UNDP RBA MDG-Based National Development Planning Workshop Synthesis of sector needs assessments; preparation of 10 year framework, and links with MTEF Chandrika Bahadur UN Millennium Project February 27-March 3, 2006

2 Agenda 1. Synthesis of sector needs assessments 2. Preparation of 10-year framework 3. MDG Financing strategy

3 Check MDG needs assessment results Scope of sector assessments –Check for gaps in needs assessment –Check for double-counting of interventions Consistency of underlying data, e.g. –population growth rates –rural and urban population ratios –gender ratios Order of magnitude of per capita investment needs –comparison with results from other countries (e.g. Millennium Project studies and World Bank sector assessments)

4 Indicative investment needs

5 Identify synergies and iteratively refine estimates Savings, e.g. –Prevention interventions in health reduce incidence of diseases –Improved fuels and stoves lower incidence of acute respiratory infections Dissavings, e.g. –Increased child survival raises number of children that will attend school Long-term synergies that do not affect medium-term strategies, e.g. –Maternal education lowers child mortality rates Dynamic inter-sectoral models can help refine needs assessment results further

6 Consolidate investment needs Aggregated needs assessments –E.g. using Millennium Project tool

7 Agenda 1. Synthesis of sector needs assessments 2. Preparation of 10-year framework 3. MDG Financing strategy

8 Sequence implementation of interventions Interventions to be sequenced first: 1. Quick Wins: Investments with high short-term impact that do not require major capacity building, e.g.: Distribution of insecticide-treated anti-malarial bed nets Elimination of school and health fees Affordable replenishments of soil nutrients 2. Capacity-critical interventions: Public management (e.g. IT, financial management skills) Human resources (e.g. training, adjusting wages, hiring new staff) Infrastructure (e.g. roads, schools, health facilities) 3. Investments with long time lags, e.g.: Behavioral change through public education/HIV intervention etc takes long time designing etc Demographic changes

9 Design effective policies in support of MDG interventions Civil service reform, e.g. recruitment and remuneration policies Regulatory reform, e.g. tariff structures, environment standards Legislative reform, e.g.: land tenure system, water laws Decentralization and community involvement, e.g. local government authorities and financing norms Fiscal reform, e.g. tax collection Financing policies, e.g. lifeline tariffs, targeted subsidies

10 Divide the work and assign responsibilities Three key types of responsibility need to be assigned: Planning and oversight –Assign lead responsibility for each set of interventions to line ministry or other public body Implementation –Agree on division of responsibilities between national and local governments –Assign responsibility for the intervention to the level at which action is necessary –Identify role of NGOs and private sector in delivering social services and infrastructure investments Financing –Decide who has authority over budgets and will report to parliament and development partners/control money

11 Agenda 1. Synthesis of sector needs assessments 2. Preparation of 10-year framework 3. MDG Financing strategy

12 Elements of an MDG financing strategy Household contributions Government MDG expenditures Debt service payments MDG Financing Gap (closed through ODA including debt relief) MDG Financing Needs Domestic resource mobilization

13 Sequence of preparing an MDG financing strategy 1. Estimate financing needs 2. Prepare MDG-consistent macro framework 3. Project government resource mobilization 4. Estimate household contributions 5. Identify MDG financing gap (debt relief & development assistance) 6. Identify strategy for maintaining macro stability

14 Purpose of an MDG-consistent macroeconomic framework Estimate key economic variables (GDP growth, exchange rate, national saving, private sector investment, current account balance, etc.) Project government revenues to map out MDG financing strategy Support policy formulation –Monetary and fiscal stabilization –Pro-poor tax systems –Promotion of private sector investment Check MDG needs assessment (Goal 1)

15 Identify Government expenditures for the MDGs Sequence for projecting government MDG expenditures 1.Estimate current expenditures on MDG 2.Project public expenditures using macroframework 3.Identify non-priority expenditures that can be reprogrammed towards MDGs 4.Identify scope for increasing government revenues in manner consistent with achieving MDGs 5.Assess needed debt relief Government MDG expenditures may rise by up to 4 percentage points of GDP through to 2015

16 Identify household expenditures for the MDGs A note on user fees –Evidence is strong that direct and indirect user fees for primary education and essential healthcare are a barrier to access for the poor –Ending user fees often requires increased aid to make up for the government revenue shortfall –C.f. Education for all Initiative and Commission on Macroeconomics and Health Household contributions for the MDGs –Policy coherence: Incentive effects of well designed user fees must be compatible with policy objectives (i.e. no health and primary education fees) –Affordability: Estimate household contributions on basis of ability to pay across all sectors

17 Are Dutch Disease and macro- instability a barrier to scaling up aid? Increased aid will lead to a one-time real exchange rate appreciation, but effect will be small: –Many investments focus on supply side (this is NOT a consumption boom) –Imports and investments in tradables are neutral Inflation can be contained by absorbing excess liquidity through increased private imports financed by foreign reserves that have been built up by aid Consensus among economists: macroeconomic stability can be maintained through good monetary policies if aid is 1.Predictable 2.Provided as grants 3.Well programmed to finance direct investments in the MDGs

18 Building MDG-consistent macroeconomic frameworks: scenario based planning MDG scenario –Investment plans and annual budgets based on country MDG needs –National scale coverage to achieve the MDGs –Sequenced investments to build absorptive capacity and train human resources MDG-minus scenario –Investment plans and annual budgets based on projected resources (domestic and external) –Reduced coverage assumptions that make achievement of MDGs impossible –Prioritized investments within and across sectors