institutional arrangements Countries usually have a range of monitoring mechanisms, often resulting from donor programs. These monitoring mechanisms tend to focus on each donor’s own reporting requirements and priorities and often lack a common framework, leading to duplication, lack of compatibility of data, and poor information flows. Therefore, donor-introduced arrangements, even when technically superior, are unlikely to be successful unless there is government backing for them and redundancies with other systems are eliminated. Instead, efforts are needed to strengthen coordinated national systems that can serve both domestic and donor monitoring needs.

Institutional arrangements need to coordinate the production, dissemination and use of data and information amongst the various actors, define their roles and responsibilities, establish reporting mechanisms, and manage the functioning of the poverty monitoring system as a whole. Institutional arrangements include formal rules and arrangements, such as the definition, allocation and timing/sequencing of responsibilities determined by work programs, national plans, legislation, etc. They also include informal rules on communication channels and policy processes. It is the combination of formal and informal rules which defines how monitoring processes actually work. In addition to formal monitoring systems, since the advent of the PRSP process there has been a flourishing of joint government-donor-civil society working groups that often play a pivotal role in tightening links between data production and policy-making. Vietnam and Cambodia have good examples of such working groups.

Building flexible systems, step-by-step One lesson from international experience is that, in the early stages of their development, systems should be kept simple and flexible and be built progressively. Internationally, there has been a general tendency to design very comprehensive and complex systems, without prioritizing functions and activities within the systems. Typically, these systems had little connection with existing monitoring activities and agencies and, by stretching government capacity too thin, they have not able to perform their functions. This lesson also applies to decentralization, since capacity is particularly weak at the local level. For example, in Lao PDR, while all levels of government are involved in the monitoring and evaluation process, the provision of information

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by line ministries and local government is patchy, the coverage and quality of information varies widely, and there are significant capacity limitations.

There is no blueprint for appropriate institutional arrangements. Rather, appropriate arrangements depend on country circumstances, such as existing data collection and management systems, degree of decentralization and reporting mechanisms. In some countries, central systems have not properly built on routine monitoring systems from line ministries or other agencies. The greatest share of the data collection work for a poverty reduction strategy ought to take place in the sectors and be carried out by line ministries or local governments. Central agencies, such as the planning and finance ministries, should only monitor a critical set of indicators that allows them to carry out their dual function of assessing the effectiveness of budget outlays and the overall impact of national strategies and policies. Therefore, efforts need to be focused on strengthening the capacity and effectiveness of government agencies producing key administrative data, especially in priority sectors, establishing good relationships between these agencies and central planning units, and building light and focused central monitoring systems that adequately integrate the work of other government agencies.

Generating demand for data is essential to strengthening feedback loops into policy-making

Systems should also be built with the ultimate purpose of feeding back into policy making processes. In most countries (either developing or developed), results are not systematically used to adjust strategies or to enhance accountability. Moreover, in developing countries, demand for information often remains weak. The reasons for low demand are numerous. They include an underdeveloped culture of information-based decision-making, poor access and timeliness of data availability, lack of statistical literacy and human resource capacity and weak demand for accountability from the population at large. In the long run, demand for data and evidence-based policy-making depends most critically on the overall level of education of the population. In the short run, however, other measures can have a significant impact. For example, building demand requires public information availability and pro-active efforts at dissemination of the outputs of the monitoring and reporting systems to the various stakeholders.

Strengthening demand and promoting performance monitoring within government to drive policy and budget decisions also requires effective dissemination and communication of data and analysis across government agencies, as well as building the analytical capacity of policy-makers. One example of tightening loops between data and policy-making is the recent effort by Mongolia to closely link the budget, policy, and strategy formulation and reporting functions. This requires consistent calendars to allow the various components to properly feed into each other, as well as strong coordination of the various units and agencies involved.

Several possible strategies for strengthening demand for monitoring systems include:

• Strengthening the practice of analysis and evaluation: For monitoring to influence policy, the practice of analysis and evaluation needs to be institutionalized. This is a striking deficit in most systems to date. Some countries have created central analytical units in the presidency, ministry of finance or national statistics institute, and these units have worked best where they remained small, close to government and focused purely on analysis. Another useful technique has been joint analytical exercises with donors, including Public Expenditure Reviews and Poverty and Social Impact Analysis.

