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Harmonisation and Alignment: Challenges for US and European donors

Alex Wilks,European Network on Debt and

Development

GMF, 18th December 2008www.eurodad.org

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Why aid effectiveness?

• Aid can be a stable financial flow at a time when others are disrupted.

• With pressure on public spending it is important that all aid is well spent and achieves results.

• Transaction costs in aid are currently too high.

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The Accra Agenda for Action

• A review of previous commitments, reinforcement of some and extension of others.

• Recognition that progress in implementation has been too slow

• Some commitments to accelerate progress– Transparency, accountability, predictability– Division of labour, Use of country systems.

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• “Developing country governments will take stronger leadership of their own development policies, and will engage with their parliaments and citizens in shaping those policies. Donors will support them by respecting countries’ priorities, investing in their human resources and institutions, making greater use of their systems to deliver aid, and increasing the predictability of aid flows”.

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• “In the Paris Declaration, developing countries committed to strengthen their systems and donors committed to use those systems to the maximum extent possible. Evidence shows, however, that developing countries and donors are not on track to meet these commitments. Progress in improving the quality of country systems varies considerably among countries; and even when there are good quality country systems, donors often do not use them. Yet it is recognised that using country systems promotes their development.”

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Ghana and Tanzania

• A large number of donors present, general high performing governments according to donor analyses.

• Good performers

– Joint Assistance Strategies in both countries– Both countries scored 4/5 for the quality of their

PFM systems (top score)– Tanzania scored B for the quality of its

procurement system– Two of only 13 countries to have mutual

accountability mechanisms in place

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Use of country systems across 33 countries

0

10

20

30

40

50

60

70

80

90

PFM Procurement PFM Procurement PFM Procurement

United States European Comission United Kingdom

% o

f ai

d

2005

2007

Use of country PFM and procurement systems across

33 countries

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Use of country Public Finance Management and procurement

systems in TanzaniaUse of country systems in Tanzania

0

20

40

60

80

100

120

PFM Procurement PFM Procurement PFM Procurement

United States European Comission United Kingdom

% o

f ai

d u

sin

g c

ou

ntr

y sy

stem

s

2005

2007

9

Use of country Public Finance Management and procurement

systems in Ghana

Use of country systems in Ghana

0

20

40

60

80

100

120

PF

M

Pro

cure

me

nt

PF

M

Pro

cure

me

nt

PF

M

Pro

cure

me

nt

United States European Comission United Kingdom

% o

f a

id

2005

2007

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Division of labour and aid fragmentation in Ghana

• Average of 12 donors per sector• 16 donors in agriculture sector.

Donor Activesectors

Delegated/ silent sectors

Amount of aid Average amount aid per active sector

US 13 0 $99 million $ 7.6 million

EC 8 1 $88 million $ 11 million

UK 9 3 $143 million $15.8 million

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Division of labour and aid fragmentation in Tanzania

• 19 donors in governance sector• 17 donors in health sector

Donor Active sectors

Delegated sectors

Amount of aid

Average amount aid per active sector

US 13 2 $265 million $20 million

EC 10 7 $176 million $17.6 million

UK 6 8 $210 million $35 million

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Barriers and enablers

• Donor legislature actions – including earmarking and restrictions on fund transfer - can disrupt the ability of aid recipient country legislatures to fulfill the same obligations they have to their own citizens.

• Action plans and policies on aid effectiveness with clear commitments.

• Decentralised decision-making and operational flexibility.

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• To strengthen and increase the use of country systems, we will take the following actions:– a) Donors agree to use country systems as the first option for aid

programmes in support of activities managed by the public sector.– b) Should donors choose to use another option and rely on aid

delivery mechanisms outside country systems (including parallel project implementation units), they will transparently state the rationale for this and will review their positions at regular intervals. Where use of country systems is not feasible, donors will establish additional safeguards and measures in ways that strengthen rather than undermine country systems and procedures”.

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• “Donors will immediately start working on and sharing transparent plans for undertaking their Paris commitments on using country systems in all forms of development assistance; provide staff guidance on how these systems can be used; and ensure that internal incentives encourage their use. They will finalise these plans as a matter of urgency”.

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• “Donors will publicly disclose regular, detailed and timely information on volume, allocation and, when available, results of development expenditure to enable more accurate budget, accounting and audit by developing countries”.

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• “We will systematically review and address legal or administrative impediments to implementing international commitments on aid effectiveness. Donors will pay more attention to delegating sufficient authority to country offices and to changing organisational and staff incentives to promote behaviour in line with aid effectiveness principles”.

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Recommendationsa) To reduce fragmentation and increase alignment with

government systems, work through Joint Assistance Strategies, reduce the number of projects, and introduce more pooled funds and sector budget support.

b) Where funding is via projects – i.e. in infrastructure – aid should be reported in the budget, integrated into the treasury account and passed through government financial management systems.

c) Ensure greater transparency and predictability of aid as set out in the Publish What You Fund principles. This includes making clear multi-year commitments.

d) Donor governments and NGOs should educate their public and parliaments about why ownership is important for development how it supports effective state building.

e) Simpler and clearer aid objectives and reporting, with delegated authority to staff on the ground to implement flexibly.

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More information

www.eurodad.org