The Need to Break the Disproportionate Power Imbalance of the Current Aid Regime
By Opa Kapijimpanga, Institute for Policy Studies, Lusaka, Zambia
The current aid regime is characterized by a disproportionate feeling of ‘power over†by donors in relation to African governments. This expresses itself in donors continuing to impose their understanding of how African economies must be run. As an example, the Medium Term Expenditure Framework (MTEF) is essentially an instrument which the IMF uses to define macro-economic parameters. For example the government wage bill is limited by the MTEF to 8% of GDP. This then sets the limits; including how many nurses or teachers Zambia can employ in a given year. The IMF denies this! Donors have also shown reluctance to directly deal with resolving the development constraints that they also visibly see. Their unwillingness to commit to meeting the MDGs is somewhat unacceptable.
The nature and character of the aid regime must therefore change. Some of the processes that might help in doing so include the following:
a) Donor support should be directed at supporting national development plans. The MTEF, a rolling three year framework must be the instrument for securing that plan targets are being met;
b) The relationship between donors and the recipient country should be based on an Aid Policy and Strategy drawn up by the recipient country. Such an Aid Policy should define the modalities for aid and also include a framework for evaluating the Donors
c) Donors, as a group, have to express their commitment to the Plan and Aid Policy through a Joint Assistance Strategy. This will help harmonize their behaviour and procedures; towards a more responsive aid regime;
d) Aid must be directed at resolving development constraints. And these are always clearly visible in any given reality. An assessment of how these are being resolved should be made on an ongoing basis.
Please send your response to this opinion to coordinator@futureofaid.net or click on 'add new comment' below
‘Mediating’ the Paris Declaration on Aid Effectiveness
By Fackson Banda, SAB-UNESCO Chair of Media and Democracy, Rhodes University, South Africa
The role of the media in public finance management in aid-dependent countries is increasingly becoming an agenda item during meetings about development assistance. A recent workshop called by the OECD Global Forum on Development brought the issue into sharp relief. At the core of the discussion was the Paris Declaration on Aid Effectiveness, adopted in 2005.
The OECD meeting did not discuss the media as a central theme. And yet the workshop theme of ‘ownership in practice’ suggests strong citizen engagement in the development process. Perhaps, the ‘silence’ on mediation typical of most official documents accounts for the uncertainty usually exhibited about the place of the media in the matrix of development financing.
Indeed, the Paris Declaration does not acknowledge the role of the media. But it spells out many commitments which only active media engagement can help actualise. For example, it urges aid-reliant countries to elaborate ‘national development strategies through broad consultative processes’. It reiterates this by enjoining upon such nations to ‘encourage broad participation of a range of actors…’ It urges both donor and partner countries to curb ‘corruption and lack of transparency, which erode public support’.
These commitments are central to media engagement in creating a dialogic environment in which civil society can hold national leadership accountable for the utilisation of development assistance. And yet the declaration only assumes this. Its emphasis on broad consultative processes is much more than one-to-one consultation. It implies civic engagement on a large scale. While foregrounding the ends of consultation, ownership and participation, the declaration omits the means through which such processes can be realised broadly.
It is important, therefore, that any exposition of the Paris Declaration explicitly analyses the role of mediation in strengthening citizen participation in development financing.
Please send your response to this opinion to coordinator@futureofaid.net or click on 'add new comment' below
Foreign Aid and the National Reform Agenda: The Case of Lebanon
Written by Mr Ziad Abdel Samad, Executive Director of the Arab NGO Network for Development
Lebanon witnessed a 15 year civil war (1975-1990) that caused massive physical destruction and huge human losses. During the post war reconstruction period (1990-2007), Lebanon became a highly indebted country, whereby debt currently constitutes almost 200% of the GDP.
Since September 2004 Lebanon is witnessing an ongoing deep structural and political crisis. In July 2006, Israel launched a war against Lebanon causing huge direct and indirect losses estimated to reach over 9 billion US dollars.