• Tailoring and disseminating outputs: Monitoring information and analysis must be compiled into outputs and disseminated across government and to the public. This is another major weakness in existing systems. Many monitoring systems are focused on the production of

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reports for donors and are often inappropriate for domestic use. A monitoring system needs to develop outputs which are tailored to the needs of the national policy cycle. Making the information accessible to the general public is also a key objective. Presenting monitoring data in a non-technical way is a new skill for governments, and is an area where cooperation with civil society partners would be valuable. In Timor-Leste, for instance, an education magazine run by Care International ran a series of illustrated stories on the country’s newfound oil wealth and its new petroleum revenue management system. The magazine is distributed to every school in the country and, though this channel, reaches a very large number of households.

• Linking monitoring to the budget process: The various occasions when government agencies bid for public funds—for example, during the elaboration of the annual budget, public investment plans, or a Medium-Term Expenditure Framework—present opportunities to require a justification of the bids by reference to PRS objectives and evidence on performance. For this dialogue to be fruitful, as explained in the section 2.B, it is helpful to have staff with the capacity and authority to engage with the sectors on their policy choices in finance –and planning-- ministries. When linking the monitoring system to the budget, care needs to be taken to avoid creating perverse incentives which may distort the monitoring process.

Including an impact evaluation strategy for major policy interventions

Outcome monitoring should be complemented with impact evaluation of selected policies and programs to help determine how outcomes (may) relate to specific public actions. They can be carried out in advance of major reforms (ex-ante evaluation) or to evaluate the impact of reforms already implemented (ex-post evaluation). Impact evaluations demand a substantial amount of information, time and resources. Therefore, it is important to select carefully the public actions (whether it be programs, projects or policies) that will be evaluated. The most important single criteria for selecting interventions for evaluation is the magnitude of their estimated impact –positive or negative—on poverty. Major structural reforms such as privatization and social sector reforms such as introducing or eliminating user fees, therefore, are particularly good candidates for impact evaluation. Another important consideration that could usefully govern the selection of interventions for impact evaluation is the potential of evaluation results for learning. In general, it is best to evaluate interventions that maximize the learning from current poverty reduction efforts and provide insights for midcourse correction, as necessary. Three questions can help guide the decision of when to conduct an impact evaluation:

• How large is the estimated or potential impact of the policy or program on poverty? Interventions that are expected to have the highest poverty impact may be evaluated to inform decision-making (in case the policy is found to have significant poverty-increasing effects), policy design (if the policy is expected to have benefits that outweigh a negative poverty impact which needs remediation) or to ensure that poverty reduction efforts are on the right track and allow for any necessary corrections (ex-post evaluation).

• Will the evaluation of a particular policy or program contribute to filling in knowledge gaps of what works and what does not in poverty reduction? Evaluation should foster learning about the most effective and cost-efficient alternatives to reduce poverty. Therefore, the decision on what to evaluate should also be guided by how much is known about the effectiveness of alternative interventions. If knowledge gaps exist about what works best to reduce poverty, an impact evaluation is well justified. In this vein, impact evaluations can help to test pioneering approaches and decide whether they should be expanded and pursued at a larger scale.

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• Is the intervention targeted at difficult-to-reach groups, or is it expected to have gender-differentiated impacts? Policies and programs targeted to difficult-to-reach poor groups encounter a wide range of social, cultural, economic, and organizational factors that may contribute to their success or failure. For these reasons, a well-designed and executed evaluation may be particularly important.

Non-governmental actors—be they research institutions, civil society organizations, special-interest and advocacy groups, or others—can play an important role in the design of the monitoring and evaluation system, in actually carrying out monitoring and evaluation activities, and in using the results. Various tools such as public expenditure reviews, public expenditure tracking surveys, participatory poverty assessments, service delivery report cards, and community scorecards, can help to incorporate citizen feedback into periodic assessments of implementation progress and results achieved. For example, a public expenditure tracking survey for primary education in Cambodia usefully identified sources of leakages and inefficiencies in public expenditures. The challenge going forward is to effectively use these findings as a management tool. Annual monitoring of the implementation of poverty reduction strategies Because of the weakness or lack of publicity of domestic processes, reporting on implementation of a national strategy has often been a donor-driven exercise. Furthermore, there have often been multiple requests by donors, which can create a large burden on an already overloaded government administration. Moving forward, good practice encourages strengthening ongoing reporting for domestic purposes, and encouraging its use for donor reporting requirements. Focusing on each country’s own regular documentation can both give incentives for the government to produce high-quality internal reports as well as increase incentives for donors to adapt their informational demands to the country’s own reporting formats. In particular, annual reporting requirements of national plans/poverty reduction strategies should build on existing domestic reporting systems. These can be either the annual budget paper or any annual monitoring report on implementation of the national plan or of achievements in poverty reduction. To be able to play this role, however, national documents may need to be substantially beefed up. For example, budget papers would need to report on achievements from the previous year, key objectives for the year ahead and an exposition of how key policies and expenditures are to address these policy priorities. For example, in Timor-Leste, the budget document and its background paper are used as the government submission to the annual CG meeting and will be further strengthened to be used as the annual progress report in the implementation of the national plan. Similarly, sector progress reports could serve as input into deliberations on sector aid levels and sector working groups could provide a good forum for these deliberations.

