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The Future Approach to EU Budget Support October 2011.

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Presentation on theme: "The Future Approach to EU Budget Support October 2011."— Presentation transcript:

1 The Future Approach to EU Budget Support October 2011

2 Main messages Continued importance of budget support instrument Stronger link with fundamental values of the EU (human rights, democracy and rule of law) Greater differentiation of budget support operations, allowing the EU to respond better to the political, economic and social context of the partner country Strengthened eligibility criteria and more rigorous assessment Stronger focus on accountability and transparency Strengthened risk management framework Continued emphasis on results, performance tranches, government ownership and predictability Strengthened EU Coordination Summary

3 1. 1. What is Budget Support, and Why A Modern Approach to Budget Support EU Coordinated Approach Design and Implementation Conclusions Communication- Outline

4 BS as package: Policy dialogue, financial transfers, performance assessment and capacity building Means of delivering better aid (not an end in itself) Most suitable form of aid consistent with aid effectiveness agenda But not a blank cheque, nor provided to every country Green Paper October 2010 – Wide consultation process of stakeholders, both from EU and partner countries. In this Communication, the Commission sets out a new policy on budget support and puts forward policy proposals for an EU coordinated approach What is Budget Support, and Why

5 Positive experiences OECD-DAC evaluations Encouraging results from new pilot evaluation methodology – Tunisia, Mali and Zambia Budget Support and MDG performance Scope for Improvement Court of Auditor findings and recommendations Calls for greater coherence and consistency of EU support Need for more transparency and accountability Lessons Learned

6 Building on success Predictability, ownership, performance related tranches, results Use of more intermediate process and output indicators to better demonstrate and communicate partner country development results Dynamic approach to eligibility criteria But more structured assessment Portfolio approach: no global targets for use of budget support Risk management to be strengthened A Modern Approach to Budget Support

7 Differentiating EU Budget Support Good Governance and Development Contract Sector Reform Contract State Building Contract A Modern Approach to Budget Support

8 Budget support as a vector of change to address the following 5 development challenges and objectives: 1.Promoting human rights and democratic values Good Governance and Development Contracts should be provided where there is trust and confidence that aid will be spent pursuing the values and objectives to which the EU subscribes, and on which partner countries commit to move towards meeting international standards. Where commitment deteriorates: adequate and coordinated EU+MS response, but also progressive and proportionate. Possibility to adjust fixed tranche Sector budget support (sector reform contract) remains a useful tool to address the basic needs of populations even where the conditions do not exist to permit the use of a Good Governance and Development Contract. A Modern Approach to Budget Support

9 Charter of fundamental rights of the European Union Everyone has the right to respect for his or her physical and mental integrity (art. 3) Prohibition of torture and inhuman or degrading treatment or punishment (art. 4) Everyone has the right to respect for his or her private and family life, home and communications (art. 7) Everyone has the right to freedom of thought, conscience and religion (art. 10) Everyone has the right to freedom of expression (art. 11) Any discrimination based on any ground such as sex, race, colour, ethnic or social origin, genetic features, language, religion or belief, political or any other opinion, membership of a national minority, property, birth, disability, age or sexual orientation shall be prohibited (art. 21) A Modern Approach to Budget Support

10 2.Improving PFM, macroeconomic stability, inclusive growth and the fight against corruption and fraud Budget support, in particular Good Governance and Development Contracts, should be used to strengthen core government systems, such as public finance management and public administration Promote macroeconomic stability and fiscal sustainability, making the systems more effective and accountable and lead to a comprehensive and transparent budgetary allocation process. address constraints on sustained growth and to promote the "green economy", including the protection and sustainable use of public goods and natural resources, while ensuring that the benefits of growth are widely shared. As part of its objective to improve core government systems, particularly procurement, budget support will contribute to the fight against corruption and crimes involving fraud. A Modern Approach to Budget Support

11 3.Promoting sector reforms and improving sector service delivery Sector Reform Contracts can be provided to a specific sector or a set of interlinked sectors Clear objectives should be defined, mainly in terms of improvements in public access and use of quality services and, in particular in the neighbourhood countries, support for the partnership agenda Sector specific conditions should lead to a regular policy dialogue, including on budgetary allocations to the sector, implementation of reforms, strengthening of institutions and systems, progress towards sector objectives, and efficient service delivery. Emphasis will be on issues relating to frontline service delivery, particularly pro-poor, gender and children's issues, and the capacity to absorb and use sector research results. A Modern Approach to Budget Support

