Operational approaches to Catalytic Fund implementation: moving toward greater aid effectiveness Sajitha Bashir The World Bank 2nd Africa Region Education Capacity Development Workshop “Country Leadership and Implementation for results in the EFA-FTI Partnership” Tunis, December 3, 2007

Presentation goals To assess how CF grant implementation modalities have contributed to strengthen aid effectiveness through stronger alignment, harmonization and results To identify good practices and lessons learned that could be useful to inform the Expanded Catalytic Fund

Presentation outline CF implementation modalities Assessment Emerging good practices Lessons learned

CF implementation modalities Flexible disbursement options CF Operational Guidelines provide for flexible implementation modalities, based to the extent possible on country systems policy-based agreements are the preferred disbursement option project-based options may be relied upon when fiduciary risk is very high A policy-based agreement allows for full or partial use of country systems. The first tranche of the grant is released immediately after signing the grant agreement. The criteria are: a national poverty reduction strategy which anchors education objectives to country-level consultative and budgetary processes; a sector-wide education program, agreed with in-country donors; an agreement to monitor a set of benchmark indicators. The subsequent tranches are released on the basis of a satisfactory report of implementation progress. A project-based approach usually relies on ring-fenced modalities similar to those used in traditional investment projects. These may include disbursement against specific expenditure and reliance on parallel mechanisms like project implementation units.

CF implementation modalities Disbursement options used in practice In most of the 18 countries implementing a CF grant, Grant Agreements provide for a policy-based approach and are fast disbursing... Eighteen countries have begun implementation of a CF grant since 2004, all of which are still active. The countries are Cameroon, Djibouti, Ghana, Guyana, Kenya, Kyrgyz Republic, Lesotho, Madagascar, Mauritania, Moldova, Mongolia, Nicaragua, Niger, Rwanda, Tajikistan, The Gambia, Timor-Leste and Yemen. The analysis of the CF Grant Agreements shows that 11 CF grant agreements provide for policy-based implementation (Cameroon, Djibouti, Ghana, Kenya, Madagascar, Mauritania, Nicaragua, Niger, Rwanda, The Gambia, Yemen) 7 CF grant agreements provide for project-based implementation (Guyana, Kyrgyz Republic, Lesotho, Moldova, Mongolia, Tajikistan, Timor-Leste)

1. CF implementation modalities Institutional and fiduciary arrangements used in practice …in practice, policy and project-based CF grants use similar implementation arrangements akin to those of an investment operation and different from those used more broadly by the Ministry of Education. 6 implemented through PIUs and ring-fenced fiduciary arrangements For both policy and project-based CF grants, funds are channeled through separate special accounts (in a development policy operation, funds are normally disbursed into a government account that forms part of the foreign reserve holdings). Six of the 11 policy-based CF grants follows either special financial management procedures or Bank procurement or both (a development policy operation has no procurement) 6 implemented through PIUs and all through ring-fenced fiduciary arrangements In virtually all countries, CF reporting is only marginally integrated into national reporting

2. Assessment Three assessment areas Alignment Donors base their overall support on partner countries’ development strategies, institutions and procedures Harmonization Donors’ actions are integrated among each other, transparent and more collectively effective Managing for results Management of resources, both internal and external, focuses on the desired objectives and uses information to improve decision-making These definitions are drawn from the Paris Declaration on Aid Effectiveness, signed in March 2005, which commits partner countries and donors to strengthen aid effectiveness through ownership, alignment, harmonization, results and mutual accountability. It includes 56 partnership commitments or goals for both governments and the donor community toward enhanced aid effectiveness and 12 monitorable indicators to assess progress.

2. Assessment Methodology Good practice checklist 5 Alignment indicators 3 Harmonization Indicators 2 Managing for Results Indicators EFA/FTI sources Country-level sources EFA/FTI endorsement reports Joint reviews CF grant progress reports Donor questionnaire (Madagascar only) FTI Case studies (Lesotho, Yemen) Global Program Country Survey (Ghana) World Bank’s Aid Effectiveness Profiles (www.worldbank.org/aer) OECD/DAC Survey on Monitoring the Paris Declaration Qualitative assessment The good practice checklist is drawn from the Paris Declaration partnership commitments. The qualitative assessment draws on a five-point scale used to assess progress toward indicator 1 (operational development strategies) and 11 (results-oriented frameworks) of the Paris Declaration on Aid Effectiveness: L Little action: Due to a wide variety of circumstances, action has remained at a virtual standstill. E Elements exist: There is some basis for making progress, either through what already exists, or definite plans. A Action taken: Progress is being made, although not yet enough, and the basis exists for even more substantive progress. D Developed: Significant action taken already, although further action is needed. S Sustainable: There are no warning signs of possible deterioration, and there is widespread expectation that the progress achieved is sustainable. Using an equivalent numeric score defined in ranges, with the lowest range 1 – 1.5 (little action) and the highest range 4.6 - 5 (sustainable), the scores for each indicator have been averaged across country to present an overall score. Education Country-level

2. Assessment Alignment The assessment shows that in the education sector alignment is stronger than at the country level…

2. Assessment Alignment …in countries that have been implementing a CF grant for two years or more, progress is even more prominent than the average on two measures of alignment… …but progress has been less strong than the average in integrating implementation units into country structures… Seven countries have been implementing a CF grant for two years or more. They are Ghana, Guyana, Kenya, Madagascar, Mauritania, Niger and The Gambia. The reference date is the date of the CF grant letter agreement transmitted to the recipient country by the Bank’s country director.

