Evaluation of General Budget Support: Synthesis Report - Belgium

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Evaluation of GBS – Synthesis Report Mozambique: The commitment to pro-poor policies exists independently of, but supported by, PGBS. Dialogue in the PGBS Joint Review process and assessment using Performance Assessment Framework have reinforced attention to pro-poor outcomes, made targets more concrete, made the propoor agenda more cross-sectoral, and embraced sectors which hitherto had less donor attention. Government has been encouraged to commit to such policies. [B5] Nicaragua: Positive link because PGBS supports the nationally developed poverty reduction strategy, but general definition of pro-poor expenditure may create problems. Empowerment in the definition/strengthening of pro-poor policies limited by the number of indicators in relation to sector policies, showing a strong influence of donors on the policy content. [B5] Rwanda: PGBS supports other processes (PRSP, joint overall government–international partner dialogue); support is uneven across sectors/themes (depends on PRSP coverage and strength of link with sector/theme dialogues). Better structured government–international partner dialogue enables government to adopt more participatory policy processes. Link between participatory policy-making and pro-poor nature of policy (analysed by sector). [B5] Uganda: Strong link found at sector and cross-sector level, although government had pro-poor agenda to begin with. [B5] Vietnam: There is a strong impact through policy actions aimed at strengthening pro-poor policy. This supports an already pro-poor government reform programme. [B5] Synthesis: As with link I, established PGBS has significant effects; more fruitful where it follows up pre-existing processes. But concepts and instruments of "pro-poor" policy may be weak or problematic. Dialogue has helped protect pro-poor expenditures but broad definitions of pro-poor expenditures may be problematic (see boxes on definition of pro-poor expenditures in each country). N 3.1 → 3.3 PGBS funding encourages and empowers strengthening of pro-poor policies Burkina Faso: Greater feeling of ownership with PGBS. More resources need better management systems and Medium Term Expenditure Framework becomes more important as there is more to spend (3.2) and permit more pro-poor (or social sector) spending (through PGBS and HIPC combined. [B3] Malawi: No evidence of link except through PPEs. Mozambique: The effectiveness of the PGBS dialogue through the Joint Review process (see M) depends on the existence of PGBS funding. Although overall funding levels for services have probably not increased as a result of PGBS, the level of funds channelled through the state budget has increased because of PGBS. Channelling of funds through the state budget supports cross-sectoral dialogue, gives support to cross-governmental policy priorities as expressed in the PRSP, and gives some support to sectors (e.g. the judiciary) which previously received limited donor attention. [B3, B5] Nicaragua: PGBS is continuing pro-poor policy emphasis started by HIPC but with limited funding so far (see I above). Rwanda: Strong effect of PGBS funding (through better budget financing) on government empowerment/ incentive to strengthen policy (e.g. fee-free education, Public Sector Reform/Reconfiguration). [B4, B5] Uganda: PGBS funding has had a moderate effect by helping to increase policy coherence by reinforcing the interest of sector agencies in participating in the pro-poor policy processes. [B5] Vietnam: PGBS funding supports government expenditure which is already relatively pro-poor, while specific PRSC policy actions aim to increase expenditure in specific pro-poor sectors. [B3] Synthesis: The availability of funding can act as an incentive for agencies to participate in policy processes. Annexes (62)
Annex E: Synthesis of Causality Findings O 2.4/2.5/2.6 → 3.4 Non-flow-of-funds effects on fiscal discipline Burkina Faso: Improved PFM and implementation of the Integrated Expenditure and Revenue Information Systems provide better tools to maintain fiscal discipline Malawi: No evidence of effect pre-2004 with continued fiscal indiscipline. Post-2004 signs that discipline improving. This could be partly attributed to the positive incentives created by effective donor management of conditionality but this argument is not easily testable. [B3, B6, C2] Mozambique: IMF policy is the strongest external influence on both government monetary and fiscal policy. However, PGBS dialogue and conditionality, linked to Poverty Reduction and Growth Facility (PRGF), have created pressure to sustain fiscal discipline. Fiscal discipline was not adhered to during the early years of PGBS owing to bank recapitalisation and outlays for post-flood reconstruction. Low levels of tax collection in 2004 have also contributed to targets not being met. However, the general trend is positive. [B6] Nicaragua: This is part of the PRGF conditionality. The fact that PGBS refers to IMF programme for the assessment of the appropriate macroeconomic environment creates indirect effect of PGBS dialogue on fiscal discipline. [B6] Rwanda: Moderate to weak effects, disciplined macroeconomic management embedded before PGBS. [B6] Conditionality linked to PRGF on track may have been instrumental in stopping temporary bout of fiscal indiscipline in 2003. Uganda: Discipline embedded before PGBS, so a supporting influence, not a decisive one. [B6] Vietnam: Fiscal discipline was already maintained prior to PGBS. Therefore, there is weak a link in this instance as PGBS only supports this process. [B6]. Synthesis: PGBS has become established only where there is a track record of fiscal discipline. IMF is the main interlocutor with government. Link from PGBS to PRGF conditionality can reinforce it. P 2.1/2.2/2.3 → 3.4 Flow-of-funds effects on fiscal discipline Burkina Faso: Fiscal discipline well embedded before PGBS in the framework of West African Economic and Monetary Union. Supplementary flow of funds smoothly absorbed through the existing system. It just leads to a higher level of expenditures under the same rules of already present fiscal discipline Malawi: Negative effect resulting from inability to react to suspension in short term. [B6] Mozambique: Discipline is probably influenced by having more funds on-budget, limiting the need to borrow and reducing the deficit after grants for the same level of expenditure. However, late disbursements have had negative effects on budget discipline when the government has resorted to issuing treasury bills to cover liquidity gaps. Fiscal discipline is fully dependent on government behaviour, and flow-of-funds effects, regardless of their size, cannot control but only influence this dynamic. [B6] Nicaragua: The government includes in the budget only secured funds. Withholding of funds in the short term has resulted in reduction of activities, but not in new borrowing since external funds are covering mainly capital expenditure and there is a strong fiscal discipline linked to the programme with IMF. Nevertheless, it is too early to use the experience of 2005 as solid evidence of a clear effect. [B6] Rwanda: Weak effect on fiscal discipline but effect on providing fiscal space for higher expenditure. Perverse effect at time due to short-term unpredictability in PGBS disbursement. [B6] Uganda: Discipline embedded before PGBS, but PGBS funding, by acting as a long-term predictable source of foreign exchange, increasing the resource envelope, and bringing funds on-budget makes task of Ministry of Finance, Planning and Economic Development easier. [B6] Vietnam: Again, fiscal discipline was already present, although PGBS brings funds on budget and increases the resource envelope. [B6] Synthesis: PGBS is an aid to fiscal discipline, through providing funds subject to budget process. Where there is fiscal discipline, PGBS allows higher spending for same level of fiscal discipline or same level of expenditure for lower deficit. Annexes (63)
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