2 December 2005

1. Upscaling aid in Africa: prospects, challenges, priorities CABRISecond Budget Report SeminarMaputo, MozambiqueRaundi Halvorson-Quevedo OECD Development Assistance Committee 2 December 2005

2. Overview • Current scenarios for aid • Challenges (aid architecture/allocation, absorptive capacity, predictability, accountability) • DAC work linked to the scale-up in aid (aid effectiveness, aid management information systems, accounting standard) • Implementing the Paris Declaration • Good practice tips for “managing” donors

3. Previous trends of ODA, non-aid official flows and private flows to Africa, 1993 - 2003

4. Net ODA to Africa, 1993 – 2003(2002 constant prices and exchange rates)

5. DAC Members’ net ODA 1990-2004 and DAC Secretariat simulations of net ODA to 2006 and 2010 simulations

6. OECD-DAC Secretariat simulation of net ODA volumes in 2006 and 2010(constant 2004 US$ million)

7. Projected impact for Sub-Saharan Africa • Development aid to sub-Saharan African countries will double (134%) by 2010 • Accelerate slowly (debt relief Nigeria $15 b and Iraq $19 billion next two years) then quickly: • 10% growth p.a. in development aid to SSA 2005-06 • Over 20% growth p.a. from 2007 to reach 2010 commitments.

8. Issues of concern: the new “aid architecture” (aid system oversight needed) • Volume • Allocation – countries, sectors, fragile states (orphans, “act fast”, reduce volatility) • Co-ordination with new actors (new donors, global funds, private citizens) • Predictability – recurrent costs linked to MDGs • Accountability – PFM, legislatures • Aid dependence – development finance scenarios, don’t lose sight of domestic revenue efforts • Results – MDG achievement, the case for giving aid

9. Challenges and risks • Uncertainty: ODA will be fastest growing element of government spending of OECD countries (multi-year scenario)! • Aid not effectively absorbed • Budgetised aid that is unspent will lapse • Accentuate aid system imbalances thus undercut goals re: effective allocation, enhanced country ownership and l-term predictability (multi/bi shift, new actors, orphans, refunding, etc.) • Aid dependence • Dutch disease • Impacts on domestic resource mobilisation, tax policies, accountability, corruption.

10. DAC work to address oversight needs • Dialogue begun among agency heads • Overhaul/retool aid reporting system • Classify by instrument • Forward reporting • Aid management information exchange system for both partners and donors – historical trends, sector/country distribution including vertical/other funding, prospective aid flows, results • IPSAS 24 – “Disclosure requirement for recipients of external assistance” (Exposure Draft) • Donors and partners use (uniform classification, definitions, etc.) • Aid effectiveness and reform (harmonisation and alignment, public financial management, managing for results, untying)

11. Aid reporting discrepancies:estimating ODA transfers to African governments(2002 constant US$ billion)

12. 850 Mozambique 800 Ethiopia 750 700 Tanzania 650 Uganda 600 Nicaragua 550 Bolivia Vietnam Aid comes with a high cost… …for countries with limited administrative capacity New donor projects and activities per year (2001- 2003)

13. ITSCONSEQUENCES Why is aid underperforming? THE REALITY Developing countries cannot handle these demands Too little coordination among donors Low ownership over their own development process Too many projects and programmes with different procedures and requirements Poor development performance

14. Paris Declaration on Aid Effectiveness • Participants include: • 35 donor countries & agencies. • 26 multilateral donor agencies. • 56 countries that receive aid. • 14 Civil society organisations. • Mutual accountability between donors and partner countries. • Actionable commitments to deliver more effective aid: • 56 specific commitments. • 12 Indicators of progress.

15. Results & Mutual accountability 4 Ownership (Partner countries) Partners set the agenda 1 Alignment (Donors - Partner) Using partners’ systems Aligning with partners’ agenda 2 Establishing common arrangements Sharing information Harmonisation (Donors - Donors) Simplifying procedures 3 From donorship to ownership Development Results

16. What will it deliver? • More ownership for recipients: • Greater control over aid funded development programmes. • Greater ability to plan aid. • Less burden on recipients: • More coordinated arrangements. • Less duplicative missions, reports… • Simplified rules of the game: • Transparency on aid delivery (commitments, disbursements…) • Simpler procedures • Opportunity

