Project Delivery Through General Budget Support Economics Essay

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The significance of the general budget support as a mechanism for aid delivery cannot be overemphasized because of it increase and popularity which has great impact on DFID's country programmes and the functions of DFID's employees (Ruffer and Lawson, 2002). The goals of the general budget support are to promote the standard of ownership and to ensure accountability of the recipient government (Ruffer and Lawson, 2002). To solve the problems associated with project failure, scholars have argued that the general budget support should be use because, it reduces transaction cost, enhance the predictability of aid flows, improve efficiency of public policies sector performance and the level of accountability (Ruffer and Lawson, 2002). The aim of this essay is to critically evaluate the argument which states that a "greater proportion of development assistance should be delivered through the general budget support". This essay will discuss mainly on aid development project and the role the general budget support in achieving foreign aid objectives. The concept of project delivery and budget support will be defined.

Ruffer and Lawson (2002), defined direct budget support as the delivery of donor funds to a partner government using its own procurement, accounting system and allocation to deliver development project. They also said that, there are two channels for development project delivery; the first is the general budget support which covers financial assistance as a contribution to overall budget with any conditionality focused on policy measures related to overall budget priorities. They also said that the general budget support ensures that funds are nominally accounted for against certain sectors, but there are no formal limitations on where funds may actually be spent. Second channel is the sectors budget support which covers financial aid disburses to the general budget but earmarked to discrete sectors, with any conditionality relating to these sectors.

Now that the conceptual definition of budget support has been clarified, then what is project delivery? National Audit Office (2010) define "Project delivery is a core skill, not just for the public sector but also for its private sector partners who are involved in delivering and sustaining the desired outcomes over the long term. Getting it right means better public services, delivered more efficiently, effectively and economically". Project delivery can also be defined as the programme and project management capability to successfully deliver change across the full range of government activity together constitute project delivery (National Audit Office, 2010).

The Partnership for General Budget Support started in the late 1990s the aim was to support national poverty reduction strategies. This Partnership was contrasted and empowered with conditionality of the structural adjustment programme era to channel funds through national systems. PGBS also aims at ameliorating national planning and implementation capacity, enhancing the effectiveness of all public expenditure, including aid (OCDE-DAC, 2007).

More so, PGBS was used in along with other kinds of aid which including projects and sector support. The OCDE (2007) in their findings found out that the differences between general budget support and sector budget support are not as sharp as they thought. However, the

PGBS was used as a modal to pursued anti-corruption strategies with a variety of instruments, was use in addressing crosscutting issues, harmonisation, and efficiency and also to benefit other forms of aid. Conversely, persistence of off-budget project aid tended to undermine the benefits of PGBS taking safeguards into account; PGBS was no longer vulnerable to corruption than other aid modalities (OCDE, 2007).

Donors and partner countries prefer the budget support as an aid delivery instrument. The Paris Declaration on Aid Effectiveness (2005) helped to boost support for this instrument, as did, albeit to a lesser extent, the Accra Agenda for Action (2008) ( Negatu G. et al, 2010). Budget support is seen as the instrument of choice for many donors and partners to help avoid aid proliferation and fragmentation and the resultant transaction costs, to increase the availability of resources for financing recurrent costs, which is an essential element of sustainability (Agbonyitor, 1998; World Bank, 2006)., to foster greater national ownership in the development process and in the use of official development assistance; (iv) strengthen public financial management (PFM) systems by integrating resources into national planning, budgeting and oversight functions; (v) strengthen predictability and timeliness of foreign aid (AfDB, 2004); and to give donors a seat at the table in discussions of critical cross-cutting policy reforms.