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A suggested monitoring and evaluation checklist The following is a checklist of some of the features that can help support effective monitoring and evaluation. The specific applicability will vary depending on country circumstances.

Box 6. Monitoring and Evaluation System Checklist

1. There is a country-driven statistical master plan, including appropriate periodicity

for carrying out household surveys

2. Systematic efforts to collect appropriately disaggregated administrative data in priority sectors are in place

3. There is a plan to enhance data quality and capacity for data analysis.

4. Data is publicly accessible for policy analysis

5. Public expenditure reviews and client-feedback-based service delivery assessments are carried out periodically

6. Impact evaluation is used strategically to inform policy choices

7. Institutional arrangements establish the role of line ministries and local governments and the links between their roles and that of central units at the Ministries of Planning and Finance and National Statistics Offices

8. Annual reporting on implementation progress of national plans/poverty reduction strategies, in formats that are appropriate for both domestic and external audiences.

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4. A Aligning assistance strategies to country priorities Consistency of policy interventions between governments and donors is essential to increased aid effectiveness

Moreover, country ownership implies that this consistency needs to take place through donor alignment to country-owned strategies. The history of development assistance, however, is plagued with inconsistency, duplication and donor-driven processes. For the past few years, the international community has been attempting to address this shortcoming. The Rome High-Level Forum on Harmonization formally launched this agenda in 2003 and, after two years of work at the country, agency, and international levels, the High-Level Forum on Aid Effectiveness was held in Paris in March 2005 to assess progress. The outcome of the Paris Forum was the Paris Declaration on Aid Effectiveness, which was endorsed by over 100 recipient and donor countries and international aid agencies, bilateral as well as multilateral. The Declaration is notable for its detailed framework of mutual commitments with respect to ownership, alignment, harmonization, managing for results, and mutual accountability. In addition, the Paris Declaration identifies 12 specific indicators to be used to track progress as well as global targets for these indicators for implementation by 2010.

Alignment requires a basic level of agreement on development priorities between governments and donors. A basic set of common objectives can be articulated around the achievement of the millennium development goals which have already been agreed at the international level. Beyond the level of objectives, however, a minimum degree of consensus on the policy interventions most likely to deliver on the achievement of these goals is also necessary, as is agreement on a specific set of intended results, targets and monitoring indicators. Even in the best of circumstances, a certain amount of flexibility and mutual trust is necessary between Government and donors, with an understanding that the views on objectives and preferred policy interventions of both sides will not always coincide. In this regard, it is crucial for donors to accept that, if governments are delivering on mutually agreed key results areas, they ought to honor the spirit of country ownership in areas of disagreement. Finally, donors are more likely to align their development assistance to a country’s strategy if it is clearly defined and prioritized, and if the country has demonstrated the political will and the capacity to deliver on its commitments.

