The Great Divide? Donor perceptions of budget support, eligibility and policy dialogue

Abstract

Budget Support (bs) has been considered the aid modality that best realises the Paris Declaration principles of alignment, harmonisation and respect for recipient ownership. In design the modality has a very strong technocratic focus, and the oecd/dac has endorsed the idea that bs should be delinked from broader political concerns. In reality, however, donors do use bs to leverage more and better democratic governance. This political use of bs is not limited to exceptional moments when the political situation seriously deteriorates in certain countries. This article shows that such use is grounded in fundamentally different visions and policies that donors hold regarding the scope of leverage for bs. Such starkly diverging interpretations of which reforms bs can ‘buy’ undermine the objectives the modality was designed to achieve.

Notes

This research was carried out by the Belgian Research Platform on Aid Effectiveness which is funded by the Belgian Directorate General for Development Cooperation and the Flemish Interuniversity Council (vlir). The author wants to thank Jonathan Beynon and Julia Zhyzko for their generous advice and support during the research, and Anna Gagiano for the final editing of the text.

1 S Koeberle, Z Stavreski & J Walliser (eds), Budget Support as More Effective Aid? Recent Experiences and Emerging Lessons, Washington, DC: World Bank, 2006, pp 267–293.

oecd/dac, Harmonizing Donor Practices for Effective Aid Delivery, Vol 2, Budget Support, Sector Wide Approaches and Capacity Development in Public Finance Management, Paris: oecd/dac, 2006.

3 S Brown, ‘Foreign aid and democracy promotion: lessons from Africa’, European Journal of Development Research, 17(2), 2005, pp 179–198; G Crawford, Foreign Aid and Political Reform: A Comparative Analysis of Democracy Assistance and Political Conditionality, Basingstoke: Palgrave, 2001; Crawford, ‘Foreign aid and political conditionality: issues of effectiveness and consistency’, Democratization, 4(3), 1997, pp 69–108; and O Stokke (ed), Aid and Political Conditionality, London: Frank Cass, 1995.

4 See, for example, R Hayman, ‘Budget support and democracy: a twist in the conditionality tale’, Third World Quarterly, 32(4), 2011, pp 673–688; and N Molenaers, L Cepinskas & B Jacobs, Budget Support and Policy/Political Dialogue: Donor Practices in Handling (Political) Crisis, discussion paper 6, Antwerp: iob, 2010, p 66.

5 T Unwin, ‘Beyond budgetary support: pro-poor development agendas for Africa’, Third World Quarterly, 25(8), 2004, pp 1501–1523.

6 D Dollar & L Pritchett, Assessing Aid: What Works, What Doesn't and Why?, Washington, DC: World Bank, 1998; and T Cordelia & G Dell'Ariccia, ‘Budget support versus project aid: a theoretical appraisal’, Economic Journal, 117, 2007, pp 1260–1279.

7 Unwin, ‘Beyond budgetary support’; and P De Renzio, ‘Aid, budgets and accountability: a survey article’, Development Policy Review, 24(6), 2006, pp 627–645.

8 S Koeberle & Z Stavreski, ‘Budget support: concept and issues’, in S Koeberle et al., Budget Support as More Effective Aid?, pp 3–26.

9 Ibid; Dollar & Pritchett, Assessing Aid; and JW Gunning, ‘Budget support, conditionality and impact evaluation’, in Koeberle et al, Budget Support as More Effective Aid?, pp 295–311.

10 Koeberle & Stavreski, ‘Budget support’.

11 Selectivity can be operationalised in three different ways: country selectivity (a donor decides which countries are eligible for aid), volume selectivity (the size of the aid envelope per country), modality selectivity (which aid modalities will deliver the aid in a given country). In this article we focus on modality selectivity and more particularly on the eligibility criteria for budget support. Dollar & Pritchett, Assessing Aid.

12 Koeberle & Stavreski, ‘Budget support’, p 17.

13 P Mosley & S Abrar, ‘Trust, conditionality and aid effectiveness’, in Koeberle et al, Budget Support as More Effective Aid?, pp 311–332.

14 O Morrisey, ‘Alternatives to conditionality in policy-based lending’, in S Koeberle, H Bedoya, P Silarszky & G Verheyen (eds), Conditionality Revisited: Concepts, Experiences and Lessons, Washington, DC: World Bank, 2005; and Morrisey, ‘Fungibility, prior actions and eligibility for budget support’, in Koeberle et al, Budget Support as More Effective Aid?, pp 139–151.

15 Koeberle & Stavreski, ‘Budget support’, p 11.

16 B Stolk & R van der Helm, ‘Talking your way out of poverty: policy dialogue as a tool for effective poverty reduction’, in A Rich Menu for the Poor, The Hague: Ministry of Foreign Affairs; and N Molenaers & R Renard, Policy Dialogue under the New Aid Approach: Which Role for Medium-sized Donors? Theoretical Reflections and Views from the Field, Antwerp: University of Antwerp, 2008, p 42. It is important to mention that, although we make a clear distinction between democratic governance and technocratic governance in this article, we are aware that both dimensions are utterly political. Reform, even of the most technocratic kind, is a fundamentally political process that produces winners and losers. As such, policy dialogues, although they tend to focus on technocratic perspectives and reforms, are very political in nature.

17 Stolk & van der Helm, ‘Talking your way out of poverty’.

18 T Williamson, ‘General budget support and public finance management reform: lessons from Tanzania and Uganda’, in Koeberle et al, Budget Support as More Effective Aid?, pp 139–151.

19 CS Adam & JW Gunning, ‘Redesigning the aid contract: donors' use of performance indicators in Uganda’, World Development, 30(12), 2002, pp 2045–2056.

20 S Koeberle & J Walliser, ‘World Bank conditionality: trends, lessons, and good practice principles’, in Koeberle et al, Budget Support as More Effective Aid?, pp 267–293.

21 Koeberle & Stavreski, ‘Budget support’.

22 Gunning, ‘Budget support, conditionality and impact evaluation’, p 297.

23 oecd/dac, Harmonizing Donor Practices for Effective Aid Delivery, Vol 2, p 32.

24 Dollar & Pritchett, Assessing Aid; and H White & O Morrissey, ‘Conditionality when donor and recipient preferences vary’, Journal of International Development, 9(4), 1997, pp 497–505.

25 T Killick, ‘Principals, agents and the failings of conditionality’, Journal of International Development, 9(4), 1997, pp 483–495; and P Mosley, J Hudson & A Verschoor, ‘Aid, poverty reduction and the “new conditionality”’, Economic Journal, 114, 2004, pp F217–F243.

26 oecd/dac, Harmonizing Donor Practices for Effective Aid Delivery, Vol 2, p 32.

27 Gunning, ‘Budget support, conditionality and impact evaluation’, p 298.

28 PM Haas, ‘Epistemic communities and international policy coordination’, International Organization, 46(1), 1992, pp 1–35.

29 C Lancaster, Foreign Aid: Diplomacy, Development, Domestic Politics, Chicago, IL: University of Chicago Press, 2007.

30 oecd/dac, Harmonizing Donor Practices for Effective Aid Delivery, Vol 2.

31 Ibid.

32 In line with D Braütigam, Aid Dependence and Governance, Washington, DC: American University, 2000; and M Grindle, ‘Good enough governance revisited’, Development Policy Review, 25(5), 2007, pp 553–574.

33 Grindle, ‘Good enough governance revisited’, p 574.