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EuropeAid 1 Revision of Budget Support Guidance AIDCO E1.

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Presentation on theme: "EuropeAid 1 Revision of Budget Support Guidance AIDCO E1."— Presentation transcript:

1 EuropeAid 1 Revision of Budget Support Guidance AIDCO E1

2 EuropeAid 2 Outline WHY? WHAT? HOW? WHEN?

3 EuropeAid 3 WHY?

4 EuropeAid 4 Misconception Budget support= we dont care about the money but the results

5 EuropeAid Break away from the mechanistic approach Measurement of Progress and performance should not boil down to this…

6 EuropeAid 6 Mechanistic approach? Is this Budget Support? IMF report on track PEFA done and PFM report PRSP review and annual report PRSP review and annual report Ready for Disbursemen t Calculations: 1,200,000 / 1,858,957 = 64.55% for a target of 64.50% > met etc. Calculations: 1,200,000 / 1,858,957 = 64.55% for a target of 64.50% > met etc. Significance of indicators Dialogue content Policy deliverables PFM reforms Fiscal policies ?

7 EuropeAid 7 WHY? Context change after publication of current guidance o Explosion of operations in al regions o Increased hostility from Member States and other stakeholders Experience in implementation of operations Feedback from Delegations Control authorities: more structured and formalised Light revision in July 2009 after internal audit recommendations Change in scope of revision Approval by AIDCOs management in November 2009 Draft expected in April/May 2010 for discussion Obvious linkages and close coordination with PPCM revision exercise

8 EuropeAid 8 WHAT?

9 EuropeAid Main axis of revision 1.Increased ex ante rigor in eligibility assesment for BS 2.Blending of GBS and SBS to define a single Budget support delivery mechanism 3.Development of a risk management framework 4.Development of a structured PFM and national sectoral policy framework 5.Enhanced guidance on emerging issues (operations in non traditional sectors, Political conditionality etc)

10 EuropeAid 10 HOW?

11 EuropeAid 11 Ex ante analysis Contextual analysis essential – obvious link with future umbrella document work of PPCM guidelines How is aid treated by government? Spent? absorbed? Budget execution? Are policy responses to the government appropriate? Are they reflected in annual action plans and visible in the budget? Prioritization and sequencing issues Dialogue content and arrangements prior to identification/formulation process… Decentralization?

12 EuropeAid 12 Verification of eligibility criteria Initial situation (strengths/ weaknesses) at national or sectoral level + macroeconomic policy + public finance BASELINE Policy or action plans (key deliverables, reforms, indicators, costs, political will, institutional obstacles) MEDIUM-TERM OBJECTIVES IDENTIFICATION / FORMULATION Relevance and credibility of the policies? Y1 Y2 Y3 IMPLEMENTATION Progress evidenced in n-1?

13 EuropeAid 13 But how? AreaConditionsVerification source National or sectoral policy and strategy Satisfactory progress on implementation of the national or sectoral policy and strategy as specified by [give details of information to be provided by the country in the disbursement request] Specify verification source Macroeconomic stability Satisfactory progress in maintaining a policy of macroeconomic stability as evidenced by [give details of information to be provided by the country in the disbursement request: e.g. "continued implementation of an IMF-backed macroeconomic programme"]. If the review of the IMF programme is delayed, temporarily suspended or (invalid), the Commission may still decide to disburse the budget support if it considers that the macroeconomic stability policy is still being implemented or that it does not jeopardise the sectoral objectives after consultations at an appropriate level with the partner country and the IMF. Specify verification source Public finance management Satisfactory progress on implementation of the programme to improve and reform public finance management as indicated, inter alia, by […give details of information to be provided by the country in the disbursement request: e.g. "the joint annual review of public finance management reform or public finance reform programmes scheduled for the (date/month) each year and the agreed implementation measures" or the "conclusions of planned analyses of public finance management"] Specify verification source ? ? ?

14 EuropeAid 14 PFM: implementation of the Action Plan Baseline/Initial diagnosis Progress over time Medium term objective Year 1Year 2Year 3 CoA established, long delays in audits (5 years) Amending Audit Act to define deadlines for government and CoA; Capacity building Reducing audit delays (3 years) Reducing audit delays (1year) Timely published and audited accounts (in line with Constitution or relevant Laws) Budget calendar does not exist (approval in 2-3 months after beginning of the financial) Amending Public Finance Act to include calendar Issuing budget circular to all MDAs Issuing budget circular to all MDAs allowing time for completion Clear annual budget calendar established and respected...

15 EuropeAid 15 9e – Macro: the IMF, yes, but not only… The right information? Programme with the IMF (PRGF, SBA or others) or Art. IV consultations? Access to documentation (budget, outturns)? Access on time? Timely submission? Accuracy? Participation in IMF reviews, debriefing with IMF staff or no interaction at all? Dialogue on macro is part of BS reviews/MoU or not? Other sources: Central Bank, Statistical Office, regional organisations, press, EIU, rating agencies, think-tanks, private sector? The right policies? Level of spending (in real terms or % of GDP)? Structure of spending? State-owned enterprises? Tax net widening or measures for tax collection? Financing: loans or bonds? IFI/bilateral or banks/ investors? domestic or international? local or foreign currency? Fiscal sustainability? Risk of debt distress? Exchange rate? Growth and private sector development? Trade and balance of payments? Inflation?

16 EuropeAid Knowing and managing Risks Risks for BS operations? Risks must be identified and mitigating measures/safeguards set out at the time of formulatino and prior to any payment. Risks should be assessed prior to the choice of delivery method!!!! PFM Funds not used for intended purposes or not properly accounted for No Value for Money aspects in PFM Risks Developmental Risks Intended results of policies not achieved Institutional Capacity Performance Management systems Budget execution Are the conditions in place for the success of the particular policy we are supporting? Political Risks Political Stability Opposition Status Elections Calendar in relation to the BS operation Freedom of the Press Role of the Army Ethnic Tensions Separatism

17 EuropeAid BS as REALPOLITIK? – our position Political issues arising on human rights, corruption, democracy, etc. (Art 9 Cotonou) Discussions locally and at HQ level (EDF Committee) - and if needed - Intensified dialogue / Formal consultations at Council level (Art 8, 96, 97 + Annex VII of Cotonou) Provisions for such consultation in DCI regulations and ALL financing agrements Consequences for projects? Consequences for budget support? Suspension of cooperation?

18 EuropeAid 18 But we are not consistent even within the EU!

19 EuropeAid 19 WHEN?

20 EuropeAid 20 Partly piecemeal approach PFM areas should be presented to delegations in April First draft guidelines for discussion mid April-May Discussions May-June Interservice consultation and approval June-July

21 EuropeAid 21 Q BRAINSTORMING!!!!!

22 EuropeAid 22 How to assess progress in policies? How to move away from indicator mania How to stay realistic and give work that CAN be done by delegations? Reality check for HQ! Capacity constraints? EEAS and possible increased compartmentalization of delegations External dimension of internal policies and dialogue?

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