Alignment also requires the existence of supporting instruments and processes. One of the aims of the PRSP process was to foster the coordinated alignment of donor support for credible, country owned poverty reduction strategies. By empowering countries to set their development priorities and encouraging donors to align their assistance around those priorities, joint accountability for development results would be fostered. The Paris Declaration supports this agenda through the commitment of signatory donors to align their aid to national development strategies focused on poverty reduction and the achievement of the MDGs. A good tool to foster this alignment is a joint country assistance strategy aligned to the national poverty reduction strategy/plan. Cambodia provides a good example of how several external partners can undertake joint analysis underlying the preparation of harmonized country assistance strategies: the March 2005 World Bank CAS includes some sections that are shared with ADB, DFID and UN agencies’ country strategies. However, country ownership and realism require customizing the MDGs to country circumstances and supplementing them with specific national objectives and targets. The emergence of mutually agreed objectives, policy interventions, and targets typically requires appropriate institutional arrangements. In particular, it requires the existence of processes that

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allow for these agreements to be reached and to be reviewed and discussed between governments and donors on a regular basis. The arrangements that typically underlie the PRSP processes and budget support operations provide that type of framework. A process of consultation between government and donors at the various phases of the development and implementation of PRSs is the basis for the emergence of this consensus. It also leads to the development of trust and to a better understanding of each side’s positions in cases where there is no agreement. These consultations can best take place when they are supported by a stable institutional structure, such as a system of working groups that facilitates joint diagnostics, the provision of advice on the development of PRSs and monitoring of the consistency between strategies, policies and budgets, as well as of the results achieved. This institutional system needs to include channels that feed into the strategies and programs of both governments and donors. The feedback loops of the system into governments’ policy-making processes can be strengthened through the work of these groups. The results of their work should also systematically feed into donor assistance strategies. In particular, joint donor assistance strategies can be developed with strong leadership from the government with dialogue taking place through these same working groups. This can help ensure alignment of donor assistance strategies to country priorities.

Governments should take the lead in the process of aligning development assistance to country priorities, processes and systems. Clearly assigned responsibilities within the executive, and appropriate capacity in terms of human and financial resources are necessary for governments to play this leadership role. However, gaps in coordination and communication—such as when line ministries enter into agreements with development partners without the agreement or even the knowledge of the Ministry of Planning and Finance—can create important inefficiencies in planning and implementing PRSs, as they hinder a common information and decision-making framework within government, and can undermine government ownership of the development process. Joint government-donor structures, such as CG and RT meetings, should also be government-led and chaired. In those meetings, governments can actively drive the development agenda by reporting on results achieved in the past and articulating their policy priorities and harmonization and alignment preferences for the future. Holding these meetings in-country allows local institutions to play a stronger role.

Similarly, it is desirable for governments to lead and chair sector and thematic technical working groups (TWGs) as soon as capacity permits. In view of the existing capacity constraints, however, it may be advisable to start with groups on the most pressing issues/sectors and only progressively expand them. The governments of Cambodia, Lao PDR, Vietnam and Timor-Leste have all set up working groups to facilitate interactions between governments, donors and, in some cases, civil society organizations. Lao PDR has set up a MOE-Partner Coordination Forum to strengthen partnership with the international community in support of the education sector. In Cambodia, 18 Joint Technical Working Groups have been formed to ensure close coordination between the external development partners (EDPs) and the government. The Government has also set up a high level Government- Donor Coordination Committee to provide guidance to the TWGs and review the progress achieved. In Vietnam, government leadership of overall development assistance coordination resides within the Ministry of Planning and Investment’s Foreign Economic Relations Department, which is responsible for coordinating the interaction with both multilateral and bilateral partners. In order to ensure effective use of ODA flows, the Government is developing a Master Plan for ODA Mobilization and Utilization 2006-10, which will identify guiding principles, priorities and criteria for ODA utilization in support of the SEDP targets. The MPI is also responsible for co-chairing annual CG meetings with the World Bank.

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Clear, mutually agreed conditionality Under the Paris declaration, donors commit themselves to:

• Base their support on national development strategies and periodic reviews of progress on implementing those strategies,

• Draw conditions, whenever possible, from a partner’s national development strategy or its annual review of progress in implementing this strategy, and

• Link funding to a single framework of conditions and/or a manageable set of indicators derived from the national development strategy.

