For the aid system as a whole, 2005 is a year of great opportunity, but one of great challenges as well. Many are arguing for a significant increase in aid flows to poor countries in the effort to reach the MDGs. New aid partnerships are being negotiated, based on more effective aid modalities and with an increasing focus on mutual accountability mechanisms.
As increasing resources are channelled to poor countries, and increasingly through modalities that rely on, or at least are compatible with country systems and procedures, budget processes become much more important as the main avenue to allocate and spend aid resources, but also to deliver on development outcomes. Public Financial Management systems have therefore been an increasing focus of donor attention, as their strength and adequacy is assessed for fiduciary purposes before aid can be channelled via sector and general budget support programmes. Recent years have also seen an increasing number of PFM reform projects being designed and implemented. The difficulties that have been encountered in their implementation point to the need to better understand some of the underlying forces (social, economic but most of all political) which influence the budget process and drive reform efforts.
Different actors and interests play different roles in shaping budget policies and priorities. In aid-dependent countries, accountability mechanisms are shaped both by external factors, such as the influence of donors on budget choices, and by domestic factors, for example through parliamentary committees and civil society organisations. Formal processes and procedures often are in contradiction with informal forces, and institutional incentives defined by existing rules and regulations may not be mirrored by individual ones driven by personal interest and other factors.
For donor agencies in particular, but for recipient governments as well, a more frank debate about recent efforts to address the weaknesses of PFM systems, and about some of the contradictions that are intrinsic in the accountability frameworks that come with aid dependency, is necessary in order to better understand how to improve the design of programmes designed to support the channelling of increased aid resources to poor countries, and to enhance their effectiveness.
Following on last year’s successful event, the 2005 CAPE workshop, to be held at ODI on 3-4 October, intends to address some of these issues by bringing together donor agencies, recipient governments, academics and practitioners, discussing recent findings and looking into future directions for policy-relevant research. The workshop will also reflect on the outcomes of the UN MDG Summit and of the WB/IMF Annual Meetings.