General Budget Support: What Next?

26 July 2006
Comment

On 18 July, ODI and the World Bank organised a joint seminar to discuss the current state of knowledge on General Budget Support (GBS) as an aid modality, bringing together a small audience of researchers, practitioners, policy makers and civil society organisations, and with John Burton (DFID) as the chair. One of the reasons for holding the seminar was the recent publication of two related pieces of work: the Joint Evaluation of GBS promoted by a consortium of donors in seven countries (Burkina Faso, Malawi, Mozambique, Nicaragua, Rwanda, Uganda, Vietnam), and a book edited by the World Bank on ‘Budget Support as More Effective Aid?’.


The two presenters, Stephen Lister (team leader for the Joint Evaluation) and Stefan Koeberle (co-editor of the World Bank volume) highlighted a number of achievements and some challenges related of the introduction of GBS as an aid modality in various countries.

Among the achievements were:

  • The provision of efficient, effective and sustainable support to national poverty reduction strategies;
  • Positive systemic effects on government capacity;
  • An expansion of public services;
  • The mainstreaming of an approach to aid which strengthens government ownership and promotes better alignment with national strategies;
  • An improved understanding of the importance and functioning of public financial management systems, and of the necessary measures to mitigate fiduciary risks associated with GBS.

The main challenges they identified were:

  • Limited progress on wider harmonisation issues and on the reduction of transaction costs;
  • Lack of predictability of GBS funding, especially regarding securing and delivering on long-term commitments;
  • The difficult balance between government autonomy and donor intrusion when defining conditionality frameworks, as intense policy dialogue and performance assessment frameworks associated with GBS can undermine domestic accountability and limit policy space.

The discussants (Atish Ghosh of the IMF and Andrew Lawson of ODI) added some further food for thought. They highlighted the uncertainty that political conditionalities unrelated to economic performance can create for budgeting processes, as well as the potential macroeconomic impact of scaling up GBS to meet the MDGs. They also stressed the importance of bringing stand-alone projects within national budget systems as a way of strengthening them, and of ensuring better predictability, given that improvements in government performance are more likely to stem from the assurance of continued support than from threats of its interruption or withdrawal, which may also have severe adverse macroeconomic consequences. Finally, they saw as issues for further consideration the harmonisation of donor conditionality frameworks (i.e. the relationship between conditions for sectoral and general budget support) without leaving a large portion of the recurrent budget vulnerable to abrupt and disruptive interruption of support. 

The discussion focused on the significance of the evaluation results and on the future of GBS as an aid modality. Some participants noted that there is a risk of overloading the ‘GBS issue’ in aid debates, given that at the moment GBS only represents 5% of total ODA (even though, another participant noted that, in the countries assessed, GBS can represent more than 20% of total aid flows). Despite its overall positive results, GBS assessments are mostly pointing towards possible improvements in GBS interventions, rather than proving the validity of the underlying theory which states that a shift towards GBS can strengthen national institutions, policy processes and accountability mechanisms. As a matter of fact, evidence on improved domestic accountability is at best scanty. Donors still have a tendency to focus too much on getting the most value out of aid funds in the short-term, rather than promoting long-term virtuous cycles of institutional development and poverty reduction.


This is partly due to the difficulties that donor agencies face in understanding and supporting such processes, sometimes due to internal constraints and incentives, but also to the fact that GBS is but one of a number of aid instruments utilised by donors. Sometimes its positive effects can be counter-balanced by the use of other more fragmented instruments, not fully realising potential complementarities. While it could be argued that in theory only a decisive shift towards GBS as the main aid delivery modality could maximise its positive effects, in practice all donors have to adopt a risk minimisation strategy using a range of instruments, let alone the fact that some donors are still heavily sceptical about GBS.


What this implies is the need to look at the total aid portfolio, including GBS, sector and project support, and technical assistance in order to ensure that overall aid effectiveness, not only in terms of poverty outcomes, but also of institutional strengthening and domestic accountability, is maximised, taking into account the complementarities and contradictions that exist across aid instruments. It also means that the discussion on how to improve the design of GBS instruments (on predictability, harmonisation, political risk) need to continue, along with thinking about other instruments, possibly more suited to genuine long-term support for country strategies.


Before the end of the seminar the chair (John Burton of DFID) asked all panelists to put forward some key points for the future of GBS. Some of the ideas that were put forward were:

  • A better integration of the core diagnostics that are increasingly utilised for determining the appropriateness of GBS in different countries (e.g. PEFA, governance assessments, etc.);
  • More pragmatism in finding appropriate solutions to each context (e.g. GBS in Sierra Leone will look very different from GBS in Tanzania);
  • An increasing shift towards ex-post conditionality, so that aid is used to finance reforms, rather than to buy them;
  • A better strategy to ‘sell’ GBS to domestic audiences in donor countries, explaining its advantages and finding creative ways to report on actual performance;
  • A move from GBS as a modality to a more comprehensive look at aid portfolios in their totality, understanding and building on the complementarities amongst different aid instruments.

Interesting additional sources:

Aid, Budgets and Accountability (CAPE 2005 Workshop Summary Paper)

Does General Budget Support Work? Evidence from Tanzania (Short Report)

The primacy of domestic politics and the dilemmas of aid: what can donors do in Ethiopia and Uganda? (ODI Opinion)

The seminar presentations will soon be available on ODI’s website at: www.odi.org.uk/pppg/cape/events.html