An Introduction to the Multi-Donor

Budget Supportin Ghana

Prepared by:

MDBS Communication Group

Outline

• What is budget support?• MDBS Six Pack:

– Financial contribution– Alignment to government systems– Performance & conditionality– Donor harmonisation– Policy dialogue– Technical assistance & capacity support

• Future of the MDBS

What is budget support?

• Many perspectives:– The economist’s view– The systems specialist’s view– The development planner’s view– The policy maker’s view– The critic’s view

What is budget support: an Economist’s view

• A transfer of funds from the donor to the Treasury of the recipient country, where it is mixed with the recipient country’s own resources in support of the overall budget.

• Underpinning: allocative efficiency

What is budget support: a Development Planner’s view?

• Unearmarked support to the recipient country’s own growth and poverty reduction policies

• Main underpinning: without ownership no progress

What is budget support: a Systems Specialist’s view

• Funds spent in accordance with the recipient country’s own procedures and rules.

• Main underpinning: by using country systems you strengthen them, by avoiding them you weaken them

What is budget support: a Policy Maker’s view

• Funds provided in view of an overall policy and political dialogue on inclusive development and equitable growth.

• Underpinning: Development progress can only be achieved through strong political will, adherence to principles of good governance, which should be addressed at the highest level. (Chair at the table)

What is budget support: a Critic’s view

• Budget support is a blank cheque transferring taxpayers’ money to corrupt regimes who use it for personal gain.

• Underpinning: Africa’s neo-patrimonial system does not meet any standards of good governance and accountable use of public funds.

What is budget support: the six pack

1. Financial contribution

2. Alignment with government systems

3. Performance agreement & conditionality framework

4. Donor harmonisation

5. Policy dialogue

6. Technical assistance & capacity support

The MDBS Six Pack

• MDBS = Multi-Donor Budget Support

Financial contribution (1)DISBURSEMENT 2009 (US$M)

PLEDGES2010 (US$M)

African Development Bank

79.5 15.0

United Kingdom 70.2 77.5

Canada 24.3 17.9

Denmark 11.8 12.6

European Commission

102.2 60.0

France 23.9 9.0

Japan 3.6 3.7

Germany 13.5 19.4

Netherlands 36.5 28.7

Switzerland 8.6 7.7

World Bank 151.0 200

Total 525.2 451.5Source: Ministry of Finance and Economic Planning (MoFEP)

Financial contribution (2)

Pledges in USD

Actual in USD

2003 281.40 277.90

2004 302.16 309.03

2005 285.33 281.88

2006 372.43 312.16

2007 319.57 316.57

2008 347.90 368.13

2009 601.10 525.20Source: Ministry of Finance and Economic Planning (MoFEP)

Financial contribution (3)

30,01

26,74

29,34

33,02

26,48 25,72

34,62

0

5

10

15

20

25

30

35

40

2003 2004 2005 2006 2007 2008 2009

Year

MD

BS

as

% o

f to

tal

aid

Source: Ministry of Finance and Economic Planning (MoFEP)

Financial contribution

• Base component + Performance component = total contribution

• Base component: good overall performance, including all PAF targets and triggers

• Performance component: good performance in key areas (triggers), leading to additional funding (WB and AfDB use triggers as their prior actions)

Alignment with government systems

• Development Partners rely on:– Ghana’s policy plans for priority setting– Ghana’s budget for targeting and expenditure– Ghana’s accounting and auditing for

accountability– Ghana’s M&E and reporting for justification– Ghana’s Parliament for democratic

supervision

Performance & Conditionality

• Framework Memorandum (2008):– Underlying principles– Performance Assessment Framework– Holistic Assessment– National Audits (Ghana Audit Service)

Underlying principles

• Continuing sound macro-economic policies and management

• Commitment to achieving the GPRS II objectives and MDGs

• Sound budgeting and PFM systems• Continuing peace and respect for human rights,

the rule of law, democratic principles and the independence of the judiciary

• Good governance, accountability of the citizenry, and integrity in public life, including the fight against corruption

Performance Assessment Framework

• Agreed set of specific targets against which overall progress of the recipient government is assessed.

• Taken from national policy documents (in particular the GPRS II)

• A selected group of these targets determine the performance tranche. These are called triggers.

• Currently: 42 targets of which 15 triggers

Basic PAF structure

Target 2009 (assessed in 2010)

Means of Verification

Target 2010 Target 2011 Expected outcomes

45% of deliveries attended trained health workers

Annual Review Report (baseline 39.5%)

55% of deliveries attended trained health workers

60% of deliveries attended trained health workers

Improved maternal health; less maternal and neonatal mortality

Holistic Assessment

• Annual Progress Review (i.c.w. NDPC)

• Macroeconomic performance (i.c.w. IMF)

• Sectoral progress assessments

National Audits

• Purpose: Since national systems are used for expenditure of funds, the national audits are used to verify whether the budget has been executed in an accountable way, including public debate by Parliament.

• We use in principle: – Audit of the Consolidated Fund– Additional: Audit of Selected Flows

Donor harmonisation (1)

• MDBS Core Group: 11 development partners (African Development Bank, Canada, Denmark, European Union, France, Germany, Japan, Netherlands, Switzerland, UK, World Bank)

• Three co-chairs: World Bank (permanent), Switzerland (current), Canada (incoming)

• Observers: UN, IMF, Norway, US, MoFEP, NDPC

Donor harmonisation (2)

• 14 sector working groups, including: sector ministries, MoFEP, NDPC, development partners (both MDBS and others), CSOs

• Joint Heads of Cooperation

• Joint Heads of Mission

• MDBS Secretariat at MoFEP

Donor harmonisation (3)

MDBS Core Group

Heads of

Cooperation

Heads of

Mission

Sector WG

Sector WG

Sector WG

SectorMinistries

CSOs

SectorMinistries

SectorMinistries

CSOs

CSOs

MoFEP CSO Plaforms

Coordinating structures +

Broad policy dialogue

Sector coordination + sector policy dialogue

Supervision +

High level dialogue

Donor harmonisation (4)

• New actors the MDBS is establishing relations with:– Parliament– Independent Goverment Institutions (CHRAJ,

Media Board, etc.)– Traditional authorities

Policy Dialogue (1)

• Umbrella term for all coordinated interaction within the MDBS harmonised structures between (executive) government and development partners.

• Increasingly, this policy dialogue broadens to other actors, like CSO, media, Parliament, etc.

Policy Dialogue (2)

• Coordinated interaction includes (but are not limited to):– Annual review (incl. PAF, holistic assessment)– Forward looking PAF negotiations– Budget discussion– Audit discussion– Retreats– High-level meetings– Sector working group meetings

Policy Dialogue (3)• Cross-Cutting Issues: cross-sectoral

implications that cannot be dealt with in one sector alone and/or which require a higher-level of strategic dialogue

• Underpinning: To feed into the technical discussions of the Consultative Group (CG) meetings thus receiving attention at a higher level with the hope of influencing policy decisions

Policy Dialogue (4)

2010 Topics• Climate Change

• Implications of Decentralisation on Public Sector Reform

• Ensuring a Credible National M&E Statistics System

• Budget-related Issues

Technical assistance & capacity development

• No TA fund under the MDBS, but targeted support provided

• Work done through sector groups and individual DPs

• TA coordination still limited, and beyond scope of MDBS

Future of the MDBS

• Strong focus on Sector Working Groups

• Inclusion of broad range of stakeholders

• Aid Policy: budget support preferred modality

• Issues of concern: quality of the budget, audits (and follow up), oil, MIC-status, MTDF.

www.mofep.gov.gh/mdbs.cfm