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Governance Themes Information Database Organisation Database Training and Events
Governance Themes Information Database Organisation Database Training and Events

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Budget support

This topic guide aims to provide key sources of information on the governance aspects of Direct Budget Support. It is an evolving resource and the GRC Exchange would welcome your comments and contributions. This guide is supported by three other GRC Exchange topic guides which cover both the specific instruments of Sector Wide Approaches (SWAps) and Poverty Reduction Strategy Papers (PRSPs), as well as providing a generic guide to the broad topic of 'aid instruments'.

Page contents

Definition of topic and content

Where is a good place to start?

Public expenditure frameworks and management

What's new? Aid instruments
What other resources are available on the GRC Exchange?
Additional information resources

Definition of topic and content

In its 2000 White Paper Eliminating World Poverty: Making Globalisation Work for the Poor, the UK Government committed to channel more of its aid through developing country government systems where the conditions are right.

"Direct Budget Support (DBS), either as support to the budget as a whole or as part of a Sector Wide Approach (SWAp), is potentially the most effective financial aid instrument in supporting the poverty reduction strategy core principles. It can strengthen local ownership and make governments more accountable to its own people. It provides greater incentives for donors and governments to address systemic weaknesses government-wide and cross-sectoral constraints to poverty reduction. It can provide governments with the certainty about donor flows needed to invest in service delivery improvements. It can lead to substantial savings in transaction costs of resource transfer and greater value for money" (DFID, 2002). Sector budget support should not be conflated with Sector Wide Approaches (SWAps). However, budget support focused on a particular sector is one (possibly ideal) way of supporting a SWAp.

DFID Definition of Budget Support

Direct Budget Support (DBS) is a form of programmatic aid in which:

1. Funds are provided in support of a government programme that focuses on growth and poverty reduction, and transforming institutions, especially budgetary.

2. The funds are provided to a partner government to spend using its own financial management and accountability systems.

DBS can take the form of a contribution to the overall budget (sometimes referred to as macro or general budget support) or with notional hypothecation (usually referred to as sector budget support).

Department for International Development 2002, Programme Based Approaches in DFID

Where is a good place to start?

The GRC Exchanges governance theme pages on Public Financial Managament and Accountability are a good starting point:

GRC Exchange Public Financial Management and Accountability Governance Theme pages
There is a subsection of this governance theme dedicated to general issues and procurement issues associated with budget support, and is supported through a number of key documents.

Public expenditure frameworks and management

Medium Term Expenditure Frameworks (MTEF) are often proposed as the solution not only to the inadequacies of planning and budgeting systems but also to the broader performance problems of government. Donors and lenders, including DFID and the World Bank, support MTEF as the logical mechanism around which to structure the design of government-wide instruments of budget support, but identifying the essential components of a successful MTEF is not easy. The documents below examine the relevance of MTEFs and review different approaches to providing remedial support to weak government financial management systems:

Oxford Policy Management 1999, 'Medium Term Expenditure Frameworks - Panacea or Dangerous Distraction'
This paper was presented at the DFID retreat on the Politics of Service Delivery, November 2002. The author examines trends and issues in choosing or designing particular instruments, as well as the direct links between these trends in aid and the possibilities for improving service delivery. It notes that in general the two agendas should be strongly complementary, but acknowledges some of the complications that arise in practice.
Full document available online

Brooke, P. 2002, 'Study of Short Term Measures Used to Address Weaknesses in Public Financial Management Systems in the Context of Budget Support'
This report reviews the different approaches undertaken by developmental agencies with regards to short-term remedial measures and budget/programmatic support.
Full document available online

What's new on this topic? Aid instruments

The GRC Exchange have developed a topic guide on aid instruments. It aims to provide key sources of information on the governance aspects of design and decision-making choices, impact, assessment and evaluation of aid instruments.

What other resources are available on the GRC Exchange?

The key resource on the GRC Exchange is held on the public financial management and accountability Governance Theme pages. There is a subsection of this theme dedicated to general issues and procurement issues associated with direct budget support.

In addition to this topic guide on budget support the GRC Exchange is developing a further three topic guides directly relevant to this topic. The first is a generic guide to the broad topic area 'aid instruments'. The other guides cover specific aid instruments:

Key texts
This resource does not attempt to provide an exhaustive list of documents relevant to 'aid instruments'. For a thorough search of the whole GRC Exchange site please refer to the Information Database.

Training and events
A searchable database of courses and conferences in each of the governance theme areas is available on the GRC Exchange site.

Additional information resources

Overseas Development Institute
ODI have done a lot of work on new approaches to poverty-focussed aid.
Full summary of ODI: available through the Organisation Database

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