Putting Progress at Risk? MDG spending in developing countries

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A little over two years remain for reaching the Millennium Development Goals (MDGs). This report is the first ever to track what developing countries are spending on the MDGs. It finds that recent spending increases explain the rapid progress on the MDGs. But the majority of countries are spending much less than they have promised, or than is needed, to achieve the MDGs or their potential successor post-2015 goals
  RESEARCH REPORT MAY 2013 Development Finance International (DFI) and Oxfam International have collaborated on the Government Spending Watch report to share research results, contribute to public debate and invite feedback on development policy and practice. This report does not necessarily reflect Oxfam or DFI policy positions, and the views expressed are those of the authors.  PUTTING PROGRESS AT RISK? MDG spending in developing countries THE REPORT   Thirty-two months remain to the deadline for reaching the Millennium Development Goals. This report is the first ever to track what developing countries are spending on the MDGs. It finds that recent spending increases explain the rapid progress on the MDGs. But the vast majority of countries are spending much less than they have promised, or than is needed  –  for example, on wages for teachers and nurses, and maintenance of water facilities  –  to achieve the MDGs or their potential successor post-2015 goals. Aid cuts, low implementation rates and low recurrent spending all threaten to reverse existing progress. This Government Spending Watch report suggests that developing countries need to make data on MDG spending more accessible to their citizens; to strengthen policies for revenue mobilisation (notably combating tax avoidance and tax havens), debt and aid management; and to spend more on agriculture, water, sanitation and hygiene, and social protection. Donors need to report and repatriate illicit outflows; end laws and investment treaties which reduce poor countries’ revenues ; increase innovative financing such as financial transaction and carbon taxes; put more aid through developing country budgets; maximise budget and sector support to make spending more accountable; and report planned disbursements to developing countries. The IMF needs to sharply increase space for sustainable spending in its programmes. The post-2015 framework should set targets for spending on social protection, gender and sustainable development including climate change. Only by implementing these measures can the global community reach the ‘World We Want’.    2 Putting Progress at Risk? MDG spending in developing countries CONTENTS Executive summary 3  About this report 3 Key findings 4 1 Introduction 9 The Government Spending Watch website 11 2 The economic context 12 Revenue recovery is reducing deficits and sustaining spending 12 Increased spending has been partly funded by loans 16 3 MDG spending trends 20 Mixed trends in overall MDG spending 20 Spending trends for each MDG sector 23  Agriculture and food 23 Education spending 26 Environment spending 29 Gender spending 31 Health spending 33 Social protection spending 36 WASH spending 39 What explains spending levels? 41 Conclusions 48 4 The status and quality of data on MDG spending 50 Why good data are important 50 Overall availability of country data 50 Data on total spending 51 Data on sectors 52 Detailed data within sectors 53 Overall data availability by country 56 Bibliography  58 Notes  61  Putting Progress at Risk? MDG spending in developing countries 3 EXECUTIVE SUMMARY  ABOUT THIS REPORT AND THE DATA The first ever report on MDG spending Thirty-two months remain until the 2015 deadline set by world leaders for reaching the Millennium Development Goals (MDGs). This Government Spending Watch (GSW) report is the first ever to track how much developing countries are spending on the MDGs. It is based on data compiled by Development Finance International (DFI) and Oxfam, covering 52 low- and lower-middle income countries, as shown in Map 1. Future reports will extend the analysis to 34 more countries. The data, research, and information on current campaigns on MDG spending, are available from the GSW website:  www.governmentspendingwatch.org   Map 1: Countries covered by the GSW database Data sources and types The data have been compiled from country budget documents and other published sources. They cover seven sectors  –  agriculture/food, education, environment and climate change, gender, health, social protection, and water and sanitation  –  from 2008 to 2015 (including medium-term forecasts). They examine planned and actual spending, disaggregated by type (recurrent or capital) and funding source (government or donor). As the data are often hard to find or interpret, a network of country officials worldwide helped to compile them. Major data gaps need filling GSW has managed to find data on total spending for almost all countries. However, it has been possible to compile only three-quarters of sector data for education and health, two-thirds for agriculture, half for social protection and environment, a third for water and sanitation, and a fifth for primary education and gender. Data on actual spending are only half as accessible as data on budgeted spending, partly due to delays in auditing and publication. There are major gaps in breakdowns of sector data: into recurrent/capital spending (55 per cent missing) and sources of funding (65 per cent missing). As Map 2 shows, GSW has been able to compile an excellent  4 Putting Progress at Risk? MDG spending in developing countries share of data for 10 countries, a good share for 17, but only a moderate share for 19, and a low share for 5. As discussed below, donors bear a major responsibility for data problems, often failing completely to report recent or current aid disbursements at country level, and rarely providing reliable forecasts of future disbursements. ã   Countries should track and publish more data on their MDG spending, and make these data more easily accessible to their citizens. Data are particularly lacking on water, sanitation and health (WASH), primary education and gender, and should be disaggregated by type of spending and source of funding. MDG spending data should be integrated into national and local campaigns for greater budget transparency. Donors have a role to play in providing support and resources for countries to compile data, and could also support global monitoring and analysis of spending trends. They must also live up to their aid effectiveness  promises (most recently in the Busan Global Partnership) to report recent, current and forecast aid flows to recipient governments. Vital decisions on future development goals affecting millions of lives should be informed by the best possible information. Map 2: data currently available for each country on the GSW site KEY FINDINGS Most countries have increased revenue and spending since 2008, but this trend is now being reversed Poor countries lost $140bn in budget revenues due to the global economic crisis which began in 2008 (actual revenues compared with the levels forecast by the IMF in 2008, before the crisis hit). However, many have been growing rapidly despite global economic stagnation. They have increased their revenue by 2 per cent of gross domestic product (GDP) since 2009, so have been able to reduce their budget deficits while spending more than ever, and (in spite of rapidly increasing aid flows) reduce their dependence on aid. On the other hand, a substantial minority of countries are being hit harder by global stagnation and other climate or conflict-related shocks. They are growing much more slowly, and have had to cut spending. As Figure 1 shows, in 2013, on average all countries covered by the GSW database have cut overall planned spending as a proportion of GDP. ã   Countries need to increase their fiscal space to spend enough to reach the MDGs, by mobilising more revenues through progressive taxes, ending tax exemptions for investors, imposing a stricter tax regime for extractive industries, and combating tax avoidance via havens and illicit flows. Donors can help by providing technical assistance to negotiate better tax deals and to track and repatriate illicit or tax-avoiding flows, by encouraging multinational corporations to pay tax in host countries, and by ending investment treaties and laws which reduce tax paid in developing countries.
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