Budget Support in Fragile Situations

Catherine Dom, Anthea Gordon
2011

Summary

This study examines the rationale, challenges of and conditions applied to budget support to fragile states; the effects of budget support on spending and the delivery of social and agricultural services; and the ability of parliaments and civil society to hold governments and donors to account for public spending. It highlights the current volatility of General Budget Support provision, and emerging good practices.

There are two broad rationales leading to very different types of GBS programmes: emergency, supposedly one-off stabilisation programmes, and more policy-oriented programmes aimed at supporting the country’s transition in the longer term. In both types of programmes, GBS has the potential to strengthen the legitimacy of the state.

Therefore, a key challenge for donors is to assess whether the current power-holders are legitimate country leaders. A commonly used yardstick is the government’s ‘commitment to development’, but it is unclear what this means and how it is measured. Donor decision-making processes are intensely politicised for the provision of GBS. However, tagging GBS as a political instrument means that donors may forego the use of a flexible type of aid that can support a country’s transition out of fragility. Other challenges for the provision of GBS in fragile contexts include the following:

  • Aid partnerships are hampered by recipient countries’ political fragility and by disagreement among donors on how to interpret and respond to this.
  • Donors’ non-developmental interests are likely to undermine their supposed state-building goals.
  • There is a wide range of donor attitudes regarding GBS in fragile countries, and a wide range of designs for both GBS and GBS ‘look-alike’ instruments across donors in one country and across countries for the same donor.
  • Donor approaches to assessing and managing the risks of providing GBS in fragile countries are not harmonised.
  • In the few fragile countries in which GBS has been significant, it has been volatile and erratic in both the short- and medium-term. In relation to the effects of GBS, there is no pattern linking the provision of GBS to countries’ development trajectories.

The way in which conditionality is used seems to depend more on the objectives of GBS than on the country’s ‘fragility’. When the objective is to act fast, conditionality tends to be light. When the rationale is more policy-oriented, there is a tension between using GBS as an instrument to incentivise policy reform, or to support the implementation of existing, non-controversial policies.

In situations where donors decide that it is legitimate to work with the government and feasible to work at least partly through it, GBS has value. It is flexible, and has potential for systemic capacity development and legitimacy building effects, linked to it being as aligned as feasible. In these cases, the following emerge as good practices:

  • Support the restoration of basic state functions and the implementation of consensus policies on a large-scale before or separately from incentivising more sophisticated policy development
  • Avoid overloading the policy agenda, especially if the prime objective is rapidity
  • In any type of GBS programme, focus on the government budget as a whole
  • Prioritise building capacity for, and transparency in, budget allocation decision-making and reporting
  • Use the focus on the budget to provide feedback on policy implementation in sectors where policy development is further ahead; and in others, to raise issues needing policy attention
  • Support systemic effects of large-scale flows of aid channelled through government systems through specific capacity development measures linked to the focus of the GBS programme
  • Use agreed principles and joint work plans rather than ‘carrot-and-stick’ conditionality
  • Work on both supply- and demand-side accountability capacity, focusing on practical measures linked to the context-specific agreed objectives of GBS
  • Use this type of non-controversial accountability strengthening as a building block for greater change
  • Strengthen information provision on GBS programmes, in country and at home
  • Do a proper risk/benefit analysis of using the country’s PFM systems, with a view to designing system-aligned aid instruments which may or may not be GBS, but would be better capable of using country systems to the fullest possible extent
  • Be proactive in assessing risks, opportunities and evolving needs; develop scenarios and instruments, mixes of instruments or graduated responses tailored to the various possibilities, ahead of critical times or events.

Source

Dom, C. and Gordon, A., 2011, 'Budget Support in Fragile Situations', Oxfam Discussion Paper, Oxfam, London