Budget Support in Fragile Situations | Aids | African Development Bank

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This study aims to provide an evidence basis for the provision of budget support in fragile states. The study sits at the intersection of three main sets of issues: fragility, budget support, and accountability (with a particular focus on the role of, and space or, civil society in holding government to account). The study provides insights into the rationale, challenges and kinds of conditions applied to budget support to fragile states
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    Oxfam Discussion Papers Budget Support in Fragile Situations Catherine Dom and Anthea Gordon Mokoro Ltd 11 November 2011 This study aims to provide an evidence basis for the provision of budget support in fragile states. The study sits at the intersection of three main sets of issues: fragility, budget support, and accountability (with a  particular focus on the role of, and space for, civil society in holding government to account). The study provides insights into the rationale, challenges and kinds of conditions applied to budget support to fragile states; the effects of budget support on spending and delivery of basic social and agricultural services, as well as on the experiences of  parliaments and civil society/communities in the study countries with regards to the ability to hold governments and donors to account for public spending. Oxfam Discussion Papers Oxfam Discussion Papers are written to contribute to public debate and to invite feedback on development and humanitarian policy issues. They ar e ‟work in progress‟ documents, and do not necessarily constitute final publications or reflect Oxfam policy positions. The views and recommendations expressed are those of the author and not necessarily those of Oxfam. For more information, or to comment on this paper, e-mail cdom@mokoro.co.uk and agordon@mokoro.co.uk    www.oxfam.org    Oxfam Discussion Paper, November 2011, Budget Support in Fragile Situations   2 Table of Contents 1.   INTRODUCTION ................................................................................................... 9   2.   TERMINOLOGY AND CONTEXT FOR THE STUDY ................................. 11  2.1. F RAGILITY  ......................................................................................................... 11 Scope of the study in relation to fragility ........................................................ 11 How are donors supposed to engage in fragile situations? ......................... 13 2.2. B UDGET S UPPORT ............................................................................................. 14 Scope of the study in relation to Budget Support. ......................................... 14 Expectations of Budget Support ....................................................................... 16 Effectiveness of Budget Support ...................................................................... 16 3.   BUDGET SUPPORT TO FRAGILE STATES –  OVERVIEW OF DONOR POLICIES AND PRACTICES ..................................................................................... 19  3.1. R ATIONALE / MOTIVATION  .............................................................................. 19 3.2. E XISTING DONOR POLICIES ON KEY ISSUES  ..................................................... 20 3.3. INGO S ‟  DISCUSSIONS  ...................................................................................... 31 3.4. C URRENT DISCUSSIONS  .................................................................................... 32 Lines of divide in the ‘theory’ of budget support in fragile countries  ....................... 32   Consensus: ‘high risk, high return’ but...  ................................................................. 33   Risk assessment and management ............................................................................ 34   4.   BUDGET SUPPORT IN FRAGILE SITUATIONS IN PRACTICE –  AGGREGATE ANALYSIS .......................................................................................... 38  4.1. A ID FLOWS TO FRAGILE STATES  ....................................................................... 38 4.2. B UDGET SUPPORT TO FRAGILE STATES :   H OW MUCH AND WHERE  ................ 39 Financial importance of ‘general budget support’ in fragile countries  ..................... 40   Where is GBS used and not used .............................................................................. 43  4.3. A  VARIETY OF RATIONALE AND MODALITY MIXES  ........................................ 45 ‘Actions related to debt'  ............................................................................................ 45   Different rationales and types of general budget support ......................................... 46    Multi-Donor Trust Funds ........................................................................................ 47     Mixes of ‘system - aligned’ instruments  ..................................................................... 48   Is there a conclusion? ................................................................................................ 49   5.   BUDGET SUPPORT IN FRAGILE SITUATIONS IN PRACTICE –  COUNTRY CASES ....................................................................................................... 52  5.1. A NALYTICAL COMPARISON OF GBS  PROVISION AND EFFECTS IN B URUNDI ,   DRC  AND E THIOPIA  .................................................................................................... 52 5.2. I NDIVIDUALISING THE CASES  .......................................................................... 68 The provision of general budget support in Ethiopia ................................................ 68   The provision of general budget support in the Democratic Republic of Congo ....... 68   The provision of general budget support in Burundi ................................................ 69  5.3. F INDING VARIATIONS AND COMMONALITIES  ................................................ 70 Country and aid contexts .......................................................................................... 70   Rationales of donors to provide (or not provide) budget support ............................. 70   GBS as a political instrument and the implications ................................................. 71   Implications with regard to budget support predictability ....................................... 72   Effectiveness of budget support ................................................................................. 73   6.   CONCLUSIONS .................................................................................................... 76      Oxfam Discussion Paper, November 2011, Budget Support in Fragile Situations   3 6.1. C HALLENGES ,  POTENTIAL AND EFFECTS OF GBS  IN FRAGILE COUNTRIES  ... 76 Rationale and main challenges .................................................................................. 76   GBS programme design (including conditionality) .................................................. 