SECTOR POLICY SUPPORT PROGRAMMES A new methodology for delivery of EC development assistance. 1

Basic Concepts and Definitions The EC is committed to delivering "more and better aid”; It is committed to the principles of Programme Based Approaches (PBAs); EC policy is to use general and sector budget support as the favoured financial vehicle for its assistance whenever conditions are favourable. 2

Programme-based Approaches “A way of engaging in development cooperation based on the principle of coordinated support for a locally owned programme of development, such as a national poverty reduction strategy, a sector programme, a thematic programme, or a programme of a specific organisation”. PBAs must reflect the particular circumstances of individual sectors and countries. Also known as Sector or Sector-Wide Approaches (SWAps) 3

Characteristics of PBAs and SWAps Leadership by the host country; A single comprehensive programme and budget framework; A formalised process of donor coordination; Harmonisation of donor procedures for reporting, budgeting, financial management and procurement; Increased use of local systems for programme design and implementation, financial management, monitoring and evaluation. 4

Budget Support 1 The transfer of financial resources from a donor to a partner country’s National Treasury, against agreed conditions. Funds are part of the partner country’s global resources, Are administered in accordance with the partner country’s public financial management systems. 5

Budget Support 2 General Budget Support (GBS) – Supports a national development policy or strategy; – Government decides how it will be used. Sector Budget Support (SBS) – Supports a sector policy or strategy; – Government or Donors can specify use. 6

Sector Policy Support Programme (SPSP) The EC's aid instrument for supporting a sector programme. Serves as a coordinating framework for – government's own activities and – donor support. The EC's favoured financing method is budget support, but sometimes the best option may be project support, or pooled funding with other donors. 7

Sector Approaches Purpose and Objectives To promote national ownership, by supporting government-owned policies and strategies, To strengthen orientation towards results, by promoting coherence between policy, budgeting and actual results, To coordinate donor inputs with other resources and reduce (eventually) the transaction costs of utilising external finance. 8

EC Perspective By using weak government structures, incentives for improvement can be generated. A clear sector policy creates greater coherence, permitting governments to assert ownership. Reduced number of projects and their transaction costs stops the dissipation of administrative capacity and allows budgetary and planning systems to become stronger. Oversight by Parliament and civil society encourages improvements to efficiency and effectiveness of public services, strengthening of planning, budgeting and management structures. 9

The 5 Main Elements of a Sector Programme A sector policy and strategy; The sector budget and its medium term perspective; A sector coordination framework; The institutional setting and existing capacities; A performance monitoring system. 10

1. Sector Policies and Strategies. 11

What is a Sector Policy? The Sector Policy is the first building block of a sector programme. Specifies what government aims to achieve in the sector, when and how; Distinguishes government’s regulatory role from its service delivery role; Specifies the roles of non-government agents; Outlines any necessary institutional or legal reforms. 12

What is a Sector Strategy? The Sector Strategy, is a detailed plan or document, describes how the government will implement the policy. Usually plans for the medium-term (normally 3-5 years). It should be directly reflected in annual sector budgets. 13

Good Practice A coherent and consistently applied sector policy focuses government, donors and stakeholders on achieving collective results. It must be consistent with the partner government’s overall strategic objectives. The sector policy document will not be a rigid plan. It will establish basic principles, objectives and strategies for the sector. It will accept that detailed strategies and resource allocations will continue to evolve. Therefore, there must be clear procedures and schedules for regularly updating the policy and strategy. 14

EC Perspective The sector approach requires a basic agreement between the government and its partners about – the sector objectives, – how they should be achieved in broad terms. Donors should not micro-manage by specifying activities in detail. The EC is interested in the expected results. 15

2. The Sector Budget and its Medium Term Perspectives. Basic Requirements for SPSP 16

A credible, comprehensive and transparent sector budget - essential for the proper implementation of the sector policy. A clear budget classification is key to the proper elaboration of a sector budget. Such a budget should – take into consideration all resources available to the sector (including external resources) and – list all expenditures (capital as well as recurrent expenditures) necessary for the achievement of the sector’s expected results. 17

The annual sector budget should increasingly reflect sector priorities and strategies. Progress towards policy based budgeting, covering all resources for the sector, with realistic medium-term sector expenditure plans. Eventually, sector budgets will become part of a coherent national medium-term budget and expenditure plan. 18

Good Practice Sector policies and sector budgets are the two faces of the same coin. In order to obtain the desired results, policies and budgets must be coherent. Well prepared budgets supporting weak policies will not achieve better sector results. Well designed policies and strategies are helpless if they are not reflected accurately and clearly in the budget. 19

EC Perspective Within Sector approaches the EC promotes the link between policy and budget. Sector budgets need to fit into government’s own disciplined overall expenditure plans, Annual spending needs to be derived from medium-term projections of resource availability, priorities and recurrent and capital expenditures. Eventually, this would become a Medium Term Expenditure Framework, and the central part of the government’s political and budgetary process. 20

3. Sector Coordination. 21

Framework Special attention must be given to sector programme management. Led by the government; it should cover – coordination of national stakeholders, i.e. all concerned government ministries and agencies; – non-governmental participants; – coordination with and among donors. 22

Good Practice Basic Principle: “Sector coordination mechanisms must not override the established structures and responsibilities of Government”. Beneficiary Ministry is responsible for implementation of the sector programme; MinFin must be involved and have a clear role; Sector coordination mechanisms must support the wider framework of the country’s own development strategy. 23

EC Perspective Experience shows – the importance of a clear government-led management and sector coordination framework. Donor coordination is regarded as a means of achieving – improved ownership and coherence – reduced transaction costs. 24

4. Institutional Setting and Capacity Development. 25

Basic Concept The sector approach aims to use national systems where possible and to reinforce them by using them. A clear capacity development strategy led by the government should be in place. 26

Paris Declaration Statement 1 "Capacity development is the responsibility of partner countries with donors playing a support role". 27

Paris Declaration Statement 2 "Partner countries commit to integrate specific capacity strengthening objectives in national development strategies and to pursue implementation through country-led capacity development strategies ……” 28

Paris Declaration Statement 3 "Donors commit to align their analytical and financial support with partners’ capacity development objectives, make effective use of existing capacities and harmonize support for capacity development accordingly." 29

EC Perspective CD must be owned and led by those wishing to develop their capacity; Supply driven and fragmented support to CD is usually only marginally effective; Support to CD must respond to a clear demand; Be designed and implemented under partner government leadership; CD must be driven by results, not by donor- funded inputs. 30

5. Performance Monitoring System. 31

Characteristics Provides key elements to steer policy dialogue and is part of the overall policy review process. Focuses on results and provides feedback to management. Might be a performance assessment framework (PAF) containing indicators for – inputs, – outputs, – outcomes, – impacts. Clear procedures and schedules for regularly updating the policy and strategy need to be in place. 32

Two Additional Elements. 33

Macroeconomic Policy Essential for a stable environment for the sector; Assures predictable resource levels. 34

Public Financial Management (PFM). Ensures that policy priorities are reflected in budget allocations; Promotes efficiency (“value for money”) in public spending; Ensures that actual expenditure complies with the approved budget and does not exceed available resources. 35