How international financial institutions can be more effective on the ground

12 September 2018
Insight
2nd Meeting of G20 Finance Ministers & Central Bank Governors. Photo: International Monetary Fund CC-BY-NC-ND

At a time when multilateralism is under threat, few are aware that last year the G20 created an eminent persons group (EPG) to review whether the global financial architecture should be reformed, including international financial institutions (IFIs).

This group, tasked with reviewing optimal arrangements for IFIs, including how they should coordinate to boost efficiency, effectiveness and transparency, has just released its recommendations.

What’s interesting is that two of the group’s proposals are not new ideas: implement effective country platforms coordinating all financiers, and achieve convergence around core development standards among all development partners. In other words, boost the impact of country programmes and reduce fragmentation on the ground.

These in fact reflect the principles of development effectiveness of the mid-2000s on country ownership, transparency, division of labour and coordination across development partners. But putting these principles into practice over the last ten years has thrown up major challenges, leading to a general sense of fatigue about the whole endeavour.

So while it’s very welcome that the EPG is now revisiting these (still valid) principles, learning from these implementation challenges will be critical to making country platforms work.

Challenges on the ground: what the evidence shows

Our analysis of how financiers operate across sub-Saharan Africa and Southeast Asia mapped very few examples of effective coordination on the ground. Previous attempts at coordination are suffering from general fatigue, and there is little interest from governments and development partners who both tend to privilege bilateral negotiations.

Making coordination mechanisms more inclusive has also been difficult. Emerging donors in particular often lack the manpower to prioritise active participation in country platforms. For example, Ethiopia, Cambodia, Ghana and Senegal showed very limited interest in involving emerging donors in coordination fora. In Kenya, emerging donors attended high-level summits – usually in listening mode only – but not coordination mechanisms for specific sectors such as education and health.  

Other challenges include recipient country governments not being clear on their priorities; high transaction costs of coordination mechanisms; and a lack of clarity around comparative advantages and synergies across development partners.

How to make country coordination mechanisms work

There are at least three actions G20 members and recipient country governments should do to make the EPG’s proposals work:

1. Put governments in the driving seat

Governments should own and lead coordination mechanisms and be clear on the purpose, strategy and benefits of harmonising country programmes across development partners. Management of coordination mechanisms by governments should be as light as possible.

2. Invest in inclusive partnerships

Country ownership of development programmes is only one of many ingredients needed to make country platforms work. All development partners – bilateral and multilateral donors, philanthropic organisations, private sector actors – should invest time, energy and human resources in making these platforms work, beyond simple attendance. 

3. Be clear about each development partners' comparative advantage

Understanding the specific contribution and the role of each development partner is a prerequisite for any effective division of labour. Systematically comparing development partners is a rather challenging exercise (as we experienced in our updated and expanded guide on multilateral development banks). As flagged in the EPG draft report, development partners should agree common measures of their operations and review what their comparative advantage really means, both when it comes to sectors and throughout the project cycle.  

G20 members should not waste the momentum the EPG process has generated to reshape the international financial architecture, supporting international organisations in their growing ‘to-do’ list of development challenges at both global and national levels. But country platforms will be effective in fostering collaborations and reducing transaction costs if – and only if – both recipient country governments and development partners (including G20 members) invest in them.