Challenges for donors and partners

1. Challenges for donors and partners Geske Dijkstra Erasmus University Rotterdam

2. Overview • The political context of the Partnership (GBS) • Comparison results of programme aid evaluation 1999 with PGBS evaluation 2006 → Two problematic issues: • Conditionality and ownership • Selectivity → Recommendations for donors and partner governments

3. Politics in donor countries • Aid must be effective, Planning for results, MDGs → poverty reduction is a technical issue • Simple eligibility criteria: IMF agreement (= technical issue), sometimes nasty political or governance situation in recipient countries, threatening to interrupt the flow of aid money • Lip service to “policy coherence”: • Issues are beyond capacity of national aid agencies • Subsidies to private sector in donor countries while subsidies to private sector in recipient countries are not allowed • Aid budgets must be spent, “scaling up”

4. Politics in recipient countries • Political patronage, clientelism → Interest in discretion, not in transparency and accountability • Poverty reduction is political issue, requires redistribution and taking political risks vis-a-vis powerful groups • (Perceived) Aid dependence → Lip service to poverty reduction, PRSPs, MDGs, good governance → Debate on domestic growth strategies dominated by foreign influence (IMF & WB) → No accountability to domestic constituencies: private sector, the poor

5. Evaluation of programme aid (1999) • Funds: effective for stabilisation and growth • Conditionality: not effective, but there can be donor influence → Selectivity → Policy dialogue, not monologue • Policies: more reforms not always better → Caution with policy prescriptions • Systemic effects: Modality matters for influence → Budget support can focus attention to budget systems, but micromanagement should be avoided

6. Evaluation of PGBS (2006) Money: • Stabilisation: unsolved tension with lack of predictability • Growth: More allocative and operational efficiency; more money to public services but outcomes uncertain Selectivity: political risks are underestimated, IMF judgment always followed, no fixed eligibility criteria for fiduciary risks and governance Conditionality and ownership: “If domestic support for policies, then PGBS can support it” → no overloading with conditions, limit disbursement conditions, agree with government and assess medium term results Policies: PRSP central; PGBS reflects biases in PRSP → more attention for growth and income poverty needed Institutional effects: positive effects on PFM systems → focus conditions on budget systems

7. Conditionality and ownership: the broader context • Lessons from programme aid evaluation: take ownership seriously, for two reasons: imposing conditions on unwilling government is not effective, and conditions may be wrong • Practice: more conditionality than before: IMF, World Bank structural adjustment plus PRSP with participation; • For example, PRSP: • Willingness? “PR is higher priority for donors than for partner governments” • Is PRSP approach appropriate? • Poverty is not a technical issue; PRSP processdepoliticizes debate on PR • Long-term, comprehensive, results oriented: ignores domestic political processes • Assumes automatic implementation

8. Selectivity • Agreement with IMF dominant precondition for debt relief and budget support • Problems: • IMF has not been selective in the past: creditor role mixed up with gatekeeper role • IMF involvement limits country ownership of PRSPs: no debate on macroecononomic framework and structural policies • Research: IMF involvement leads to lower growth • Too little attention for political risks, governance, corruption

9. Average on six governance indicators (Kaufmann et al.) by number of IMF agreements during ‘94-’02

10. Recommendations for donors • Provide policy space for debate • Consider limiting the role of the IMF in low-income countries, especially with regard to defining eligibility for BS • Be more selective with respect to politics and governance criteria, and assess political willingness to combat poverty (progressive taxes?) • Take ownership and domestic political processes seriously: assess home-grown plans and use plans that may be more limited in scope and time frame, rather than comprehensive, long-term PRSPs

11. Recommendations for partner governments • Take policy space for debate on growth policies • Design policy measures for growth in cooperation with domestic private sector (including SMEs) … that may include financial sector policies, subsidies for exports … • Give attention to domestic revenue mobilisation including progressiveness of taxes