SECTOR POLICY SUPPORT PROGRAMMES

1. SECTOR POLICY SUPPORT PROGRAMMES A new methodology for delivery of EC development assistance.

2. Basic Concepts and Definitions • The EC is committed to delivering "more and better aid”; • It is committed to the principles of Programme Based Approaches (PBAs); • EC policy is to use general and sector budget support as the favoured financial vehicle for its assistance whenever conditions are favourable.

3. Programme-based Approaches • “A way of engaging in development cooperation based on the principle of coordinated support for a locally owned programme of development, such as a national poverty reduction strategy, a sector programme, a thematic programme, or a programme of a specific organisation”. • PBAs must reflect the particular circumstances of individual sectors and countries. • Also known as Sector or Sector-Wide Approaches (SWAps)

4. Characteristics of PBAs and SWAps • Leadership by the host country; • A single comprehensive programme and budget framework; • A formalised process of donor coordination; • Harmonisation of donor procedures for reporting, budgeting, financial management and procurement; • Increased use of local systems for programme design and implementation, financial management, monitoring and evaluation.

5. Budget Support 1 • The transfer of financial resources from a donor to a partner country’s National Treasury, against agreed conditions. • Funds are part of the partner country’s global resources, • Are administered in accordance with the partner country’s public financial management systems.

6. Budget Support 2 • General Budget Support (GBS) • Supports a national development policy or strategy; • Government decides how it will be used. • Sector Budget Support (SBS) • Supports a sector policy or strategy; • Government or Donors can specify use.

7. Sector Policy Support Programme(SPSP) • The EC's aid instrument for supporting a sector programme. • Serves as a coordinating framework for • government's own activities and • donor support. • The EC's favoured financing method is budget support, but sometimes the best option may be project support, or pooled funding with other donors.

8. Sector Approaches Purpose and Objectives • To promote national ownership, • by supporting government-owned policies and strategies, • To strengthen orientation towards results, • by promoting coherence between policy, budgeting and actual results, • To coordinate donor inputs with other resources • and reduce (eventually) the transaction costs of utilising external finance.

9. EC Perspective • By using weak government structures, incentives for improvement can be generated. • A clear sector policy creates greater coherence, permitting governments to assert ownership. • Reduced number of projects and their transaction costs • stops the dissipation of administrative capacity and • allows budgetary and planning systems to become stronger. • Oversight by Parliament and civil society encourages • improvements to efficiency and effectiveness of public services, • strengthening of planning, budgeting and management structures.

10. The 5 Main Elements of a Sector Programme • A sector policy and strategy; • The sector budget and its medium term perspective; • A sector coordination framework; • The institutional setting and existing capacities; • A performance monitoring system.

11. 1. Sector Policies and Strategies .

12. What is a Sector Policy? • The Sector Policy is the first building block of a sector programme. • Specifies what government aims to achieve in the sector, when and how; • Distinguishes government’s regulatory role from its service delivery role; • Specifies the roles of non-government agents; • Outlines any necessary institutional or legal reforms.

13. What is a Sector Strategy? • The SectorStrategy, is a detailed plan or document, describes how the government will implement the policy. • Usually plans for the medium-term (normally 3-5 years). • It should be directly reflected in annual sector budgets.

14. Good Practice • A coherent and consistently applied sector policy focuses government, donors and stakeholders on achieving collective results. • It must be consistent with the partner government’s overall strategic objectives. • The sector policy document will not be a rigid plan. • It will establish basic principles, objectives and strategies for the sector. • It will accept that detailed strategies and resource allocations will continue to evolve. • Therefore, there must be clear procedures and schedules for regularly updating the policy and strategy.

15. EC Perspective • The sector approach requires a basic agreement between the government and its partners about • the sector objectives, • how they should be achieved in broad terms. • Donors should not micro-manage by specifying activities in detail. • The EC is interested in the expected results.

16. 2. The Sector Budget and its Medium Term Perspectives. Basic Requirements for SPSP

17. A credible, comprehensive and transparent sector budget - essential for the proper implementation of the sector policy. • A clear budget classification is key to the proper elaboration of a sector budget. • Such a budget should • take into consideration all resources available to the sector (including external resources) and • list all expenditures (capital as well as recurrent expenditures) necessary for the achievement of the sector’s expected results.

18. The annual sector budget should increasingly reflect sector priorities and strategies. • Progress towards policy based budgeting, covering all resources for the sector, with realistic medium-term sector expenditure plans. • Eventually, sector budgets will become part of a coherent national medium-term budget and expenditure plan.

19. Good Practice • Sector policies and sector budgets are the two faces of the same coin. • In order to obtain the desired results, policies and budgets must be coherent. • Well prepared budgets supporting weak policies will not achieve better sector results. • Well designed policies and strategies are helpless if they are not reflected accurately and clearly in the budget.

20. EC Perspective • Within Sector approaches the EC promotes the link between policy and budget. • Sector budgets need to fit into government’s own disciplined overall expenditure plans, • Annual spending needs to be derived from medium-term projections of resource availability, priorities and recurrent and capital expenditures. • Eventually, this would become a Medium Term Expenditure Framework, and the central part of the government’s political and budgetary process.

21. 3. Sector Coordination .

22. Framework • Special attention must be given to sector programme management. • Led by the government; it should cover • coordination of national stakeholders, i.e. all concerned government ministries and agencies; • non-governmental participants; • coordination with and among donors.

23. Good Practice • Basic Principle: “Sector coordination mechanisms must not override the established structures and responsibilities of Government”. • Beneficiary Ministry is responsible for implementation of the sector programme; • MinFin must be involved and have a clear role; • Sector coordination mechanisms must support the wider framework of the country’s own development strategy.

24. EC Perspective • Experience shows • the importance of a clear government-led management and sector coordination framework. • Donor coordination is regarded as a means of achieving • improved ownership and coherence • reduced transaction costs .

25. 4. Institutional Setting and Capacity Development .

26. Basic Concept • Thesector approach aims to use national systems where possible and to reinforcethemby using them. • A clear capacitydevelopment strategy led by the government should be in place.

27. Paris Declaration Statement 1 • "Capacity development is the responsibility of partner countries with donors playing a support role".

28. Paris Declaration Statement 2 • "Partner countries commit to integrate specific capacity strengthening objectives in national development strategies and • to pursue implementation through country-led capacity development strategies ……”

29. Paris Declaration Statement 3 • "Donors commit to align their analytical and financial support with partners’ capacity development objectives, • make effective use of existing capacities and • harmonize support for capacity development accordingly."

30. EC Perspective • CD must be owned and led by those wishing to develop their capacity; • Supply driven and fragmented support to CD is usually only marginally effective; • Support to CD must respond to a clear demand; • Be designed and implemented under partner government leadership; • CD must be driven by results, not by donor-funded inputs.

31. 5. Performance Monitoring System .

32. Characteristics • Provides key elements to steer policy dialogue and is part of the overall policy review process. • Focuses on results and provides feedback to management. • Might be a performance assessment framework (PAF) containing indicators for • inputs, • outputs, • outcomes, • impacts. • Clear procedures and schedules for regularly updating the policy and strategy need to be in place.

33. Two Additional Elements .

34. Macroeconomic Policy • Essential for a stable environment for the sector; • Assures predictable resource levels.

35. Public Financial Management (PFM). • Ensures that policy priorities are reflected in budget allocations; • Promotes efficiency (“value for money”) in public spending; • Ensures that actual expenditure complies with the approved budget and does not exceed available resources.