The budget support alone is not a solution or remedy; it has generally helped to improve PFM systems in Africa and has resulted in higher spending on basic services, for example, in health and education, expanded services have been at low quality (World Bank, 2006; OECD-DAC, 2006). Moreover, where there is macroeconomic and political instability, the perception of higher risk associated with budget support (especially fiduciary risk) can make the instrument more susceptible to interruption by donors than projects ( Negatu G. et al, 2010). Cordella and Dell'Ariccia, (2003), in their opinion suggest that budget support is preferable to project aid when total aid is small relative to the recipient's own resources, while project aid is superior for relatively large programs. In addition to their suggestion, they also opined that project aid is preferable to the budget support when the preferences of the donor and those of the recipient government are relatively far apart. Jevolac and Vandeninden (2008) said that off-budget funds have been argued against over time, due to their poor impact on development. The main reason is as a result of lack of coherence (between the individual projects of each donors and also with the national policies of the recipient country), no building of institutional capacities because the donors do not use the national procedures, lack of transparency, risk of double use of resources (e.g. two schools are built in the same village) and high transaction costs (World Bank, 1998; Lavergne, 2003, Tarp, 2002). In the late 1990's, because of the weaknesses of the project aid, the donors' community started to consider the need for changes in the aid delivery system (Jevolac and Vandeninden, 2008). The European commission is one of the most prominent advocates of budget support along with the World Bank, the United Kingdom, and Netherlands. Since 2000 the commission has pursued a strategy involving a departure from projects and a transition in particular project support PBAs (Schmidt, 2007).

According to Francois and Sud (2006), there are additional advantages of budget over Project aid. First, budget aid would enhance the prospect of donor funds reaching beyond the capital city into the rural areas thereby contributing to redress unbalanced development, itself a potential cause of fragility. It is argued that the government, by working through its own systems, would have greater ability to reach the rural poor. Donors have been ineffective in doing this for a number of reasons, including problems with ensuring security for their personnel. Secondly, the provision of budget aid would reduce the heavy 'foreign footprint' of donors that can lead to distortions in economic activity and labour markets (e.g. high salaries in project implementation units) and come to be resented before too long in most fragile situations, notably in countries emerging from conflict. Third, it would reduce demands from fragmented aid projects and processes on already limited government capacity, much of which gets diverted to fulfilling individual donor requirements. Evaluating Francois and sud (2006) statement, it is clear that the use of General budget enhances efficiency and it's the most effective for Project aid delivery in the developing world (Maxwell, 2009).

According to Louis M., (2008), "I know that budget support is controversial. Although I can accept that there may be situations where this form of aid is impracticable, I am convinced that, where circumstances permit, budget support is the most effective instrument of development". Budget support gives meaning and depth to the dialogue between partners and donors, the relationship is by definition much stronger as soon as budget support becomes a decisive factor in the partner's general budget. The budget reflects the government's fundamental policy choices and priorities. It is essentially a statement of its objectives, which reflects its economic and social priorities. (Adelio F.A. et al, 2008). Budget support is essential because it is recurrent and predictable, and the practical value it represents in operational policy terms for the government are important advantages that they create much more productive scope for discussion and dialogue. It is much easier to achieve progress in areas such as the rule of law, democracy and improving public finances in this type of context than with any other method ( Adelio F.A. et al, 2008).

Koos Richelle (2008), opined that budget support is aid which is provided directly into the national budget of a developing country. He wrote that "Budget Support has the potential to be more effective than other types of aid in supporting development. This is not only because it reinforce the financing available for genuinely home grown development efforts, but because it strengthens the local capacity and know - how for managing the public services and public investments necessary for development Furthermore, in time it should reduce the administrative burden that aid can impose on developing country administration. All of this should increase aid effectiveness". He also writes in the concluding part of his address that "ultimately, budget support like other aid instruments should not be evaluated on the basis of theoretical discussions concerning its risk and potential benefits. Instead, like other programmes, it should be judged on the results it produces on the ground in developing countries". Against a backdrop of controversy, momentum in favour of budget support has grown steadily over the last twenty years between its supporters who lavish praise and critics who can see no merit in it. There has been little room for objective analysis, to complicate matters, unlike traditional aid in the form of individual projects, donors cannot point to the roads or schools they have funded (Richelle K. 2008).

European commission, (2008), wrote "if one is to believe its critics, it is more vulnerable to misappropriation than other types of aid. While trust between partners is one important element, a number of safeguards have nevertheless been put in place. Budget support is a complex instrument that is still evolving which requires a balanced approach based on a rigorous assessment of risks and rewards. The growing success of budget support reflects efforts to improve the general effectiveness of aid. While traditional projects remain a useful and important tool, they are not always well suited to new development challenges, including the Millennium Development Goals, which aim to reduce poverty by half in 2015".

In 2006, the European Union agreed to increase the use of budget support where possible through the European Consensus on Development, which seeks to improve the quality and impact of its aid. For its part, the OECD's Development Assistance Committee gave it a positive first evaluation in 2006 ( EuropAID, 2008). ).