The donor community convened in “Paris III Conference†during early 2007 and pledged more than 7.6 billion US dollars to support Lebanon. Paris III conference had three main objectives: (1) providing direct support for the post war reconstruction plan, (2) securing cash for the due debt services and (3) covering the budgetary deficit. A new reform program was promised by the government in return to these pledges; it includes significant economic and structural reform including privatization, tax increases, labour law reform, and reforms to the social security system. This program was the result of national public efforts supported by a World Bank team. The International Monetary Fund was delegated to monitor the implementation of the reform process and the multinational consultancy firm Booz Allen Hamilton was contracted to provide technical assistance to the public administration and oversee the coordination of efforts within the reform process.
In exchange, Lebanon pledged to increase growth rate by promoting foreign investment and enhancing competitiveness. This implies the integration of Lebanon in the global economic system and the promotion of trade liberalization. Unfortunately, all this process is perceived as a target in itself instead of being understood as a factor towards enhancing development, thus adopting it within the framework of a national developmental strategy.
In order to reduce the budgetary deficit, the government tends to increase public revenues by reforming the tax policy, mainly based on increasing the VAT. This is because Lebanon adopted a new tariff rate in the year 2000 which halved custom revenue. Unfortunately, these low tariff rates (mostly ranging between 5% and 10%) were adopted as well under Lebanon’s obligations in its accession package to the World Trade Organization.
On the other hand, the government is working towards privatizing two major sectors in the near future: communications and power. The main objectives of this privatization are: (1) to secure cash flow to pay the due debt services, (2) to overcome the inefficiency of the public administration and (3) to enhance competitiveness.
Consequently, Lebanon is a clear model of the interlink between foreign aid and the reform agenda which is not necessarily the result of a dialogue reflecting national priorities but it is a strategy proposed according to the donors’ vision.
Should Donors Deliver Aid Through Developing Country Government Budgets? The Case of Ghana
By E. Gyimah-Boadi, Executive Director, Ghana Centre for Democratic Development (CDD)
OECD donor countries channel about US$ 5 billion – some 5% of their aid – directly to the budgets of developing country governments. The OECD in their report - "An Evaluation of General Budget Support (1994-2004)", showed that this system of delivering aid was an effective way to strengthen the management of public financial systems in developing countries, and also helped to improve access to services like healthcare and education.
Recently, an evaluation of Multi Donor Budget Support (MDBS)to Ghana was carried out jointly by the Overseas Development Institute in London and the Ghana Center for Democratic Development (CDD) in Accra. The main findings are presented in an ODI briefing paper. Professor Gyimah-Boadi, the Executive Director of CDD and a prominent member of the MDBS Evaluation team tells the Forum on the Future of Aid (FFA) what he thinks of MDBS in Ghana...
"I like the concept of MDBS. I support it in principle because it aims to provide much needed resources for a democratically elected government to fulfil pledges and promises made in its election campaign and which constitute part of its mandate. Moreover, MDBS has the potential to stimulate domestic accountability processes - as more resources are channelled through the budgetary process.
Indeed, there is evidence to suggest that Ghana’s MDBS has helped to reduce domestic debt stock and contributed to increased public spending in poverty-reducing sectors such as education and health. MDBS has helped to orient the “Christian democratic†NPP administration towards poverty reduction and somewhat away from its initial focus on “wealth creation.†In addition, participation of non state actors and of civil society and independent research and advocacy organizations in the budget process has begun to grow over the period of MDBS.
However, I remain concerned about other aspects of the MDBS. It is irresponsible for donors to write a cheque to a government and then look the other way. There is substantial risk that rather than empower, MDBS resources would be abused by government. This imposes a difficult-to-enforce obligation on donors to ensure that recipient governments are not only democratically elected but that that there are adequate mechanisms for domestic civil society to hold government accountable.
