Budget Support Can't Buy Reform But It Can Support It
Several European Commission evaluations confirm that Budget Support can be a useful instrument to support policy implementation and reforms in developing countries. But it can only contribute to positive change, experts warn, if there is a strong political commitment from partner governments.
Budget Support involves making financial transfers to the national treasuries of partner countries and is widely used by the European Commission, which is one of the largest providers of budget support in the world. Over the period 2003-2009, the EC made budget support commitments totalling over 13 billion euros, or about 25% of all its commitments in this period and a recent EC Communication confirmed that Budget Support would remain an important instrument in the coming years.
A large scale evaluation of General Budget Support between 1999 and 2004, commissioned by a group of 24 Aid agencies, including the European Commission, and 7 partner governments, shows clear evidence of the positive impact of General Budget Support.
"What is striking is how strongly positive evaluations are about the impact of Budget Support whether it is its ability to increase funding in the social sector, or improvement in the public financial management, and in another range of areas," explained Marcus Manuel, from the Overseas Development Institute, on the sidelines of a recent EC technical seminar on Budget Support.
But another useful lesson that evaluations have taught us is that "you can't buy reform but you can support reform", said Mr Manuel. "In areas where there is no agreement between the development partners and the governments, you can't just say because we put an agreement around Budget Support, this is going to achieve the change."
Enzo Caputo, an independent expert involved in the recent evaluation of Tunisia, Zambia and Mali as tests for the European Commission's new approach for evaluating Budget Support, agrees partner commitment is crucial.
"In Tunisia, the main effect on financial allocations in the social sector and in the general economic reform is mainly due to the policy dialogue and the convergence of the strategic objectives between governments and donors," explained Mr Caputo. "We have noticed that in Mali and Zambia in particular, Budget Support was not able to promote reforms in areas where governments were not committed. This has confirmed the clear idea that Budget Support cannot buy reform."
But a strong commitment from partner governments is not the only key for successful Budget Support programmes, Mr Caputo warned. International opportunities such as political and economic partnerships may have an important role to play in accelerating capacity development and facilitating economic and governance reforms (see previous article on the opportunity framework).
"When you are in the presence of a strong political commitment and strong international opportunities, then Budget Support has optimal conditions to work," he explained. "When these conditions are lacking, when political commitment is lacking, Budget Support is useless.”
Visit the EuropeAid's portal for more information on EU budget support
|Join a Public Group|
|If any of these issues interested you, you might want to consider joining the Public Group on Macroeconomics and Public Finance|
DISCLAIMER: This information is provided in the interests of knowledge sharing and capacity development and should not be interpreted as the official view of the European Commission.