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SECTOR BUDGET SUPPORT

Learn how to prepare, design, and implement a budget support program effectively, ensuring compliance and successful disbursements.

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SECTOR BUDGET SUPPORT

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  1. SECTOR BUDGET SUPPORT Preparation and Implementation

  2. 1. PREPARATION .

  3. Programming Budget SupportStep 1 • Government and NCU to discuss the possibility of engaging the EC (and possibly other donors) in developing sector approaches. • Objective – to understand the Government’s views and development priorities and ascertain whether they coincide with the EC. • If results positive, agree which sectors.

  4. Programming Budget SupportStep 2 • Discuss with EC to ensure that what was decided is/can be reflected in EC programming. • If positive, establish a sector working group to formalise the further discussions and negotiations.

  5. Designing the Budget Support Programme .

  6. Preparation • Assemble analytical documents & information (eg PEFA, IMF, World Bank reviews etc); • Carry out joint assessment of 7 KAAs; • Determine whether the country is eligible for Budget Support; • Analyse and plan the SPSP and its impact on the national budget.

  7. Drafting the Action Fiche. • Ensure participation of the Sector Working Group. • Confirm satisfactory results of the 7 KAAs; • Agree the SPSP implementation schedule (including disbursements) ; • Agree the type of tranches (fixed or variable); • Agree the form of additional TA.

  8. The Action Fiche • The SPSP’s basic planning document. Contains the following: • Rationale & country context; • Description of the SPSP (not including indicators); • Implementation arrangements. • It is the EC’s “first offer”, subject to detailed discussion with the benficiary.

  9. Disbursement Conditions and Performance Indicators 1 • General Conditions, applied to all disbursements: • Stability oriented macroeconomic policy continues; • PFM should show continued “improvement”; • Sector Working Group meets regularly. • Specific Conditions, applied to individual disbursements, usually performance related. • Disbursement conditions must always depend on Government action (not donor action).

  10. Disbursement Conditions and Performance Indicators 2 • Indicators must be clear and objectively verifiable. • They should not be subject to interpretation. • Great care must be taken with formulation. • Limit the number of conditions and indicators to manageable levels. • The EC is not concerned with detailed activities and needs to focus on policy issues.

  11. The Financing Agreement 1 • The contract between the EC and the beneficiary. • Contains all agreed conditions and indicators for disbursement and sector programme implementation; • Details responsibilities of both sides; • Sets out what is to be done, by whom and when.

  12. The Financing Agreement 2 • The FA sets out • The nature and purpose of the operation,(ie support to sector programme), • the EC’s contribution, • the beneficiary’s contribution, • period of execution, • special conditions (if any) • Annexes: • General Conditions for EC Contracts; • Technical and Administrative Provisions.

  13. Technical and Administrative Provisions • Updates the rationale set out in the Action Fiche; • Confirms that the country is eligible for budget support. • Affirm that the partner country is responsible for implementation; • States that the project will cooperate with other donors (eg World Bank etc); • Specifies direct and untargeted budgetary support; • Specifies that funds will be disbursed to the partner country’s Treasury and applied in accordance with local legislation and procedures. • Specifies when disbursements may not be made. • Contains 2 important annexes.

  14. General & Specific Conditions and Timetable for Disbursements. • Specifies • general and specific conditions for disbursements • how disbursements are made and what docs are required; • how tranches are composed (fixed and variable); • how the EC assesses satisfactory compliance with disbursement conditions

  15. Policy Reform Matrix • Contains pre-conditions, conditions and indicators for each disbursement; • Defines the expected outcomes; • Establishes responsibilities (eg, MoF, Beneficiary ministry etc).

  16. Annual Reviews • Confirms that the country remains eligible for budget support; • That the beneficiary is in compliance with disbursement conditions; • Assesses each condition for full, partial or non-compliance; • Is the basis on which the EC will disburse fixed or variable tranches; • May make recommendations for changes in future disbursement conditions.

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