What Effects has GBS Had? Stephen Lister 9 May 2006

Paris, 9 May 2006The Effects of GBS2 Overview of Presentation  Aims  to explain the effects the evaluators found  to justify overall country assessments  findings, not recommendations  Sequence  the evaluation subject: partnership GBS  what effects did we look for?  what effects did we find?  overall assessment.

Paris, 9 May 2006The Effects of GBS3 What did we evaluate? (concept)  Multiple inputs of GBS (finance + +)  Focus on partnership GBS  unearmarked funds  new style of conditionality (?)  support to poverty reduction strategy  Identified via country-level inventories  overlap with “sector budget support”

Paris, 9 May 2006The Effects of GBS4 What did we find to evaluate?  illustrative sample of countries  large volume, but recent, uneven distribution of PGBS  useful contrasts in “penetration” PGBS flows (Table 3.3)

Paris, 9 May 2006The Effects of GBS5 What effects did we look for?  Expectations from GBS ultimately, poverty reduction via:  more predictable funding  harmonisation and alignment  lower transaction costs  more efficient public expenditure  more effective state and public administration  improved domestic accountability  etc.  Evaluation Instruments Enhanced Evaluation Framework  flow of funds effects  policy effects  institutional effects Causality Map  Counterfactuals

Paris, 9 May 2006The Effects of GBS6 Effects on public expenditure  PGBS – additional or substitute?  Influence on discretionary expenditure PGBS not established in Malawi, Nicaragua Clear expansion of funds and discretion in Uganda, Rwanda More funds on budget in Mozambique, Burkina Faso, Vietnam  Influence on “pro-poor” expenditures Uganda: increased level and share for Poverty Action Fund Mozambique: bringing funds on budget, rather than raising “pro- poor” share Burkina Faso: balancing (targeted) HIPC funds Rwanda: facilitating “priority” spending Vietnam: in principle, financing pro-poor policy actions  Efficiency of expenditure gains in allocative and operational efficiency efficiency improvements benefit other modalities

Paris, 9 May 2006The Effects of GBS7 Effects on growth and poverty  Macro-economic effects  contribution to total aid flow effects, reinforces existing stability and discipline  Effects on poverty reduction Caveats:  problems of data, time scale, correlation vs causality (not unique to GBS)  form vs. content of PGBS: support to evolving PRSs Conclusions:  Weak effect on income poverty (indirect, via macro effect)  Stronger effect on basic services (limited by quality and targeting issues)  Weak empowerment effects (but early..)

Paris, 9 May 2006The Effects of GBS8 Effects on Harmonisation & Alignment  Positive H&A effects in all cases:  policy alignment behind PRSs (but some PRSs not very operational – Uganda exceptional)  by definition disbursed through government finance system  short-term alignment with budget calendar improving, but weak on medium/long term commitments  harmonisation effects of PGBS spread to other modalities (especially among PGBS donors)  Transaction costs:  clear gains for government during implementation  ambiguous effects at negotiation, monitoring stages

Paris, 9 May 2006The Effects of GBS9 Institutional Effects  Public finance management  Bringing discretionary funds on budget, and using government systems does have the anticipated effects on ownership and system strengthening.  Capacity development  TA and capacity building are the least well specified or coordinated inputs of PGBS.  Nevertheless, complementary effects on system development.  Policy processes  A variety of positive effects on policy processes, where PGBS is established.

Paris, 9 May 2006The Effects of GBS10 Unintended and adverse effects  Unpredictability?  short term predictability improving  destabilising effect of suspension in Malawi  long term predictability?  Bias against private sector / growth?  public services bias reflects first-generation PRSPs  no major “crowding out” effects specific to PGBS  Revenue effect?  no major revenue substitution effects found  Fiduciary risk and corruption?  PGBS increases focus on PFM strengthening  no clear evidence that PGBS funds have been more vulnerable than other modalities [LATER SESSION FOR MORE ON RISK.]

Paris, 9 May 2006The Effects of GBS11 Interaction with other modalities Important interactions include:  Broad influence on harmonisation and alignment.  Increased policy coherence across sectors.  PGBS flexibility improves expenditure efficiency across all funding sources.  General benefit of PFM strengthening.  Complementarity between PGBS and other instruments (e.g. on cross-cutting issues, capacity building, corruption).  PGBS benefits (e.g. on efficiency and t-costs) are diminished when off-budget modalities persist. Potential complementarities are not very systematically exploited.

Paris, 9 May 2006The Effects of GBS12 Feedback and sustainability  Evolutionary design, adaptation.  Some convergence between PGBS and PRSP monitoring systems.  Limited effects so far on domestic accountability (but domestic and donor accountability can reinforce each other). [LATER SESSION FOR MORE ON OWNERSHIP, ACCOUNTABILITY, INDICATORS.]  PGBS needs to be durable for sustained institutional effects – main risk political? [LATER SESSION FOR MORE ON RISK.]

Paris, 9 May 2006The Effects of GBS13 Overall assessment (1)  Confidence:  Systematic and rigorous approach applied consistently across the range of study countries.  Careful to provide the evidence on which judgements are based.  Confident that conclusions – as far as they go – are well founded.

Paris, 9 May 2006The Effects of GBS14 Overall assessment (2)  Distinctive features of partnership GBS:  Orientation to support national poverty reduction strategies.  Focus on strengthening capacity, especially in public finance management.  Focus on results.  Explicit attention to the quality and effectiveness of aid.  Its aspiration to function as a partnership.  Overall positive assessment in 5 of 7 cases.

Paris, 9 May 2006The Effects of GBS15 Overall assessment (3)  Principal findings:  Relevant response to problems in aid effectiveness.  Efficient, effective and sustainable way of supporting national poverty reduction strategies.  Positive systemic effects on capacity by providing discretionary funds to national budget system.  Spill-over effects enhance quality of aid as a whole.  Initial effects on poverty mainly through expanding public services. Ultimate effects will depend on the quality of the national poverty reduction strategy.  Capacity for learning suggests instrument can become more effective over time.  Did not find unintended effects or side-effects that would outweigh benefits.  Sustainability requires more attention to mitigation of risks.  Findings are more widely relevant to programme-based approaches which share PGBS design principles.

Paris, 9 May 2006The Effects of GBS16 Thank You