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Southern Voices for Change in the International Aid System Project

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From earmarked sector support to general budget support: development partners' experience

Source: NORAD

The purpose of this report is to discuss the question of how a change of aid modality towards general budget support would affect the dialogue and technical cooperation in the priority sectors, in Norwegian partner countries in general and in Tanzania in particular. The paper focuses on the experience of other donors in this area. The interviews with representatives of EU, DFID, Sida, Netherlands, and the World Bank, has made it clear that the issue of priority sector cooperation and general budget support is under active consideration in many other aid administrations.

The report argues that few donors have experience from de-linking sector support and sector dialogue. This is however a highly debated topic in most agencies and one would anticipate a substantive move in this direction by many donors in the coming years. EC, Sweden and other like-minded donors are “struggling” with the same issues and are eager to discuss challenges and options with other development partners.

The relationship between dialogue on priority sector issues and the move towards general budget support as aid modality differs from country to country. It is therefore difficult to provide generic answers and define a common approach in the countries where Norway is involved as a main development partner. The main impression from other donors’ experiences seems to be that there is a good possibility of maintaining a sector level dialogue in combination with a budget support aid modality. What appears to happen in most cases is a combination of two factors. Firstly, the general budget support dialogue "takes over" many of the policy and cross-cutting dialogue issues that were previously discussed in sector programme working groups. Secondly, administrative resources in donor agencies are freed to be more involved in output and outcome related issues in the sector.

It is furthermore evident that there is an ongoing convergence of issues in the dialogue linked to budget support and traditional social sector dialogue. The macro dialogue has become more focused on PRSPs, poverty outcomes and governance, while sector dialogues have increasingly become involved in issues such as civil
service reform and public sector financial management.

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