In the absence of official transparency and effective domestic accountability mechanisms (which remain the case in Ghana today), MDBS resources are subject to capture by personal and private networks in control of the state and resources may be allocated in partisan ways to kin/ethnic groups and cronies. Despite credible elections and given the weak involvement of parliament in the budgetary process, there is a real risk that MDBS resources would be diverted principally to serve the interests of NPP administration and the individuals that control the executive arm of the government."
Please send your response to this opinion to coordinator@futureofaid.net or click on 'add new comment' below
Other relevant resources
Evaluation of General Budget Support.
OECD DAC Network on Development Evaluation.
A review of Multi Donor Budget Support
ISODEC, Ghana
How MDBS works in Ghana
DFID
Multi-Donor Budget Support and Capacity Development: Emerging Lessons from Ghana
DFID
Multi Donor Direct Budget Support in Ghana. The implications for Aid Delivery and Aid effectiveness
Centre for Policy Analysis, Ghana
The GPRS and Multi Donor Budget Support (MDBS): Strengthening the Links of Accountability – the Role of Parliament
World Bank
The GPRS and Multi Donor Budget Support (MDBS): Strengthening the Links of Accountability – the Role of the Media
World Bank
From earmarked sector support to general budget support: development partners experience - Analysis of Norwegian donor budget support
Norad
General budget support evaluation study phase 1: final synthesis report Projects to programmes: does budget support improve the quality of governance in developing country contexts?
DFID
Effects of budget support: a discussion of early evidence: Review of General Budget Support programmes
SIDA
Does general budget support work? Evidence from Tanzania"
ODI
Money can’t buy you love: Partnership prospects for donor budget support
EURODAD
Further GBS related resources on the Gerster Consulting homepage
IDA 15: PUT YOUR MONEY WHERE YOUR MOUTH IS!
By Jeff Powell, Coordinator, Bretton Woods Project
Every three years the rich countries get embroiled in a lengthy series of meetings deciding how much to give to the World Bank's pot of money for poor countries. In World Bank-speak, this year's exercise is known as the "IDA 15 replenishment" The power of the purse means that this provides one of the few opportunities for those with a chair at the table to try to influence the Bank's policies and operations.
Until recently, the poor countries themselves have had no say in the process. During the last round, several poor countries had 'observer status'. At the time of writing, it was unclear which poor countries would be allowed in as 'observers' this year; but what is clear is that a transparent, systematic procedure for their participation is urgently needed.
As we head towards the opening meeting in Paris in early March, every issue under the development sun is on the table for discussion. Often these are disguised under broad, opaque headings like 'aid effectiveness' or 'international financial architecture'. Pick your favourite issue, and for sure you'll be able to fit it under at least one of such headings!
By the time of the second meeting in Mozambique in June, the countries will have had to choose five 'special themes'. Two issues are key priorities for NGOs. The first is that steps already taken towards reducing the use of conditionality be locked in and requirements for further progress outlined. The second is a call for the Bank to phase-out support for oil, gas and coal - the urgency of the climate change problem demands that we stop using scarce public resources to subsidise multinational oil firms.
The stakes are high - without progress on this agenda, many organisations will be calling for European countries to consider cutting back support to the Bank, and channelling it instead through agencies which take both developing country ownership and climate change seriously. Click here to go to the World Bank Campaign Europe Website.
The Link between Multilaterals and Donor Governments through the International Monetary Fund (IMF)
BY MR CHRISTOPHER MWAKASEGE - CHIEF EXECUTIVE OF THE TANZANIA SOCIAL AND ECONOMIC TRUST (TASOET)
The link between the multilaterals and donor governments through the IMF is known to many of those who are involved in development, but very few are ready to discuss its impact on the recipient countries.
