Challenges for donors and partners

Geske Dijkstra

Erasmus University Rotterdam

Overview

The political context of the Partnership (GBS) Comparison results of programme aid evaluation

1999 with PGBS evaluation 2006

→ Two problematic issues: Conditionality and ownership Selectivity

→ Recommendations for donors and partner governments

Politics in donor countries

Aid must be effective, Planning for results, MDGs → poverty reduction is a technical issue

Simple eligibility criteria: IMF agreement (= technical issue), sometimes nasty political or governance situation in recipient countries, threatening to interrupt the flow of aid money

Lip service to “policy coherence”: Issues are beyond capacity of national aid agencies Subsidies to private sector in donor countries while subsidies to

private sector in recipient countries are not allowed Aid budgets must be spent, “scaling up”

Politics in recipient countries

Political patronage, clientelism → Interest in discretion, not in transparency and accountability

Poverty reduction is political issue, requires redistribution and taking political risks vis-a-vis powerful groups

(Perceived) Aid dependence→ Lip service to poverty reduction, PRSPs, MDGs, good governance→ Debate on domestic growth strategies dominated by foreign

influence (IMF & WB)→ No accountability to domestic constituencies: private sector, the

poor

Evaluation of programme aid (1999)

Funds: effective for stabilisation and growth Conditionality: not effective, but there can be donor

influence→ Selectivity→ Policy dialogue, not monologue

Policies: more reforms not always better→ Caution with policy prescriptions

Systemic effects: Modality matters for influence→ Budget support can focus attention to budget systems,

but micromanagement should be avoided

Evaluation of PGBS (2006)

Money: Stabilisation: unsolved tension with lack of predictability Growth: More allocative and operational efficiency; more money to public

services but outcomes uncertain Selectivity: political risks are underestimated, IMF judgment always

followed, no fixed eligibility criteria for fiduciary risks and governanceConditionality and ownership: “If domestic support for policies, then PGBS

can support it” → no overloading with conditions, limit disbursement conditions, agree with government and assess medium term results

Policies: PRSP central; PGBS reflects biases in PRSP → more attention for growth and income poverty needed

Institutional effects: positive effects on PFM systems → focus conditions on budget systems

Conditionality and ownership: the broader context

Lessons from programme aid evaluation: take ownership seriously, for two reasons: imposing conditions on unwilling government is not effective, and conditions may be wrong

Practice: more conditionality than before: IMF, World Bank structural adjustment plus PRSP with participation;

For example, PRSP: Willingness? “PR is higher priority for donors than for

partner governments” Is PRSP approach appropriate?

Poverty is not a technical issue; PRSP process depoliticizes debate on PR

Long-term, comprehensive, results oriented: ignores domestic political processes

Assumes automatic implementation

Selectivity

Agreement with IMF dominant precondition for debt relief and budget support

Problems: IMF has not been selective in the past: creditor role mixed up with

gatekeeper role IMF involvement limits country ownership of PRSPs: no debate on

macroecononomic framework and structural policies Research: IMF involvement leads to lower growth

Too little attention for political risks, governance, corruption

Average on six governance indicators (Kaufmann et al.) by number of IMF

agreements during ‘94-’02

-0,6

-0,5

-0,4

-0,3

-0,2

-0,1

0

1996 1998 2000 2002 2004

0 1 2 3

Recommendations for donors

Provide policy space for debate Consider limiting the role of the IMF in low-income

countries, especially with regard to defining eligibility for BS

Be more selective with respect to politics and governance criteria, and assess political willingness to combat poverty (progressive taxes?)

Take ownership and domestic political processes seriously: assess home-grown plans and use plans that may be more limited in scope and time frame, rather than comprehensive, long-term PRSPs

Recommendations for partner governments

Take policy space for debate on growth policies Design policy measures for growth in cooperation

with domestic private sector (including SMEs) … that may include financial sector policies, subsidies for exports …

Give attention to domestic revenue mobilisation including progressiveness of taxes