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Government Budgets, Aid and Development Outcomes

Explore the importance of incorporating international goals like the MDGs into government budgets and aid strategies. Understand the impact of policy formulation, resource management, and public administration on service delivery. Discover the key institutional factors necessary for effective service delivery.

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Government Budgets, Aid and Development Outcomes

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  1. Government Budgets, Aid and Development Outcomes Anand Rajaram and Bill Dorotinsky, PRMPS Public Expenditure Perspectives for HD, Session 1, November 12, 2003 HD week, 2003

  2. A Question • If a key MDG objective is to be achieved in a country (say100% primary enrollment), should we: • Insist that the goal is included in the PRSP of the country? • Develop conditionality to increase public spending on that sector? • Design and implement a multi-year Bank project/program to achieve the outcome? • Ensure coordination with donors to achieve the outcome?

  3. Emerging development consensus • “Developing countries will have to strengthen policies and governance so as to ensure that domestic resources, private inflows and aid can be used effectively in spurring growth, improving service delivery and reducing poverty.” • “Developed countries will need to move vigorously in supporting these efforts with more and better aid, debt relief and improved market access.” • Dev.Committee Communique, Sept.2003

  4. Aid can have perverse effects • Governments are besieged by demands from interest groups – including diverse donors with financial influence and agendas • Such pressures often contribute to sub-optimal outcomes where capacity is weak • Policy “steering” by aid agencies (undermines ownership and weakens internal policy debate) • Competitive donor promotion of projects, corruption • Capacity diminution - donors poach limited capacity to staff PIUs • Little attention to budgeting, public administration or service delivery • In this scenario, countries develop in spite of, not because of, development assistance

  5. What must change to implement this consensus? • Home grown policy – from PRSP or other process, responsive to country priorities • Effective resource management by country to implement policy • Support from donors to help strengthen, not undermine, govt. capacity to manage resources • This requires a better understanding of govt. institutions, systems and processes and medium to long term strategies to improve them (no quick fixes)

  6. Key institutional factors for effective service delivery • Recent WDR highlighted the following • Budget Management • Formulating and implementing budgets in line with policy objectives and fiscal constraints • Organization of tiers of government • Appropriate assignment of responsibilities and fiscal resources to different levels of government • Public Administration • Motivating and managing public employees for effective service delivery

  7. What are implications for work? • Country teams will have to • Incorporate a medium term program of analytical work on public expenditure policy and management, • Ensure corresponding work on issues of public administration and tiers of government and its impact on service delivery in each sector • Assist government in defining their strategy to address policy and management weaknesses • Coordinate donor support to government strategy to strengthen institutions and govt. capabilities

  8. Implications …… continued • All sectors to pay more attention to the chain of links between broad policy objectives and the capabilities needed for resource management and service delivery • Country teams to form a collective view on the cross and intra-sectoral choices in the annual government budget and include it in sector and PRSP dialogue • Increasing support to PRSPs via PRSCs that provide predictable resource inflows to government

  9. Implications for project work • Integrate the PE system perspective into project level work • Feed project insights into broader assessment of system performance (incentives and staff motivation, corruption, etc.)

  10. Key Messages • The government budget is a key instrument for linking policies, resources and outcomes • Channeling development assistance through the government budget can reduce transactions costs and strengthen domestic capacity • International goals such as the MDGs require donors and aid receiving governments to match resources with better policies and institutions • Donor (including Bank) assistance strategies must be based on a good understanding of public expenditure policies and institutions of resource management

  11. Thank You

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