17. 12 Indicators of progress

18. Selected Paris Declaration indicators relating to partner countries • Indicator 2 – Number of partner countries that have procurement and PFM systems that (a) adhere to broadly accepted good practices or (b) have a reform programme in place to achieve them • Targets • (a) Half of partner countries move up at least one measure on the PFM/CPIA scale of performance • (b) One-third of partner countries move up at least one measure on the four-point scale used to assess procurement performance for this indicator

19. Selected Paris Declaration indicators relating to partner countries • Indicator 11 – Number of countries with transparent and monitorable performance assessment frameworks to assess progress against (a) the national development strategies and (b) sector programmes • Target – reduce the gap by one-third

20. Selected Paris Declaration indicators relating to OECD Member countries • Indicator 3 – Percent of aid flows to the government sector that is reported on partners’ national budgets • Target – Halve the proportion of aid flows to the government sector not reported on government’s budget(s) (with at least 85% reported on budget) • Indicator 7 – Percent of aid disbursements released according to agreed schedules in annual or multi-year frameworks • Target – Halve the proportion of aid not disbursed within the fiscal year for which it was scheduled

21. Selected Paris Declaration indicators relating to OECD Member countries • Indicator 9 – Percent of aid provided as programmme-based approaches (e.g. where there is i) country leadership, ii) single comprehensive programme and budget framework, iii) common donor reporting, budgeting, financial management and procurement, iv) increased use of local systems for financial management, monitoring, evaluation • Target – 66% of aid flows are provided in the context of programme-based approaches

22. Selected Paris Declaration indicators relating to OECD Member countries • Indicator 5 – Percent of donors/aid flows that use partner country procurement and/or public financial management systems in partner countries, which either (a) adhere to broady accepted good practices or (b) have a reform programme in place to achieve these • Targets -- • Donors using partner PFM/procurement systems • Reduction of gap of % of aid not using partner country PFM/procurement systems

23. Going forward • Implementation emphasis --“Monitoring Group” comprises DAC Members + 24 partner countries • Partner country caucus, co-Chair role, Ghana to host 2008 HLF follow-up • Monitoring of the 12 indicators is managed at country level (56 countries) • Questionnaire being developed (2006, 2008) • Three sets of questions • Relies on existing coordination structures • Results informs country-level dialogue between government and partners -- mutual accountability in practice, allowing partners and donors to question behaviour that is in conflict with the principles and actions agreed • Active international monitoring and transparency

24. African states implementingthe Paris Declaration • There are 23 SSA signatories: Benin, Botswana, Burkina Faso, Burundi, Cameroon, Congo D.R., Ethiopia, The Gambia, Ghana, Guinea, Kenya, Madagascar, Malawi, Mali, Mauritania, Mozambique, Niger, Rwanda, Senegal, South Africa, Tanzania, Uganda, Zambia

25. Good practiceHow Uganda reasserted government control over development planning and budgeting processes • Many donor-driven projects (duplication, recurrent deficits) • Progressive adoption of sector strategies (coherent, prioritised framework for donors) • Sector strategies then integrated in the PEAP and unified (including intersectoral linkages) in MTEF (funding priorities, integrated K and recurrent) • Gov’t enhanced PFM, invited budget support, result: more expenditure came under gov’t oversight and subject to Parliamentary scrutiny • 2005 tighten budget oversight by off-setting additional donor support to sector Ministries • Essential backdrop: • Transparency, continuous dialogue, confidence-building • Strong central ministry, donors prepared to be innovative • Donor co-ordination centralised, “Partnership Principles” developed

26. “Managing” donors: Tanzania’s tips • Assessment of relationship: action taken • Clear strategy strengthened donor understanding/acceptance of development goals • Strong gov’t ownership and leadership at highest levels exercised (quiet time, challenge donors) • Gov’t H&A plan proved crucial to consolidating progress (identify achievements and constraints) • Additional resources for gov’t aid co-ordination • Measures to facilitate H&A • Training to donors in functions of Tanzanian PFM system • Standardised format for recording aid • Open PFM systems to outside scrutiny and assessment • Public website for donors (www.tzdac.or.tz): info on missions/meetings (open to general public, thus peer pressure to reduce)

27. Thanks for your attention! www.oecd.org/dac www.oecd.org/dac/effectiveness www.aidharmonisation.org