German Institute for Development Evaluation

Accompanying Measures to Budget Support (concluded)

According to the intervention logic of budget support, direct financial transfers to national budgets shall enable developing countries to implement their national development strategies more effectively. Current multi-donor evaluations indicate improvements in government spending towards addressing poverty, as well as a strengthening of public financial management systems in countries receiving budget support. However, despite these effects, budget support remains controversial, mainly because the provision of budget support carries a number of fiduciary risks. These include the risk of the misappropriation of budget support funds, as well as the danger that budget support funds are not used efficiently.

Evaluation of accompanying measures to budget support

In addition to the financial inputs, the standard package of budget support programmes includes non-financial elements such as conditionality, an intensive policy dialogue between donors and the partner government, and accompanying measures. In the short- to medium-term, accompanying measures are targeted to reduce the fiduciary risks related to budget support. For example, this could be achieved by financing additional audits. For the medium- to long-term, these measures aim at improving capacities within government institutions of public finance management, such as the Court of Auditors, the national tax authority, or decentralised units of financial administration. Furthermore, accompanying measures can aim at improving the formulation and implementation of development policies and at enabling parliaments, civil society and the media to better exercise democratic control in national budget processes.

Accompanying measures to budget support have gained importance within German development cooperation over the last years. The evaluation has considered whether, how and under what conditions accompanying measures to budget support can contribute to achieving the objectives of budget support. Therefore, it has addressed questions regarding the relevance, the functioning, and the factors of success of these measures. Additionally, the interaction of accompanying measures with other elements of the overall budget support package such as policy dialogue, conditionality and donor coordination has been reviewed. The evaluation report will be published in August 2015.

What are the effects of budget support?

Due to a large number of stakeholders on both donor and partner side and numerous influencing factors in the political setting, budget support is considered a complex evaluation topic. As an important donor of budget support, the EU has commissioned a range of budget support evaluations in several partner countries. The evaluation methodology applied to these evaluations so far is currently being reviewed and further refined. To add to this discussion, DEval will summarise the methodological findings from its evaluation of accompanying measures to budget support. Furthermore, it is planned to draw the findings from existing budget support evaluations in a structured manner.