GLOBAL VERTICAL PROGRAMS AT COUNTRY LEVEL What have we learned? Presentation to May 30, 2008 Workshop Paris Prepared by: The Global Programs and Partnerships Group Concessional Finance and Global Partnerships Vice Presidency

Global Vertical Programs (GVPs) and the Paris Declaration Issue-based, multi-country program with significant targeted funding that operates at country level. Verticality ranges from thematic to sectoral to sub-sectoral. Estimated 6% of ODA (bilateral and multilateral). The Paris Declaration 2005: “Insufficient integration of global programmes and initiatives into partner countries’ broader development agendas, including in critical such as HIV/AIDS…” Work Program Bank-OECD Policy Workshop, Mauritius Workshop, Country Consultations, Synthesis. See www.worldbank.org/cfp, select “Global Programs and Country Level Linkages.”

1. Ownership and alignment of aid flows with country priorities are seen by countries as critical For countries, the need for aid flows to be aligned with national priorities remains the major concern. Harmonization, management for results and mutual accountability are seen as subsidiary to major allocative alignment issues and ownership.

2. Countries have made significant progress in ownership, but much depends on institutional capacity. All countries consulted have made progress in defining medium term national strategies and translating objectives into actionable MTEFs. Progress in this area is critical for countries to stay on top of discussions with donors. However, institutional capacity remains a concern and varies across countries. More focused donor support is needed, including for building domestic processes and systems.

3. Governments place a high value on aid being on budget (i) As a response, GVPs have made different efforts to integrate into country level programs. GFATM joining SWAps (Rwanda) and pooling funding (Malawi, Mozambique). EFA-FTI’s education sector plan and donor harmonization as basis for expanded Catalytic Fund support.

Governments place a high value on aid being on budget (ii) Some programs remain off-budget. This is of concern when many donors concentrate their financing in one sector/subsector (HIV/AIDS). Transparent reporting critical to help government assess what is going on in sector. Sustainability and predictability critical even to private approaches (government unlikely to be able to pick up the bill itself). Large GVPs that are not on budget should make special efforts at disclosing information.

4. However, strong verticality increases the risk of allocative distortions Large amounts of narrowly targeted vertical funding can create distortions within the sector. Rwanda: 42% of health aid earmarked to HIV/AIDS. Mozambique: 15 donors to HIV/AIDS subsector. For example, in HIV/AIDs: Balance between prevention and treatment. Other healthcare priorities compete for scarce local personnel. A balanced strategy across interventions is required while expanding the overall health system. Problems are exacerbated when the GVP grows very rapidly in a short period of time. Uganda: donor funding for HIV/AIDS grew sixfold in 4 years.

5. Allocative imbalances and sustainability risks rise when GVPs are off-budget and do not provide the necessary information on funding. GVPs that are off-budget tend to provide less detailed information, and are not part of a multi-year planning process. This can hamper the government’s ability to assess risks, adjust its own resources to avoid duplication and over-funding, and predict future funding flows. GVPs with high verticality may create fiscal contingent liabilities, whose risks are difficult to predict.

6. Progress in managing for results and accountability Indicators for results need to be broader and incorporate notions of sustainability. This will allow assessing the extent to which the interventions being supported contribute to the ultimate objective and the need for complementary interventions. Concerns expressed about too much emphasis on attributing results to a single GVP or donor. Progress results from a variety of factors is not always easily attributed. A broader approach would enhance a shared sense of mutual accountability.

Conclusion: When new GVPs are being created, their sponsors should learn from recent experience. The creation of new funds may be most appropriate in the area of global public goods. From the start GVPs should be designed to become well integrated into country priorities (avoiding strong verticality and including a multi-year financing framework to help predictability). Fragmentation into many sub-programs or windows financing a very specific way of addressing the final objective (each one being financed by a different donor) should be avoided. Ideally such specificity should emerge at the country level according to country circumstances, and not be defined ex-ante by donors.

Conclusion: Donors should strive to maintain balance between vertical and horizontal approaches. GVPs cannot succeed in a vacuum. Their ultimate success depends on sustained overall growth and fiscal sustainability in recipient countries. A supportive policy and institutional environment is necessary. Identifying and supporting these is very country-specific and is at the center of the more horizontal approaches to aid. This complementarity means that donors should be selective about creating new GVPs or expanding existing ones.

Thank you