Making budget support work for development European parliament hearing

1. Making budget support work for development European parliament hearing Lucy Hayes, Policy and Advocacy Officer, European Network on Debt and Development Brussels, 5th November 2008

2. Structure of presentation • What is Eurodad? • Some facts about budget support • Budget support and accountability • Budget support and conditionality • Improving budget support

3. What is Eurodad? • A network of 54 organisations from 17 countries (including Norway and Switzerland) • A platform for joint research and advocacy on development finance – aid, IFIs, debt, capital flight, etc. • A specialist tracker of influential institutions – the World Bank, IMF, Paris Club, OECD DAC, European Union institutions, etc • An office of 8 people in Brussels • An NGO funded by its members (1/3), the Dutch, Swedish and British governments and some private foundations. • A link between European NGOs and relevant coalitions in other regions

5. How much aid spent as budget support? • Only 5% of all ODA is provided as budget support (OECD/DAC) • Paris Monitoring Survey on Aid Effectiveness finds that of official aid actually disbursed to 54 developing countries, 22% of aid disbursed to those countries delivered as budget support • Excludes aid through northern NGOs • Excludes “Non-aid” items (debt cancellation, support for refugees and students in Europe) • The European Commission has agreed to channel 50% of EC ODA through budget support by 2010.

8. Aid and accountability • All aid needs to be both transparent and accountable in order to be effective. • Parliaments both north and south should have oversight over aid. • In the south, when aid is “on budget” there is greater potential for parliamentary oversight and for citizens to see how aid flows are being used to support national policies • Budget support is the easiest way to put aid “on budget” – so that it is reflected in the budget, is overseen by the parliament, and goes through the treasury and accounting systems

9. Budget support and accountability • Improved transparency from donors regarding flows and clear aid contracts setting out reporting and accountability terms are critical for accountability to citizens north and south. • Budget support contracts should also be underpinned by core human rights principles and should set out the steps that donors will take if there is a breach of these principles.

10. Aid is more likely to be successful when it is “owned” by the developing country. It needs to be aligned to a recipient government’s strategies and systems if recipient governments are to be “in the driving seat” Budget support is a clear way of supporting a recipient governments own policies Budget support and ownership

11. Eurodad supports the shift from the EC towards more “outcome based” conditions, but these should be over a longer a period Outcome-based allocations or conditions refer to: disbursements linked to performance measured by indicators at the outcome level; which refrain from spelling out concrete policy measures that should be adopted in order to obtain certain results; and which refer to outcomes in areas clearly linked to human development and poverty reduction. Budget support and conditionality “Donors should agree to reform, streamline and harmonise the design and implementation of conditionality with a view to increasing ownership, predictability, transparency and democratic scrutiny of conditions for the use of aid resources” European Council,July 2008

12. Upwards and downwards accountability

13. Improving parliamentary and citizen oversight of aid requires more donor transparency “How can you handle local accountability which is so important – if aid is not even visible to the organisations of scrutiny in the country” Richard Manning • Information on aid not disaggregated or accessible enough • New donor commitment in Accra: “Donors will publicly disclose regular, detailed and timely information on volume, allocation and, when available, results of development expenditure to enable more accurate budget, accounting and audit by developing countries.” “Donors would tell you the information If you went and knocked on their door, but you have to be in their world in order to get access in the first place”, Sierra Leone CSO representative

14. Improving accountability of budget support • Making the process of deciding about budget support contracts more inclusive. Consult citizens, parliamentarians, other Ministries • Indicators for improving PFM should also consider whether information is being produced in a way that is useful for parliamentary budget committees, citizens groups etc • Proactive communication by donors of their activities, and support for building capacity for citizens to hold governments to account very important • Support for independent media groups, citizens groups engaged in monitoring and advocating on budgets and local and national level

15. Improving ownership and predictability of budget support • Improve the predictability of budget support • Streamlining conditionality practices and reducing the “collage of conditions” that European donors bring to the table • Roll out MDG contracts which will mean aid is committed over a 6 year period, with a mid-term review.

16. What to avoid…

17. Contacts By Lucy Hayes, Policy and Advocacy Officer European Network on Debt and Development lhayes@eurodad.org www.eurodad.org

18. Subscribe to Eurodad’s Development Finance Watch, a fortnightly update on aid, debt and related policy issues.