1. Putting the new aid agenda to work Asia Programme Managers Meeting Delhi, May 22 nd 2002

2. 2 Quick Recap (1) Asia poverty reduction strategy processes are different – not necessarily a PRS maybe state rather than federal level different views on role of state large/entrenched private sector welfarist vs. dev. concepts of poverty capacity is available civil society generally more organised

3. 3 A new opportunity to influence pro-poor change? Not if political commitment remains weak – process conditionality unlikely to be any different, project/sector support still important An entry point for DFID to support more strategic thinking, pro-poor dialogue & changes in donor behaviour Pro-poor political change is complex & does not come from ‘outside’ Recap (2)

4. 4 Recap (3) Challenges/dilemmas What makes for a quality prs process? What’s the bottom line? Is there a shared Asian perspective? Is a ‘sound’ prs one backed by an MTEF? Should DFID support national/subnational govts without such a strategy? What about China? India? MICs? Need to establish some ground rules for working with more effectively with IFIs, RDBs (& Japan) Need an HQ policy that is evidenced-based, able to address the VFM question

5. 5 PRSPs & Aid instruments Support country leadership/ownership by working to strengthen Govt. systems and processes: A move away from parallel/off-budget projects Shift towards joint funding of: Sector programmes General budget Jointly agreed indicators, common performance assessment & monitoring systems (building on national systems) Harmonised rules/procedures for disbursement, accountability & risk assessment

6. 6 Types of project/sector support - on-budget, linked with PRS framework, performance-monitoring Balance between conditionality, earmarking, accountability requirements Capacity support/non-financial assistance Working with other donors and with non-government entities Implications

7. 7 Issues in selecting aid instruments Presence of a national commitment to poverty reduction (presence of a prs/MTEF?) Quality of PEM & PFM, integrity of accounting & audit arrangements, off-budget exps., quality of indicators for performance monitoring/ expenditure tracking? Reform record on macro & structural Risk vs. reward

8. 8 IFI Instruments PRGF – ‘Key Features’ : supporting PRS policy fw. Performance criteria/benchmarks streamlined & linked to PRS policy commitments. Importance of PSIA. PRSC – programmatic adj. credit, ex post performance assessment, annual tranches within medium term framework set by PRS. Due diligence tests – CFAA, CPA, SSR, PSIA. Issues – Ambitious reform agenda, need to build on sectoral processes, ‘champions’ within Govt, annual tranching (reporting) vs.medium term perspective. Dangers – ‘donors ganging up’, eggs in one basket

9. 9 Budget Support – Risks/Safeguards Risk of not achieving stated objectives because of: only rhetorical commitment to poverty reduction other reform measures not taken or macro deteriorates corruption Ways of assessing/mitigating risk Presence of PRS backed by signs of pro-poor allocations/spend CFAA, PER, CPA & other diagnostic tools Safeguards - capacity support to budgeting & auditing, independent financial tracking, financial accountability conditions, expenditure/ sector earmarking Media/NGO scrutiny

10. 10 Case study - Tanzania Shift to budget support based on: Macro stability largely achieved PRSP in place Increasing poverty focus of Govt. spending Commitment to improving Govt. systems Features of budget support: Common mech. (9 other donors), common performance assessment linked to PRSP Safeguards: CFAA complete, TA support to Govt. systems & poverty monitoring

11. 11 Tanzania Risks PRSP implementation off track PFM/PSR reforms ineffective Joint donor support collapses Complementary measures ‘Strategic’ project support for pro-poor growth; public accountability from below (CSOs) Continued SWAP engagement in PRS priority sectors Influencing through analytical support, aid coordination.