The political economy of Budget Support The donor-side issues - - PowerPoint PPT Presentation

University of Antwerp

Nadia Molenaers

The political economy of Budget Support The donor-side issues

Nadia Molenaers Institute of Development Policy and Management University of Antwerp ODI, April 4th 2011

University of Antwerp

“… donors react more strongly to concerns about political governance when they provide budget support. These sensitivities or concerns about good governance issues increasingly result in a number of EU Member States interrupting, reducing or stopping their budget support… the attention shifts from the developmental agenda to the political elements that underpin the budget support arrangements between partner country and donor. These include democracy, the rule of law, human rights… usually integrated in the Ups in the MOUs…” EC Green Paper 2010 Why do experts like GBS? Why are policy makers, parliaments and public opinion so hesitant/critical about it?

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• Donor readiness

Assumption:

• Policy makers face the same incentives as

experts/aid agencies What does political economy tell us about assumptions? (Level 0 entry conditions)

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POLICY MAKERS GBS Political business cycle Developmental process, institutional reform Short term Long term Direct visible results, easy to measure Indirect results, the broken feedback loop & info asymmetry Indirect invisible results, difficult to measure Attribution Contribution Multiple purposes/interests:

• Diplomacy – Development -

Democracy

• Proliferation deliverables
• Denmark Orthodoxy

Clear priority Risk avoidance A leap of faith

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Consequences

• Donor dynamics in assessing government readiness

– Eligibility criteria (assessments) vary widely & become tighter – Status of political Ups

• Increasing expectations regarding what GBS can/should

do (see next slide), especially when a crisis occurs

– Policy dialogue beyond budget/expenditure – Political conditionalities

• Predictability of GBS is heavily undermined
• Portfolio approach

– Proliferation, fragmentation, isolation of policy dialogues

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What GBS should do…

Technocratic road Technocratic+Democratic road GBS-goals

One instrument, one goal One instrument, two goals

Forum

Policy dialogue: technocratic (democratic issues should be dealt with elsewhere, not tied to GBS) Policy dialogue must be open for technocratic and democratic reforms/concerns – political conditionalities Dominant in WB, EC  Increasingly bilateral donors, especially during and after „abnormal‟ events (crisis)

Advantages

Predictable – toolkits Perceived as less intrusive BS = carrot and stick Flexibility for donors Legitimacy/reputation donors

Disadvantages

Over-technocratisation Lack of democratic progress may undermine technocratic progress Under-use GBS/policy dialogue Legitimacy issues (home – locally) BS = stick for democratic regress, reactive (ex-post), unpredictable (stop&go), emotional - no toolkits (strategy) Bazooka effect: undoing progress Overburdening GBS/policy dialogue Perceived as intrusive: legitimacy locally

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Looking forward

• Incentives for policy makers will persist + governance

challenges in LICs will not disappear

 Stop & go GBS, and/or,  More political conditionalities

Unless…

• A modality-like division of labour?

– GBS for the politically „unrestrained‟ donors, SBS as the safer modality for bilateral donors ? – Portfolio approach may be sound to pro-actively tackle some democratic governance issues – The need to manage the disadvantages of the technocratic approach

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Nadia Molenaers

Thank you! nadia.molenaers@ua.ac.be http://www.ua.ac.be/dev /aid_effectiveness