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Key Text Partnerships for Poverty Reduction: Rethinking Conditionality

Author: Department for International Development
Date: 2005
Size: 38 pages (211)

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Summary

In recent years the UK has been moving away from traditional approaches to conditionality. This paper sets out the current UK government's position on effective aid partnerships. Produced jointly by the Department for International Development (DFID), HM Treasury and the Foreign and Commonwealth Office, it is based on a broad range of international experience and evidence. While good policy matters for development, it has proven ineffective for donors to impose policies on developing country governments. Donors should support countries to decide what policies should be included in poverty reduction plans.

'Fiduciary' conditionality is where donors can stop funding if there is a significant breakdown in the performance of public financial management and accountability. More controversial is 'policy conditionality' where donors make their aid conditional on the pursuit of particular policies in the partner country. Increasingly, 'process conditions' are set to cover the process of policy making rather than the actual content.

The paper sets out what impact conditionality has had before elaborating on the UK government's approach to aid partnerships and its recommendations for the way forward. It represents a significantly new approach to building a successful partnership for poverty reduction, focussing on poverty outcomes rather than specific policy conditions.

Evidence on the impact of policy conditionality in bringing about policy change is mixed. Conditions have not been met, poverty reduction has not always been given priority and there has been insufficient analysis of the impact of different reforms on poor people. The government therefore believes that effective aid involves:

Shared commitment to poverty reduction and the Millennium Development Goals (MDGs).
Respect for human rights and other international obligations and strengthening of financial management and accountability.
Where a partnership breaks down, the decision to reduce/suspend aid must consider the impact for poor people and longer-term poverty reduction efforts.
The UK will therefore be guided by five principles in giving aid: developing country ownership, participatory and evidence-based policy making, predictability, harmonisation, and transparency and accountability.

The UK believes that a new consensus across the international community built on these principles is important. Poverty reduction plans through real ownership by developing countries are critical and donors must enable this process. The UK will work with partners to make this happen, including:

Building accountability linked to a country's own plans for reducing poverty, agreeing benchmarks equally with partners.
Highlighting importance of good economic and social policies as well as strong commitment to transparency, accountability and good governance.
Promoting a shared commitment to respect human rights and encouraging greater cooperation between all organisations providing aid.
Acting to prevent misuse of funds and supporting improved public financial management and accountability.
Supporting the World Bank, IMF and other donor agencies to harmonise terms and conditions of aid. Considering further how to maintain predictable and stable aid flows. Promoting increased use of Poverty and Social Impact Analysis (PSIA).
Developing further understanding of effective partnerships in fragile states, publishing more information about DFID's conditions on bilateral programmes, and monitoring and reviewing the impact of this policy.

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Source: UK Government, 2005, Partnerships for Poverty Reduction: Rethinking Conditionality, A UK Policy Paper, Department for International Development, Foreign and Commonwealth Office and HM Treasury, London
Author: Department for International Development (DFID), http://www.dfid.gov.uk