Dave Biggs

1
Poverty Reduction Budget Support

• Dave Biggs
• Senior Governance Adviser
• Asia Directorate
• CIPFA Conference16 June 2005

1 Palace Street, London SW1E 5HE Abercrombie
House, Eaglesham Road, East Kilbride, Glasgow G75
8EA
2
Structure of presentation

• Poverty Reduction and Millennium Development
  Goals
• Aid Effectiveness
• Poverty Reduction Budget Support
• DFIDs PRBS
• The underlying hypothesis
• DFIDs current policy
• Is it working?
• Key Issues

3
Poverty Reduction and the MDGs

• The focus of the international development
  community (agreed at various international
  conferences)
• Millennium Development Goals (MDGs) agreed at
  Millennium Summit 2000 and progress to be
  reviewed later in 2005
• 8 goals (see next slide), 18 targets, 48
  indicators
• Aid Effectiveness

4
The 8 MDGs

• Eradicate extreme poverty and hunger
• Achieve universal primary education
• Promote gender equality and empower women
• Reduce child mortality
• Improve maternal health
• Combat HIV/AIDS, malaria and other diseases
• Ensure environmental sustainability
• Develop a global partnership for development

5
Aid Effectiveness

• More and better aid 10 principles
• Country owned
• Aligned with national poverty reduction strategy
• Delivered through effective institutions
• Results focused
• Allocated to the poorest
• Policy coherence from donors (aid trade
  agriculture investment etc)
• Harmonisation between donors
• Predictable and untied 
• Minimal conditions
• Choice of aid instruments that strengthen
  accountability and participation

6
Poverty Reduction Strategies

• Set out country approach to reducing poverty
• Linking policy with resources (medium-term)
• Domestic and international resources
• Poverty Reduction Budget Support (PRBS)

7
Definition of PRBS

• A form of financial aid (resource transfer) in
  which funds are provided
• In support of a government programme (typically
  focussed on growth and poverty reduction)
• Directly to a partner governments central
  exchequer I.e. using governments systems
• Can be a general contribution to budget general
  budget support - PRBS (G)
• Can be earmarked to a discrete sector sector
  budget support - PRBS (S)
• Can be provided at national or sub-national level
• One of a number of aid instruments used by DFID

8
DFIDs PRBS

• Provided to following in 2004/05
• Africa Ethiopia, Ghana, Malawi, Mozambique,
  Rwanda, Sierra Leone, Tanzania, Uganda, Zambia
• Asia Vietnam, India sector support in
  Bangladesh, Pakistan
• Afghanistan, Bolivia, Palestinian Authority, East
  Timor (some via World Bank Trust Fund)
• Averaged 250m p.a. in 2000-2003 (15 bilateral
  expenditure), 345m in 2003/04, expected to be
  around 600m 2005/06 and perhaps 1.2bn 2007/08

9
The underlying hypothesis

• Ownership empowerment harmonisation
  policy dialogue predictability
• Stronger, more transparent, more meaningful plans
  and budgets
• Improved efficiency, and pro-poor resource
  allocation, lower transaction costs
• Improved service delivery and changing
  expectations over public services
• Increased engagement of public and increasing
  democratic accountability

10
DFIDs current policy (1)

• Origins in UK Governments 2000 White Paper
• The UK Government will work with other donors
  to channel more of our support through developing
  country budgetary systems, where governments have
  strong commitment to poverty reduction, and help
  strengthen their planning, financial and
  procurement systems to make this possible
• PRBS policy paper officially published in May
  2004

11
DFIDs current policy (2)

• DFID believes that, when circumstances are
  appropriate, PRBS is the aid instrument most
  likely to support a relationship between donor
  and developing country partners which will help
  to build the accountability and capability of the
  state.

12
DFIDs current policy (3)

• Assessment of appropriate circumstances
• Governments planned budget priorities support
  poverty reduction
• There is sufficient commitment to improving
  government systems so that they will be able to
  deliver poverty reduction
• Provision of PRBS will produce significant
  benefits relative to other forms of aid delivery

13
Is it working ?

• Major OECD/DAC evaluation exercise underway
  (results due by end of 2005)
• Previous studies indicate
• Expected benefits are not automatic
  complementary measures, appropriate TA and policy
  dialogue is needed (Budget support plus)
• PRBS has not increased predictability of donor
  funds major concern in countries with high aid
  dependence - more susceptible to political
  governance issues (easy to switch off)

14
Key Issues

• The need to be rigorous in assessing the likely
  benefits and risks
• How to attribute PRBS? (i.e. explain where it has
  been spent)
• How to improve predictability? (ongoing work to
  review policy on conditionality rolling
  programmes timing of tranches)
• Is it appropriate in fragile states?