1. Budget support in the Enlargement
Terhi Karvinen (NEAR A4)

2. Budget Support - definition
Budget support is the transfer of financial resources of an external financing agency to the National Treasury of a partner country, following the respect by the latter of agreed conditions for payment. The financial resources thus received are part of the global resources of the partner country, and consequently used in accordance with the public financial management system of the partner country

3. General Eligibility criteria
Macro- economy
Stability established/maintained
PFM
Budget transparency
Sector policy
Credible and relevant programme
Progress required
Improvement required
Credible and relevant programme
Progress required

4. General eligibility – Sector Policy cycle
Problem analysis
Sector strategies
Monitoring & Evaluation
Implementation
National development strategy
Macro-economic policy
PFM reform
Budget Transparency Roadmap
Public Administration reform
Parliament and SAI
Judiciary
etc
Annual targets
Action plans
Coordination mechanisms
Policy financing
Engagement of different stakeholders
Communication, visibility and change management
Technical and managerial capabilities
National & sector M/E strategies, systems, capabilities
Data collection & use
Public sector internal and external accountability mechanisms
Analytical studies:
PEFA, IMF, WB, SIGMA, OBI, etc
Sector analysis

5. PAR and budget support Baseline assessments
Policy development and coordination
Country level policy planning and coordination systems
Financial planning
Monitoring and evaluation systems
Better regulation agenda (timely consultations and evidence based policy making)
Public service and human resources management
Accountability
Service delivery
The enlargement strategy establishes public administration reform (PAR) as a key pillar of the enlargement process together with the rule of law and economic governance and describes the PAR in the enlargement context: a medium-term strategic framework defining the reform targets in the core dimensions of Policy development and coordination; Public service and human resources management; Accountability; Service delivery; and Public financial management (PFM). The Principles of Public Administration developed by the OECD/SIGMA in cooperation with the European Commission, define the requirements for a public administration under these dimensions. In short, in addition to a professional and depoliticized civil service, a well-functioning public administration, able to deliver services to citizens and business, requires a robust policy planning system, inclusive and evidence-based procedures for policy and legislative development, clear accountability arrangements among institutions and between institutions and citizens, and a sound public financial management system. The 2015 OECD/SIGMA gap assessments on the PAR core dimensions inform the PAR and PFM strategies and action plans in Enlargement countries. They are regularly repeated for follow up.
The PAR principles support the PFM and budget oversight and transparency eligibility criteria under budget support. In addition, PAR provides a robust basis for the eligibility criterion on relevant and credible sector policy.
The horizontal PAR efforts reflect all sectors for example as follows:
Baseline assessments
Weaknesses in administrative capacity, organisational structures and procedures at sector level are usually symptoms of systematic weaknesses in the country’s administration. Consequently, the SIGMA baselines assessments should be factored into the design of the budget support operations.
Policy development and coordination a:
Most PAR strategies envisage the improvement of the country’s overall policy planning system. The country is expected to establish and co-ordinate the system for sector strategies, and to guide their development with a view of ensuring coherence and quality control. In order to avoid undermining the country requirements, the sector strategies supported under budgets support must have been prepared in line with the formal country requirements,
PAR strategies typically aim for improved financial planning. The country is expected to set requirements for costing of sector strategies and to control their implementation, allowing to programme the costs into the medium-term budgetary frameworks. Budget support design should verify that costing of the strategy follows the established country requirements.
PAR strategies also support robust monitoring and evaluation systems for key planning documents and sector strategies, moving from reporting on basic outputs to analysing the outcomes of the government’s work. The annual sector progress reports (also the basis for assessing satisfactory progress under budget support) should reflect this general PAR goal.
The Principles of Public Administration advocate an inclusive and evidence-based approach to policy and legislative development. This is in line with the EU Better Regulation agenda, which is promoted by the EU and expected from the Member States, when transposing acquis. Therefore, the draft sector strategy and legislation produced under it should be subject to public consultations in the right time of the process. The legislation should be based on evidence (fiscal and regulatory impact assessments).
Public service and human resources management
Professionalisation of the civil service, merit-based recruitments, promotions and dismissals, and quality standards in management of human resources are typically part of the PAR strategies, along with the transparent salary systems. Human resources and capacity-building measures under budget support should be aligned with the overall training and capacity-building by the ministries responsible for the management of civil service.
Accountability of administration
In order to avoid further politicization and fragmentation, of accountability arrangements under the state administration, it is important to ensure that any new state bodies that might be created in the context of budget support have clearly defined accountability lines towards the relevant ministries (demonstrated through regular supervision and reporting). Steering and controlling of these bodies should be normally assigned to sector ministries. They should be subject to the court and public scrutiny. As a rule, creation of policy development functions outside ministries should be avoided together with the establishment of new public administration organisations, unless supported by legal requirements or wide EU Member State practice in the sector.
Service delivery (to citizens and businesses)
To ensure legal certainty for citizens and businesses, and to avoid corruption, service delivery should be regulated by a legal framework on administrative procedures, with special administrative procedure rules limited to a minimum in sector laws. The budget support operations should be compliant with this general principle.
Budget support often supports development of e-services and IT systems, which must be consistent with national ICT strategies or ICT investment programmes. In order to ensure sustainability development of registries, databases, management information systems and other IT systems must respect the national standards for interoperability. Also, in order to ensure accessibility of IT systems for general public, a designated supervisory authority should be overseeing the implementation of the legislation on public information with the power to set standards, make prescriptions and impose sanctions.

