Outcome-based conditionality: Too good to be true? Brussels, 29 January 2008

2 “Policy conditionality is both an infringement on sovereignty and ineffective” Africa Commission, 2005 “True partnership supposes autonomy of beneficiary countries in requesting aid and in determining its objectives… Often programs are imposed on us, and we are told it is our program…People who have never seen cotton come to give us lessons on cotton… No one can respect the conditionalities of certain donors. They are so complicated that they themselves have difficulty getting us to understand them. This is not a partnership. This is a master relating to his student.” President Toure of Mali

3 World Bank Conditionality Review, 2005 “Traditional conditionality in policy- based lending has often been criticized as being ineffective and intrusive” “In the past, policy-based lending mistakenly focused almost exclusively on policy actions, without giving much attention to their intended outcomes or contributions to a country’s long term development goals”

4 But what do we mean when we talk about “results”? “Outcome-based conditionality means different things to different people” Senior IMF official

5 Outcomes a la IMF

6 The WB and the EC: logics compared Policy actionsOutcomes World Bank Burkina Faso PRSC 7: - Alignment to international market price - Contracts with professional operators to manage water systems Tanzania PRSC 5: - Reform of business activities registration Burkina Faso PRSC 7: - SOFITEX operating profit at $US Million (>0) - Access to drinking water % Tanzania PRSC 5: - Ranking on “Doing Business” European Commission No policy conditions are used to spell out the actions that the government should undertake to achieve a particular outcome Mozambique PRBSP III: - Primary school enrolment rate - Completion rate - Proportion of institutional deliveries among expected births

7 For the purpose of this study… Outcome-based allocations or conditions refer to: (a) disbursements linked to performance measured by indicators at the outcome level; (b) which refrain from spelling out concrete policy measures that should be adopted in order to obtain certain results; and (c) which refer to outcomes in areas clearly linked to human development and poverty reduction.

8 The EC’s shift to outcome- based conditionality “Drawing on lessons from previous structural adjustment programmes and the recognition of the central importance of ownership, the European Commission has moved to an approach based on linking their aid to poverty reduction results” CountrySectorOutcome indicator Burkina Faso ABRP Health% children vaccinated Mozambique PRBSP III Education% completion rate – girls Tanzania PRBS III Education% primary school enrolment

9 EC’s expectations for outcome-based conditionality - Encourage a focus on results by using indicators of service delivery / poverty reduction; - Protect the political space for governments to determine policy; - Streamline conditionality; - Promote domestic accountability; - Stimulate demand for quality data on poverty.

10 What has been the impact of outcome-based conditionality? Positive effects: 1. Outcome-based conditionality has pushed a results based approach; 2. It has managed to streamline conditions; 3. It has managed, generally, to refrain from spelling out economic policy conditions; 4. It has been a catalyst to increase governments’ focus on poverty reduction results.

11 Operational challenges: too soon or too hard to tell? The not so good news: - Not enough funds to make a difference; - Cryptic data: failing to improve downwards accountability; - Outcome indicators: cure or curse? - The problem of attribution; - Mechanistic links to disbursement; - Time lags; - Limited CSO participation.

12 Political challenges: letting go of the reins Opening-up policy space: contextual burdens or “business as usual”? - The problem of conditionality baskets; - The problem of “creating incentives” - The other side of the coin: not enough buy-in from Southern governments

13 Conclusions and Recommendations Outcome-based conditionality can be based in internationally agreed development goals; increase policy space; and put results in the spotlight. To fully unleash this potential: The process of choosing outcome indicators should be much more inclusive and genuinely led by recipient countries; Indicators should also try to grasp qualitative aspects; Data should be collected and displayed to strengthen downwards accountability; Assessments with financial implications should take place on a multi-year basis; A less mechanistic link between targets and disbursement; Avoid “double-conditionality”

14 By Nuria Molina-Gallart EURODAD