BUDGET SUPPORT: A REFORMED APPROACH OR OLD WINE IN NEW SKINS?

Martin Knoll

No 190, UNCTAD Discussion Papers from United Nations Conference on Trade and Development

Abstract: Multi-donor budget support is an increasingly important modality for aid delivery, comprising up to30 per cent of central government spending in sub-Saharan African countries. While many donor institutions regard budget support as an improved method of developmental assistance, citing positive impacts on pro-poor spending and the quality of services delivered to the poor, the concepts of strengthened ownership and sovereignty at the heart of this new approach have not been fully implemented to date. This paper explores deficiencies evident in three areas: (i) the volatility of budget support funding remains high, undercutting national-budget sustainability; (ii) the non-BWI donor community is overly reliant on conditionality formulated by the World Bank and IMF, conditionality that is ideologically coloured and often inconsistent with PRSPs; and (iii) the process towards harmonization and alignment is slow and sluggish, complicated by donor concerns over visibility and influence as well as deficiencies in recipient financial management systems, a lack of transparency, and weak links between national budgets and poverty-reduction strategies. It is hoped that additional research in this area will facilitate the development of budget support schemes with greater harmonization and alignment, enhanced recipient ownership, and larger effects on poverty reduction.

Date: 2008
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