78   Sector and PFM results and contributing/hindering factors ................................... 80   The provision of GBS and accountability in fragile states ........................................ 81  6.2. E MERGING GOOD PRACTICES  .......................................................................... 82 6.3. R EFLECTIONS  .................................................................................................... 83 C OUNTRY SPECIFIC  ...................................................................................................... 84 6.4. G APS AND FUTURE AREAS FOR RESEARCH  ..................................................... 85 ANNEX 1: SCOPE OF THE STUDY IN RELATION TO FRAGILITY ............... 87  L ISTS OF FRAGILE SITUATIONS FOR O XFAM N OVIB STUDY  ........................................ 87  Attempts at categorising fragile situations ............................................................... 88   ANNEX 2: AID DEFINITIONS AND TERMINOLOGY....................................... 94   Budget support, balance-of-payment support and debt relief ................................... 94   GBS and SBS ............................................................................................................ 95   The OECD definitions .............................................................................................. 95   The EC ‘definitions’  .................................................................................................. 96   Earmarking and traceability ..................................................................................... 96   Predictability ............................................................................................................. 97     Aid-On-Budget ......................................................................................................... 97    Conditionality ........................................................................................................... 98   ANNEX 3: DONOR POLICY AND PRACTICES ABOUT BUDGET SUPPORT IN FRAGILE SITUATIONS ........................................................................................ 99   Selected donor policies related to BS in FSs .............................................................. 99   Budget support in FSs for the UK .......................................................................... 100   Budget support in FSs for selected ‘Development Banks’ ....................................... 103   World Bank budget support in fragile situations ................................................... 103   Other Development Banks ...................................................................................... 108   Budget support in FSs for the EU/EC .................................................................... 110   Different ‘intervention theories’ and other major differences  ................................. 114   Divergences, or emerging common approaches? .................................................... 116   ANNEX 4: EXTERNAL FINANCING FLOWING TO FRAGILE STATES ..... 119    Aid flows important and growing but unbalanced ................................................. 119   Financing the transition: a challenge ...................................................................... 122   ANNEX 5: ‘GENERAL BUDGET SUPPORT’ IN FRA GILE STATES .............. 124   Data issues .............................................................................................................. 124   Importance of ‘GBS’ in ODA in fragile countries  .................................................. 131    MDTFs and debt actions ........................................................................................ 138    Multi-Donor Trust Funds/MDTFs ........................................................................ 138  A5.16) Variety of objectives and designs ............................................... 138 A5.19) Financial importance ................................................................... 140 A5.21) Why MDTFs over other types of aid ......................................... 140 A5.25) Accountability ............................................................................... 141  Actions related to debt ............................................................................................ 142   ‘GBS’ trends  ............................................................................................................ 144   Link b etween ‘GBS’ and ‘results’ in fragile countries  ............................................ 148      Oxfam Discussion Paper, November 2011, Budget Support in Fragile Situations   4 There is no pattern associating ‘GBS’ and ‘results’  ................................................ 153   ‘GBS’ is not straigh tforwardly associated with HIPC ............................................ 155   The type of ‘GBS’ varies and this may matter in relation to ‘results’  .................... 155   ANNEX 6: COUNTRY CASE STUDIES AND PEN PORTRAITS ................... 158  B URUNDI CASE STUDY –   I NTRODUCTION AND SUMMARY OF RECOMMENDATIONS  ..................................................................................................................................... 160  Main findings and reflections: ................................................................................ 160  DRC  CASE STUDY –   E XECUTIVE SUMMARY  .............................................................. 162  Main findings ......................................................................................................... 162   Reflections ............................................................................................................... 163  E THIOPIA CASE STUDY –   E XECUTIVE SUMMARY  ...................................................... 166 Context .................................................................................................................... 166    Main findings ......................................................................................................... 167    Reflections ............................................................................................................... 168  A FGHANISTAN PEN PORTRAIT  .................................................................................. 170 C ENTRAL A FRICAN R EPUBLIC (CAR)  PEN PORTRAIT .............................................. 174 N EPAL PEN PORTRAIT  ................................................................................................ 178 S IERRA L EONE PEN PORTRAIT  ................................................................................... 183 BIBLIOGRAPHY ......................................................................................................... 188   ACKNOWLEDGEMENTS ........................................................................................ 198   NOTES .......................................................................................................................... 199  
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