6. Contract components Budget Support Programme
Other action with links to BS operation
Fixed tranches
General eligibility criteria
Variable Tranches
Variable tranche indicators
Complementary assistance
Capacity Development
Support to CSOs, anti-corruption bodies, watchdog orgs.
Other national programmes
CSO support
Regional programmes
Other DGs' programmes
Communication & visibility

7. Introducing BS in the Enlargement context
1st programme in 2014, fundamentals first
Albania, Serbia, Montenegro, Kosovo
Still far from the ENI: in Morocco the open balance is more than € 900 million

8. IPA II MTR – preliminary findings
Efficiency gains and direct results yet to materialise
Major indirect effects of the instrument
meeting the eligibility criteria has pushed significant administrative and/ or legislative changes such as a credible PFM reform programme.
a greater results-orientation in programmes
closer strategic alignment between national and IPA strategies.
programmed via a rigorous process contributing to focussed and robust foundation for the delivery of IPA assistance, aligned with national budgets and other donor inputs
IPA II MTR is under public consultation at the moment
The eligibility criteria linked to BS have pushed the IPA countries to introduce changes in important areas such as public financial management.
The content of the sector budget support programmes which have been approved or are under examination so far can certainly be considered as contributing to the accession requirements, in parallel to the restructuring and development of the given specific sectors. In general, the National Authorities in the Western Balkans are satisfied with budget support, because they have full control/ responsibility on its implementation.

9. IPA II MTR – preliminary findings
BS is triggering improved dialogue:
more inclusive dialogue structures,
more informed policy dialogue between the stakeholders
between the EC and IPA beneficiary countries, and among IPA country institutions involved in BS delivery
BS has prompted improvements in the M/E systems in the sectors where BS is provided - preparation of sector progress reports by the government demonstrates increasing capacity & serves as a tool for accountability and transparency.
Communication:
Where BS is being established, the quality of policy dialogue is likely to increase compared to the time before the introduction of this instrument (e.g. in Serbia).
BS has been a catalyst for improved policy dialogue within IPA country institutions dealing with its preparation and delivery (e.g. between Ministry of Finance/Treasury and SLIs responsible for the Sector Reform Contracts), but also between the EC and the national stakeholders, as effective cooperation and communication is a requirement already during the planning phase.
Budget support programmes have incorporated efforts for improving the M&E systems in the sectors where budget support is provided. In the main, however, in many countries, there are few if any other elements of a sector monitoring system in place to allow such monitoring to happen in practice

10. Considerations Policy costing and financing
Mainstreaming cross cutting issues
Reporting
Policy & political dialogue
Communication and visibility
Budget support is a means, not the end
Bringing PAR to sector level
Design: maturity and scope of the programmes
Timeliness of TA
Budget support is the means, not the end: avoid BS related structures, reports, etc. the focus needs to be on how anything new that is introduces is benefitting the country
Design: maturity of the programmes has been excellent this year, makes a whole difference for the negotiating the programme and preparing for the implementation:
Timeliness of TA: improving, but needs constant attention
Policy costing and financing: improvements still required
Mainstreaming cross cutting issues: environment forgotten
Bringing PAR to sector level: understanding the implications of PAR at sector level (e.g. rightsizing, HR, M/E)
Reporting: SIGMA has helped the M/E systems in PAR and to some extent the PFM. They can also help with the country wide systems, AT THE REQUEST OF THE COUNTRIES
Alignment of policy & political dialogue
Communication and visibility ?