Challenges for donors and partners Geske Dijkstra Erasmus University Rotterdam

Overview  The political context of the Partnership (GBS)  Comparison results of programme aid evaluation 1999 with PGBS evaluation 2006 → Two problematic issues: Conditionality and ownership Selectivity → Recommendations for donors and partner governments

Politics in donor countries  Aid must be effective, Planning for results, MDGs → poverty reduction is a technical issue  Simple eligibility criteria: IMF agreement (= technical issue), sometimes nasty political or governance situation in recipient countries, threatening to interrupt the flow of aid money  Lip service to “policy coherence”: Issues are beyond capacity of national aid agencies Subsidies to private sector in donor countries while subsidies to private sector in recipient countries are not allowed  Aid budgets must be spent, “scaling up”

Politics in recipient countries  Political patronage, clientelism → Interest in discretion, not in transparency and accountability  Poverty reduction is political issue, requires redistribution and taking political risks vis-a-vis powerful groups  (Perceived) Aid dependence → Lip service to poverty reduction, PRSPs, MDGs, good governance → Debate on domestic growth strategies dominated by foreign influence (IMF & WB) → No accountability to domestic constituencies: private sector, the poor

Evaluation of programme aid (1999)  Funds: effective for stabilisation and growth  Conditionality: not effective, but there can be donor influence → Selectivity → Policy dialogue, not monologue  Policies: more reforms not always better → Caution with policy prescriptions  Systemic effects: Modality matters for influence → Budget support can focus attention to budget systems, but micromanagement should be avoided

Evaluation of PGBS (2006) Money: Stabilisation: unsolved tension with lack of predictability Growth: More allocative and operational efficiency; more money to public services but outcomes uncertain Selectivity: political risks are underestimated, IMF judgment always followed, no fixed eligibility criteria for fiduciary risks and governance Conditionality and ownership: “If domestic support for policies, then PGBS can support it” → no overloading with conditions, limit disbursement conditions, agree with government and assess medium term results Policies: PRSP central; PGBS reflects biases in PRSP → more attention for growth and income poverty needed Institutional effects: positive effects on PFM systems → focus conditions on budget systems

Conditionality and ownership: the broader context  Lessons from programme aid evaluation: take ownership seriously, for two reasons: imposing conditions on unwilling government is not effective, and conditions may be wrong  Practice: more conditionality than before: IMF, World Bank structural adjustment plus PRSP with participation;  For example, PRSP: Willingness? “PR is higher priority for donors than for partner governments” Is PRSP approach appropriate? Poverty is not a technical issue; PRSP process depoliticizes debate on PR Long-term, comprehensive, results oriented: ignores domestic political processes Assumes automatic implementation

Selectivity  Agreement with IMF dominant precondition for debt relief and budget support  Problems: IMF has not been selective in the past: creditor role mixed up with gatekeeper role IMF involvement limits country ownership of PRSPs: no debate on macroecononomic framework and structural policies Research: IMF involvement leads to lower growth  Too little attention for political risks, governance, corruption

Average on six governance indicators (Kaufmann et al.) by number of IMF agreements during ‘94-’02

Recommendations for donors  Provide policy space for debate  Consider limiting the role of the IMF in low-income countries, especially with regard to defining eligibility for BS  Be more selective with respect to politics and governance criteria, and assess political willingness to combat poverty (progressive taxes?)  Take ownership and domestic political processes seriously: assess home-grown plans and use plans that may be more limited in scope and time frame, rather than comprehensive, long-term PRSPs

Recommendations for partner governments  Take policy space for debate on growth policies  Design policy measures for growth in cooperation with domestic private sector (including SMEs) … that may include financial sector policies, subsidies for exports …  Give attention to domestic revenue mobilisation including progressiveness of taxes