1. Session 1 UK Department of International Development

2. A brief history Established in 1997 following New Labour election a Cabinet position (with Clare Short as Minister): i.e., made independent of the FCO 2 White Papers (1997 and 2000): –Eliminating world poverty: a challenge for the 21st century –Eliminating world poverty: making globalisation work for the poor IDTs to MDGs Translating these into operational goals: MDGs-PSA-SDA-CAP/ISP Target Strategy Papers: poverty, women, human rights, health, UPE, water, urban areas, governance, HIV

3. Three strategic shifts: From aid to development from agency to department from administration to development

4. Session 2 DFID in operation - strategies, approaches and instruments

5. At a global level attempts to influence other actors (OECD, UN, World Bank with regard to: –poverty reduction as focus of development and aid; –aid volume; –debt relief; –restrictive trade arrangements / market access; –donor practice (lighter / harmonised procedures, untying aid, from projects to programmes)

6. At a country level: Country ownership (NB not just Government) Moving upstream: from projects to programmes, sectors, and country strategies Focus on policy and public expenditure management (PEM) for poverty reduction Participation: both to inform policy-making, and for accountability

7. At country level: why? Critiques of aid effectiveness –failure of SAP and conditionality; critical role for national ownership, process conditionality –Limits to a project-based approach to aid Changing opportunities: end of Cold War, election of new UK government in 1997

8. At country level: what? Depends (or should depend) on country circumstances - particularly the policy environment Since 1999, a broad move among donors to use PRSPs as overall framework for agreed policies Thus a choice of financial aid instruments (from projects to general budget support), depending on macroeconomic situation, PEM system, Government capacity, etc. Plus of course TA and commodity aid: not used by DFID, but by some other donors (e.g. USAID)

9. Types of financial aid instruments

10. Choice of financial aid instruments Depends on: –level of agreement on priorities and policies (PRSP and PEM, SWAPs); –impact / net benefit - donor co-ordination costs, aid efficiency, policy influence –capacity of Government (various levels) to plan, execute and account for public expenditure (see decision tree in handout)

11. The usual starting point: what donors look for in PEM integration of recurrent/development outcome oriented prioritisation integration of planning and finance fiscal discipline enforced by MoF strengthening links to policy making process) …all usually captured in an MTEF

12. Session 3 Sector approaches

13. Outline of this session What do we mean by a SWAp or sectoral policy process? What is the rationale for such an approach? When and where are sectoral approaches appropriate? How do sectoral approaches fit with other reform processes or instruments?

14. What do we mean by a SWAp, or sectoral approach? The defining characteristics of a SWAP are that –all significant public funding for the sector supports a single sector policy and expenditure programme, –under Government leadership, –adopting common approaches across the sector, –and progressing towards relying on Government procedures to disburse and account for all public expenditure, however funded. The working definition focuses on the intended direction of change rather than just the current attainment. (Foster and Mackinosh-Walker 2001)

15. The rationale for a sectoral approach Part of a general trend: donors recognised drawbacks of project approach, and the importance of Government policy and financial systems A SWAp is, in other words, an attempt to link: –improved Government sector policy and sectoral PEM, seen as crucial for improved development outcomes and –more intelligent donor support, with more coordination, under Government leadership, so less transaction costs - and possibly greater total donor funding too

16. When is a sectoral approach appropriate? Public expenditure is a major feature of the sector Donor contributions to the sector are large enough to give rise to co- ordination problems Basic agreement exists between Government and donors re: sector strategy There is a supportive macro and budget environment –i.e. sector decisions can be made with reasonable confidence that budgeted resources will be available Supportive institutional arrangements –i.e. sector policy falls under the purview of a single line Ministry, and a manageable number of donors Government and donor incentives are compatible with SWAp-type changes

17. Basic elements of a sector approach Sectoral situation analysis - incorporating links to poverty Agreement on sector priorities, and on role of public policy and public expenditure in relation to other sector actors sector strategy and sectoral expenditure planning - participation; policy / budget consistency building sector management structures: building capacity, avoiding PMUs setting sector targets and agreeing M&E arrangements establishing financial accountability, procedures, donor funding modalities agreeing joint annual sector review arrangements: mutual accountability rather than conditionality

18. How does a sectoral approach relate to other reforms / instruments? There are limits to achievements possible with policy / PEM improvements within a single sector. A SWAp should fit with whole-of-Government initiatives (a national poverty strategy, public expenditure reforms, and public administration reform) In practice, these separate initiatives may fail to mesh, and can work against each other - especially if different donors involved in each

19. Summary of lessons of experience Ownership, partnership and conditionality –SWAps not universally appropriate –needs broad and high-level Government commitment to a strategy donors can broadly support. Requires hard choices (MTEF helps). –Takes time; incremental rather than revolutionary improvement. Sector management structures

20. Questions for discussion At what scale (Federal or Provincial) should a sectoral approach be planned in Pakistan? What are the advantages and drawbacks of each? How do sectoral approaches relate to public administration policies, PRSP, etc.? What would be the potential gains from moving towards a sectoral approach? What would be the potential costs? What are the obstacles?