The national strategy and other domestic government documentation, however, may not be sufficient to satisfy the informational requirements donors attach to their funding – especially if resources are provided in the form of budget support. Moreover, there may be a vast array of possible progress indicators available for donors within a country’s poverty reduction strategy or plan. In such cases, donors and governments may find it useful to agree on a single performance assessment framework (PAF) including a manageable set of disbursement conditions and performance indicators, which should be closely linked to the priorities of the national development plan, and which both government and donors consider most critical for progress measurement and upon which future aid commitments and disbursements would be based. In Timor Leste, for instance, the National Development Plan has provided the framework for coordination of external assistance. Eleven partners provide budget support through an operation whose performance framework is strongly anchored on the national plan and subsequent implementation documents such as annual action plans. Moreover, not all donors may be able to sign on to the common performance assessment framework. This is the case of the IMF whose Articles of Agreement prohibit it from signing such agreements. Moreover, as acknowledged in the Paris Declaration, coordination among donors “... does not mean that all donors have identical conditions, but that each donor’s conditions should be derived from a common streamlined framework aimed at achieving lasting results.” Governments will also need to carefully weigh the risks that arise when all donor resources are tied to the same set of indicators. Some governments, while valuing the focus of performance assessment frameworks and the resulting clarity about donor expectations, have preferred that donors use different indicators from those set out in the PAF to condition disbursements. Another way to reduce risks to donor flows is to request that donors agree to partial release of funding against progress made. Donor procedures should ideally be based on reliable domestic systems

Specifically, under the Paris Declaration external partners commit to rely on recipient country procurement and public financial management systems when they are sound enough and/or where the countries have a reform program in place to achieve a reasonable level of broadly accepted good practice. Where country systems do not provide sufficient assurances that donor resources will be used for agreed purposes, stronger coordination of donor procedures could help strengthen their quality while reinforcing domestic accountability. In order for this to happen, external partners should strengthen and rely on existing government structures to coordinate daily management of projects and programs. General and sector budget support by their nature rely much more heavily on government structures than project aid. However, where the project-based approach remains, line ministries should be provided with adequate support to take responsibility for the overall coordination and implementation of projects and programs in their area. For

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example, following the adoption of the Action Plan for Rural Roads and Road Infrastructure by the Government of Lao PDR, donors agreed to disband multiple project implementation units (PIUs), shifting responsibility for implementation – including procurement, financial management, disbursement and reporting – to the Ministry of Construction, Transport, Ports and Communications.

Suggested donor alignment checklist: The suggested indicators below are based on the 2005 Paris Declaration on Aid Effectiveness and are tailored to the East Asian regional context.

Box 7. Donor Alignment Checklist

1. Countries have poverty reduction strategies with clear strategic priorities that are linked to a medium-term budget framework and reflected in annual budgets

2. Sector strategies exist or are under preparation in PRS/plan priority sectors

3. Transparent and monitorable joint performance assessment frameworks in place to assess progress against (a) the poverty-reduction strategy/NP and (b) sector programs

4. Governments lead the coordination and alignment of development assistance by chairing CG and RT meetings as well as joint government-donor working groups

5. Percentage of aid flows to the government that are reported on the national budget

6. Percentage of aid flows provided in the form of programmatic approaches

7. Percentage of each donor’s overall disbursements going to priority sectors

8. Percentage of (a) field missions and (b) country analytic work, carried out in a joint manner

9. Existence of a comprehensive government-led capacity-building strategy to strengthen government institutions that is integrated in the national plan/PRS and enjoys coordinated donor support.

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4.B Aligning aid cycles and reporting to country timetables

Aligning donor review and aid commitment and disbursement cycles to country timetables can contribute to reducing transaction costs and enhancing the overall effectiveness of aid. However, reaping these benefits is neither easy nor automatic. It requires both strong country leadership in managing donors and carefully planning how to integrate donor reviews with country processes. Aligning aid cycles to country timetables is essential to sound public finance management Planning and budgeting cycles typically depend on a country’s historical context and its political system and culture. In some countries, however, these cycles are not stable or clearly specified. To effectively align aid cycles to country timetables, governments first need to clearly identify and fix the timetable of their own internal processes. In this regard, it is essential to carefully consider the timing of both a country’s budget and planning cycles. Typically, budget cycles are well publicized and their timing is regular and fixed by the constitution, public finance management law, or other laws and regulations. Steps in the budget cycle can therefore serve as an anchor for the timing of other government processes, particularly planning cycles and implementation reviews. In particular, governments should try to ensure that planning, reporting and monitoring and evaluation cycles are timed so that they can feed into budgetary processes. Only if plans inform budget allocation choices on a regular basis is there reason to believe that resources are directed toward agreed objectives and that the latter can be achieved. Therefore, governments should engage in dialogue with donors on aligning their aid cycles with a fully established national budget cycle that is appropriately synchronized with the government’s planning process. Governments could then indicate at which point in the budget and planning cycles interactions with donors would most usefully support their own planning processes. The firmer a government is about the timing of its own processes and information needs and the sounder the management of its own resources, the better it can steer the donor community toward aligned donor cycles. In particular, information on aid commitments for the year should be made available at the beginning of the planning and budgeting cycles so it can be properly taken into account. Unpredictability and bunching of disbursements are common and they significantly impede the normal implementation of government programs and policies, especially in the case of budget support. Therefore, disbursements ought to be timed predictably and, to the extent possible, avoid bunching at the end of the fiscal year so as to support good budget management. Moreover, the government should also request firm commitments of donor financing for the following budget year, as well as some indication of likely medium-term support that can underpin policy planning. This is particularly important in the context of donor support for the elaboration of medium-term budgets by recipient countries. Donors that are unable to firmly commit at this early stage in the budget cycle (which may be 6-8 months before budget approval), should at least commit to confirm the financing amount 1-2 months before the beginning of the budget year in order to avoid sharp spending adjustments within the year. For example, the ministry of finance of Timor-Leste has requested its development partners to provide information on annual and medium-term aid commitments as well as disbursements with appropriate classifications on a time-schedule appropriate to the government’s budget cycle. Similarly, the government of Mongolia has set its own budget and planning cycles and has requested the donor community to align its aid cycles to the country’s timetable.