12 4.State-building in fragile states, and addressing development challenges of SIDS and OCTs Fragile states: focus on state building, coherent and coordinated approaches, reinforced political and policy dialogue. Decisions case by case. State Building Contracts SIDS and OCTs: BS to address cross-cutting, long-term and structural challenges 5.Improving domestic revenue mobilisation and reducing dependency on aid BS should complement, not substitute, domestic revenue mobilisation Promote natural resource governance and transparency in resource rich countries A Modern Approach to Budget Support

13 Objective – –to increase effectiveness of this modality in contributing to development and reform policies, and to provide coherent and consistent responses to challenges encountered – –Work towards a single EU Good Governance and Development Contract – –Acting together to increase critical mass and leverage Key principles – –Sovereign decision making – –systematic information exchange as a minimum, with coordinating responses the ultimate goal – –EU coordination should always be supportive of wider donor coordination and country-led co-ordination – –Coordination at both HQ and field level and must build on existing bodies and mechanisms of cooperation as well as existing legal frameworks. EU Coordinated approach

14 Key elements share initial assessment on commitment of partner country to the EU fundamental values; share, where relevant, diagnostics and assessments of eligibility conditions (but decisions on compliance remain the responsibility of each donor); harmonize, as far as possible, risk assessment tools and promote a coordinated dialogue on mitigating actions; perform joint assessments at country level and regular joint evaluations; ensure high level of expertise for effective policy dialogue with the partner countries by using delegated cooperation and transfer arrangements; carry out high level political dialogue, including monitoring of commitment to fundamental values and appropriateness of pursuing good governance and development contract; jointly communicate to local stakeholders budget support disbursements and compliance with disbursement conditions. EU Coordinated approach

15 Precondition EU to assess whether preconditions for Good Governance and Development Contract exist: Human rights, Democracy and Rule of Law Eligibility Criteria Stable macroeconomic framework Increased focus on domestic revenue mobilisation National/sector policy and reform Continued focus on national ownership Focus on sustainable growth and poverty reduction (link to Agenda for Change) Public financial management Assessment of PFM system to establish a baseline upon which dynamic approach will be based May require short-term measures from PFM reform strategy before commencing BS Partner countries to be actively engaged in fight against fraud and corruption NEW: transparency and oversight of budget Public availability of budgetary information Entry point to be defined, combined with dynamic approach Design and Implementation

16 Managing Risk Improved risk management framework Political governance, macroeconomic, development, PFM, corruption and fraud Complementary tool in programming, design and implementation, and to inform decision-making and policy dialogue Focus on risks with high impact and high likelihood How Much Budget Support Financing needs Budgetary allocations according to policy objectives and priorities Effectiveness, VFM, and impact Track record and absorption capacity Result orientation Design and Implementation

17 Policy Dialogue To ensure that major reforms are discussed and fully resourced, objectives are identified and results assessed Involvement of relevant Commission services, delegated cooperation with MS, improved access to TA and training Committed to promote inclusion of domestic stakeholders in policy dialogue and annual reviews Performance Incentives and Conditions Base tranches linked to eligibility Performance tranches linked to progress against indicators (mix of process, output and outcome indicators) Good governance and development contracts: conditions may be attached to supporting democracy and human rights Design and Implementation

18 Predictability Eligibility related conditions to be as clear as possible Longer term commitments where strong track record, informed by review of experience with MDG-Contracts (late 2011) Strengthening domestic and mutual accountability Strengthening openness, transparency and accountability of the budget process Supporting a participatory budget support approach Integrating programmes to support national legislative and oversight bodies and CSOs Increasing transparency by publishing relevant information on budget support financing agreements and performance reviews Design and Implementation

19 Capacity development Needs to be identified and assessed systematically as part of BS operations To be based on demand, linked to clear outputs, harmonised and aligned initiatives Monitoring, evaluation and communication Importance of credible and functioning M&E system and identified actions to address weaknesses, especially regarding: Institutional set-up of M&E system Link between M&E plan and policy development Quality, regularity and reliability of data M&E system should contribute to strengthening voice of national stakeholders Need better communication of results of evaluations and lessons learned Design and Implementation

20 Communication seeks to Make budget support more efficient and effective in delivering development results Equip the EU and Member States with an EU Coordinated Approach on budget support New guidelines to reflect guiding principles Conclusions

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