Whether you are discussing the role of multilaterals or bilaterals at a country-level in most nations in the South, the International Monetary Fund (IMF) is a key link. It should be noted that multilaterals are largely funded through treasuries or aid agencies from developed countries. But at the same time these funders also provide bilateral aid to developing countries. While the above linkages are being widely discussed, refined and harmonized, however the role of the IMF in these linkages is not being discussed at all or it is being discussed at a very low profile level. Let us face it. Few if any of the PRSP (Poverty Reduction Strategy Paper) countries will have its PRSP funded from the multilateral or bilateral aid agencies without the IMF supervised PRGF (Poverty Reduction and Growth Facility)!
For those developing countries which have graduated from PRGF are still keeping the IMF – aid link through a newly established Policy Support Instrument (PSI). This type of aid-relationship is not sustainable and it undermines the ownership of a development process in the aid – recipient countries. It is high time the international community start thinking and planning for aid delivery without the IMF linkage as it is. This is a possible future scenario. What do you think?
Reforming Aid Architecture – what role for the Commonwealth?
Commonwealth Finance Ministers held their annual meeting 12th-14th September 2006) on the theme of ‘Growth with or without new jobs?’ – Commonwealth Finance Ministers to re-examine the secrets of economic success’ . The timing was designed to fall just before the annual meetings of the World Bank and IMF which this year takes place in Singapore.
This year’s Finance Ministers’ meeting discussed a full agenda including the usual look at the current world economic situation, small states issues, private finance and investment issues, and this year’s theme of growth and livelihoods.
In addition, ministers considered a role for the Commonwealth in the growing international debate about the Aid Architecture. Ministers have been presented with five options for reform of the international architecture in a paper produced for the meeting. These options have been drawn from a series of workshops with Commonwealth finance ministry officials and civil society representatives which took place in London, UK, Dhaka, Bangladesh and Yaoundé, Cameroon. The five options presented were:
1. Option A – Do Nothing - Slow implementation of Paris Declaration on Aid Effectiveness; creation of more vertical funds and special purpose vehicles.
2. Option B - Rely on Harmonisation and Alignment - Gradual implementation of Paris Declaration leads to better H&A at country level; new vertical funds and special purpose vehicles continue to be created; DAC remains largely a bilateral donor club.
3. Option C – Harmonisation and Alignment+ - Recipient countries take the lead in driving H&A; donor numbers in each country controlled, with more joint programmes and offices; DAC should become open to wider membership, including non-OECD member observers; national level Paris Declaration agreements and 10-year partnership agreements agreed; mutual peer review programmes implemented; independent monitoring group at country level begins and countries request multi-donor evaluations; publication of a World Aid Report considered; the UN sets norms and standards for co-ordination, harmonisation and delivery of aid.
4. Option D - Multilateralism - A determined effort is made to simplify the aid system while retaining diversity, by increasing the share of aid channelled through the World Bank, the UN, the MDBs and the EU; UN and IFI governance reform is given high priority and a single UN Development fund formed; a forum such as a reformed and strengthened ECOSOC becomes the principal arena for discussion of aid issues.
5. Option E – Empower Recipient Governments - Developing countries are equipped with better information about the relative performance of aid agencies, the result of independent monitoring and evaluation; they are then given more say in the choice of which agencies act as suppliers of aid, perhaps through vouchers or similar; A forum such as a reformed and strengthened ECOSOC becomes the principal arena for discussion of aid issues.
In thinking about the reform of the international aid architecture and these different options, Ministers were asked to consider what role there might be for the Commonwealth given that it has both an interest in the issues and, given its unique membership and convening power, the capacity to help shape the debate.
At a minimum, the Commonwealth might content itself with monitoring progress against the Paris Declaration and providing assistance to countries which wish to strengthen their capacity to manage aid flows successfully. At a maximum, the Commonwealth could position itself in a position of leadership in the global action programme to reform aid architecture. This would obviously require both commitment and investment in a collective project.
Questions:
1. Does the Commonwealth offer a unique perspective on these issues?
2. Is the Commonwealth able to play a distinctive role in the debate and help resolve differences and tensions present in other forums which discuss the issue?
3. What role should the Commonwealth play if the answer to those two questions is yes?