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Harmonizing reporting processes and cycles and aligning them to country timetables In order for information on aid commitments and aid disbursements to be available to governments in a timely fashion, donor review processes must be properly aligned with country timetables. In particular, a joint calendar for donor reviews with appropriate timing for country processes can bring great benefits to a country. Government leadership is very important in the harmonization of reporting cycles. In particular, governments can communicate to donors their preferences for the timing of joint donor reviews and announcement of aid volumes based on their domestic timetable. Donors, on their side, will likely be interested in holding at least one annual review and, possibly, a mid-term review every six months. Typically, the main review would summarize progress made under the government’s program over the past year and allow discussion and feedback from the donor community. From the planning and budget perspective, it is likely most beneficial to hold this review before the budget planning cycle begins and before any update of medium-term financial plans is made. That way, the budget planning process can take full account of agreed policy priorities as well as availability of funds going forward. Donor sector reviews also ought to be carried out jointly and in time for their results to be incorporated into the preparation of annual plans and budget submissions by line ministries. In Cambodia, for example, there is a joint Ministry of Education Youth and Sports/donor monitoring process that is timed so as to dovetail into the government’s planning and budgeting cycle. Suggested donor harmonization checklist: The checklist below summarizes key actions to be taken by governments and donors to improve the timeliness of donor reviews and aid flows. It is based on the 2005 Paris Declaration on Aid Effectiveness.

Box 8. Donor Harmonization Checklist

1. Regular budget, planning and review cycle has been established by governments

2. Joint donor reviews with appropriate timing for the government’s planning cycle

3. Information from program reviews/sector reviews feeds into budget decisions

4. Donor reviews are coordinated around government program/sector reviews

5. Donor reviews announce financing decisions before budget planning starts

6. Financing decisions are firm before budget implementation starts

7. Aid disbursement occurs according to pre-announced timing

8. Donors provide indications of medium-term financing (3 years)

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ANNEX 1. SUMMARY OF SUGGESTED KEY INDICATORS

PRINCIPLES

ASPECTS

INDICATORS

BROAD PARTICIPATION

TRANSPARENCY (PUBLICATION AND POSTING

ON WEB OF ITEMS 1-7)

PARTICIPATION

1. Budget/Financial Management Law 2. Government budget published at start of fiscal year 3. Executed budget numbers published (3 months after year-end) 4. Final audited accounts and auditor’s report (1 year after year-end) 5. Annual progress reports and progress towards achieving MDGs

reports 6. Poverty diagnostics (poverty assessments, household surveys,

census, social data) 7. Key macro-economic data including debt profile/DSA 8. Distribution of central government budget to local governments and

publication and posting of local government budgets 9. Government information centers stocking all of the above

information

1. Existence of a participation action plan for national plans 2. National plan consultation includes line ministries, local

Government, civil society and donors 3. National plan is discussed and approved by Parliament 4. Budget process starts at least 9 months before start of fiscal year

and allows at least 1 month for Parliamentary discussion 5. Sector strategies and major policy and legal initiatives undergo

consultation inside and outside government 6. Government-private sector dialogue process on investment climate

in place 7. National plan monitoring system (including annual progress

reports) allows for input from civil society and development partners and is discussed and approved by Parliament

