Does General Budget Support Work? Evidence from Tanzania
The paper's main findings are:
• In Tanzania, General Budget Support is provided by 14 donors and together with HIPC relief contributes 20% of public expenditure. Despite this, however, GBS is not yet a dominant aid modality.
• The immediate effects of the GBS programme have been strongly positive, but its role has been to facilitate a nationally-driven reform process; domestic revenues have grown even faster than aid.
• GBS has been associated with a large growth in government discretionary spending and a major expansion in health and education services. However:
i. There are few signs of improved efficiency of public spending or of long-term obstacles to service quality being addressed.
ii. The ‘challenge function’ in the budget process remains weak, mainly for political but also for more technical reasons.
iii. The expected improvements in intra-government incentives and democratic accountability are not yet apparent.
• The scope for change in these respects has been limited by the fact that 80% of development spending is still funded by donor projects.
• Outcomes have improved remarkably in respect of macroeconomic stability, investment and growth, while the negative macroeconomic effects of increased aid flows appear manageable.
• Outcome improvements are otherwise rather mixed, with large questions about service quality, and significant legal changes that are too recent to have yielded results.
• Poverty impacts are uncertain for the last half decade, the most relevant period, because there has been no household survey since 2001.
• The unevenness of growth and service-delivery improvements give reasons for caution about future poverty trends.
• In summary, GBS in Tanzania has not had all the positive effects expected of it, some of which are necessarily long-term. But the gains that have been made are important and would not have been so effectively facilitated by any other aid modality.
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