Use of country systems in fragile states

Research reports and studies
December 2015

Fragile states arguably hold the key to ending extreme poverty. On current projections, extreme income poverty will increasingly be a phenomenon associated with conflict-affected and fragile states. To 'leave no one behind' will increasingly mean working in these countries – in extremely varied contexts – to help foster sustainable, politically viable states capable of meeting the demands of their citizens.

Using country systems is an important component in building state capacity – to maintain security, foster economic stability and growth and deliver services. Bypassing country systems creates additional transaction costs for the government and may even distract attention from the systems that govern the use of domestic resources, undermining accountability of the state. In contrast, it is argued that using country systems encourages the development of state institutions, encourages the accountability of spending agencies and improves coordination.

Despite the potential benefits and ambitious commitments in Paris and Busan to increase the use of country systems, progress has so far failed to meet expectations. Though the picture varies from donor to donor, in aggregate the proportion of aid using country systems in recipient countries has increased little, if at all. The quality of country systems does not explain much of the variation in their use between countries, despite widespread efforts to measure the strength of public-financial management systems through frameworks like CPIA (country policy and institutional assessment framework) and PEFA (public expenditure and financial accountability framework). This suggests that it is the political decision of how much fiduciary risk a donor will take on that drives use of country systems – and this varies between donors and between countries, even for the same donor.

Against this backdrop, there are a number of principles that may be used to guide decisions on the use of country systems in fragile states.