2. Assessment Harmonization …progress toward harmonization is somewhat stronger than at the country level…

2. Assessment Managing for results …while managing for results is the same as at the country level.

2. Assessment Factors of success Joint reviews are behind the relatively better progress Joint reviews provide for a number of factors of success: Regular dialogue at the country level Mechanism for government leadership Capacity building for civil servants on project management Mechanism to help inform the budget

3. Emerging good practices Ghana, Madagascar and Rwanda All policy-based CF grants with different institutional and fiduciary arrangements

3. Emerging good practices Ghana—Managing for results M&E embedded in sectoral M&E for education EMIS monitors CF grant implementation Operational manual facilitates a strong M&E team and quality reporting in the education sector Reporting embedded into national reporting Preliminary National Education Sector Review Report discussed at annual review including development partners and national stakeholders Single point of reference for government and development partners for all issues concerning education performance and service delivery Background: country-level progress toward managing for results Ghana has taken action to develop a results-oriented framework. Information on Government policies is easily accessible and disseminated regularly. The quality and availability of poverty-related data is improving. Significant progress has been made to implement a M&E Plan for the Growth and Poverty Reduction Strategy, but a country-level M&E system is still under development.

3. Emerging good practices Rwanda—Harmonization Coordinated financing mechanisms Memorandum of Understanding Pooled account for CF grant and other funds consolidates fiduciary requirements Joint education reviews are in synch with budget preparation Joint reviews of the education sector combined with joint budget support reviews Review of performance of the sector thus informs the annual budget, which in turn helps strengthen the budget’s performance orientation Background: country-level progress toward harmonization The government and development partners have taken some action to strengthen harmonization in Rwanda. Development partners are increasingly relying on common arrangements and procedures. They have established a Basket Fund for Harmonization, Alignment and Coordination in Rwanda, which is managed by the Aid Coordination Unit. 42 percent of aid is program based. The Government and the development partners providing general budget support undertake joint Budget Support Reviews aimed at discussing sectoral and sub-sectoral budget allocations and expenditures at the national and district levels. The Government organizes Joint Sector Reviews on an annual basis. These Reviews offer the opportunity to review the performance of sectors against sector strategic plans and the PRSP, and each Review has high-level Government support.

3. Emerging good practices Madagascar—Alignment Alignment with country priorities Government taking lead in developing Integrated strategy for quality improvement (curriculum, teacher training, books) National school construction strategy Better costing Development partners aligning around this Government-led coordination Joint bi-annual reviews have strengthened the Ministry’s capacity to lead development assistance coordination and helped development partners plan for and conduct joint missions Background: country-level progress toward alignment Elements exist to further strengthen alignment in Madagascar. External partners have strongly supported the DSRP, and they are working with the Government to align their development assistance strategies with the MAP. The Government is moving toward taking a leadership role in development assistance coordination, primarily through its efforts to lead dialogue on a common policy framework for budget support, although coordination is largely still managed by external partners. The Government has requested that PIUs be increasingly integrated, where possible, within Government structures, although it has recognized that this goal can take some time. . All external financing is reflected in the budget.

3. Emerging good practices Madagascar—Alignment (cont.) Integrated implementation unit Multiple PIUs combined into a single PIU (but some not consolidated) The PIU is being progressively integrated into the structures of the Ministry of Education Financing reflected in the budget Inclusion of external funds in the budget is helping the Ministry of Education strengthen budget execution reporting

4. Lessons learned Experience reinforces the need to maintain flexibility in CF grant modalities Alignment with country priorities is a process that helps improve evidence-based decision-making as country leadership strengthens CF grant can help strengthen institutional arrangements and fiduciary mechanisms regardless of the implementation modalities Important not to lose sight of CF grants objective of using country systems when possible

4. Lessons learned (cont.) Joint reviews are helping strengthen aid effectiveness Experience indicates that they have been better at strengthening alignment, government leadership, integrated implementation units and financing reflected in the budget Progress in use of country systems, coordinated financing mechanisms, joint analytic work and M&E has been lagging behind

4. Lessons learned (cont.) Recipient countries’ governments could consider using joint reviews to focus more on Country fiduciary systems Coordinated financing mechanisms Joint analytic work M&E