ANNEX 1. SUMMARY OF SUGGESTED KEY INDICATORS

PRINCIPLES

ASPECTS

INDICATORS

POVERTY FOCUS

DIAGNOSTICS

LINKING PLANS, SECTOR STRATEGIES AND BUDGETS

1. Poverty assessment and participatory poverty assessment feed into national plan

2. The national plan identifies clear pro-poor priorities, based on PA, PPA and popular consultations

3. Government works with research institutes, civil society organizations and donor community to carry out diagnostics

4. Pro-poor sector strategies supported by diagnostics and joint Government-donor-civil society working groups

5. Budget devotes sufficient resources to pro-poor plan priorities and clearly identifies, monitors and reports on them in budget documents

1. Line ministries, the Ministry of Finance and LG are part of the inter-ministerial group leading the plan development process

2. Monitoring frameworks in national plans and sector strategies and entirely consistent

3. Existence of an overall medium-term budget framework (3-year horizon)

4. Engage in the development of MTEFs in priority sectors 5. Functioning sector/technical working groups including membership

from planning, finance and line ministries, donors and civil society 6. Existence of a mechanism for coordination between planning and

finance units within ministries and between Ministry of Planning, Ministry of Finance and line ministries in budgeting process

7. Existence of a mechanism for coordination between national and local levels of government, at both the planning and implementation stage

ANNEX 1. SUMMARY OF SUGGESTED KEY INDICATORS

PRINCIPLES

ASPECTS

INDICATORS

RESULTS ORIENTATION

TARGETS AND INDICATORS

MONITORING AND EVALUATION

1. Selective choice of good indicators and targets, in line with priority

public actions and capacity included in national plan 2. Choice of indicators includes MDG-based country-tailored

indicators disaggregated by income quintile 3. Appropriate mix of inputs, outputs, intermediate and final

indicators to monitor various stages 4. Indicators and targets appropriately capture disparities by social

group, gender, and region 5. Regular, public reporting on progress towards a consistent set of

indicators and targets 6. Changes to targets and indicators follow a transparent process and

are identified and explained

1. There is a country-driven statistical master plan, including appropriate periodicity for carrying out household surveys

2. Systematic efforts to collect appropriately disaggregated data in priority sectors are in place

3. There is a plan to enhance data quality and capacity for data analysis 4. Data is publicly accessible for policy analysis 5. Public expenditure reviews and client-feedback-based service

delivery assessments are carried out periodically 6. Impact evaluation is used strategically to inform policy choices 7. Institutional arrangements establish the role of line ministries and

local governments and the links between their roles and that of central units at the Ministry of Planning and Finance and National Statistics Offices

8. Annual reporting on implementation progress of national plans/PRSs, in formats that are appropriate for both domestic and external audiences

ANNEX 1. SUMMARY OF SUGGESTED KEY INDICATORS

PRINCIPLES

ASPECTS

INDICATORS

DONOR ALIGNMENT AND

HARMONIZATION

ALIGNMENT

HARMONIZATION

1. Countries have PRSs with clear strategic priorities that are linked to

medium-term budget frameworks and reflected in annual budgets 2. Sector strategies are in place/under preparation in priority sectors 3. Transparent and monitorable joint performance assessment frameworks in

place to assess progress against: a) the PRS and b) sector programs 4. Governments lead the coordination and alignment of development

assistance by chairing CG/RT meetings as well as joint government-donor working groups

5. Percentage of aid flows to the government that are reported in the national budget

6. Percentage of aid flows provided in the form of programmatic approaches 7. Percentage of each donor’s overall disbursements going to priority sectors 8. Existence of a comprehensive government-led capacity-building strategy

to strengthen government institutions that is integrated in the national plan/PRS and enjoys coordinated donor support

1. Regular budget cycle has been established by governments 2. Regular planning and review cycle for government programs has been

established 3. Donor reviews are aligned with program and sector reviews and with the

government’s budget cycle 4. Information from program reviews/sector reviews feeds into budget

decisions 5. Donor reviews announce financing decisions before budget planning

starts 6. Financing decisions are firm before budget implementation starts 7. Aid disbursements occur according to pre-announced timing 8. Donors provide indications of medium-term financing (3 years)

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