New directions in the quality of aid debate: Implications for support to Public Financial Management

Stephen Groff Deputy Director Development Co-operation Directorate

Outline
I.The Aid Quality Agenda and Commitments II.Assessing Progress III.Paris Declaration Commitments on PFM IV.New Actors and New Themes V.High Level Forum on Aid Effectiveness: Implications for the future Aid Quality Agenda

Change ….? Why Change?

It’s about making aid work better where it is needed
3

A Day in the Life of…

Source; Don De Savigny & COHRED

Ministry of Health: Kenya

C

o m

m

o d i t

Kinzett (2004)

C

o m m o d i t y T y p e

( c o l o u r

C o c o d e d ) c e p R

The Aid Quality Journey…
Istanbul principles on CSO effectiveness Dili Declaration on Fragile States Accra Action Agenda Paris Declaration Rome on Aid Declaration Effectivenes on s Harmonisati on 2003 2005

HLF-4

29 Nov – 1Dec 2011

Busan

HLF-3 HLF-2 HLF-1

Bogota Declaration on SSC

Monterrey Consensus

2002

2008

2010

2011

The Paris Declaration
“ pyramid ”

§Unprecedented consensus; §

Paris Declaration : what makes it different?

§56 action-oriented commitments §

for both Donors and Partners countries; §Built-in mechanism for monitoring progress at country and global levels (12 Indicators); and §Targets set for 2010 monitored in 3 separate surveys (20052011).

Outline
I. The Aid Quality Agenda and Commitments II.Assessing Progress III.Paris Declaration Commitments on PFM IV.New Actors and New Themes V.High Level Forum on Aid Effectiveness: Implications for the future Aid Quality Agenda

Progress on track 2005-2008
36 %

1 2

Operational De Strategies
88 %

59 %

Reliable Public Management S

Targets requiring efforts but within reach (2005-2008))
36% 49% 59%

1 2

45%

Operational D Strategies
1483 88%

Reliable Public Management

Targets requiring very special efforts (20052008))
22% 36% 49% 59%

1 2

43% 42%

45%

Operational De Strategies
1483 88%

42% (slippage) 20% 44% 9%

22% (No progress)

Reliable Public F Management Sy

Outline
I. The Aid Quality Agenda and Commitments II.Assessing Progress III.Paris Declaration Commitments on PFM: Key Messages IV.New Actors and New Themes V.High Level Forum on Aid Effectiveness: Implications for the future Aid Quality Agenda

Total donor PFM support, 1995-2008

Evaluation of Donor Support to PFM Reform in Developing Countries, ODI, 2010

Paris Declaration and PFM

DONORS committed to:

ü Provide reliable commitments of aid over a multi-year framework ü Disburse aid in a timely and predictable way ü Rely on transparent partner government budget and accounting mechanisms ü Adopt harmonised performance assessment frameworks

PARTNER COUNTRIES committed to:

ü Publish timely, transparent and reliable reporting on budget execution ü Ensure that national systems are effective, accountable, and transparent ü Take leadership of the public financial management reform process ü Mobilise domestic resources, strengthen fiscal sustainability ü Create an enabling environment for public and private investments

Evidence on PFM: Mixed
24 % 36 % 49 % 59 %

1 2

45 % 43 %

45 %

Operational De Strategies
1483 88 %

47 % 21 % 44 % 9%

Reliable Public

26 %

ACCRA AGENDA FOR ACTION: Commitments on PFM (2008)

DONORS will: – Use country systems [including PFM systems] as the first option in the public sector. – Be transparent when they don’t use them. – Support country-led reform programmes. – Develop corporate plans for using country systems. – Channel 50% (or more) of government-to-government aid through country fiduciary systems (i.e. PFM + Procurement)

PARTNERS will: lead in defining reform programmes. Strengthen their budget planning processes Facilitate parliamentary oversight including through more transparency in PFM

PARTNERS & DONORS will jointly assess quality of country systems.

What are the different components of the PFM system that aid can “use”?

Source: Mokoro (2010)

§

Challenges in Implementation Many factors lead to donors bypassing
country PFM systems
• Emphasis on fiduciary risk • Developmental risk of not using country systems

§ Varying perceptions of risk

§ Incentives and capacities in donor organisations § Political constraints: visibility, traceability... § Quality of partner country systems § Shifting transaction costs from partner government to donor

Some common myths
§ Using country systems means providing budget support • Not necessarily: all aid modalities can make use of country systems § An “all or nothing” approach? • Different components of country systems can be used § Pooled funds are a move towards use of national systems • They might be, but this is more about harmonisation § Technical co-operation cannot make use of country systems

Working Party on Aid Effectiveness support to PFM
§ Assessing progress (Quality and Use of PFM Systems) § Global Partnership on Country Systems
• Dedicated Task Forces on PFM and Procurement • Identifying and disseminating good practice • Developing and supporting common tools (e.g. procurement assessment)

§ Country Level Work
• Lending political support, monitoring, sharing experiences

Outline
I. The Aid Quality Agenda and Commitments II.Assessing Progress III.Paris Declaration Commitments on PFM IV.New Actors and New Themes V.High Level Forum on Aid Effectiveness: Implications for the future Aid Quality Agenda

Broadening the Partnership
§ Shaping the global development architecture – i.e. G20 Development Consensus § G20 discourse (June 2010) on the need for greater transparency, accountability and institutional governance including use of country systems § Development actors beyond the DAC: • Non-traditional providers of development assistance (i.e. Middle Income Countries, Emerging Economies, Arab donors etc) • Civil society organisations • For-profit private sector and foundations § Bridging the divide: DAC Statement on “New Partnerships”, Bogota Statement on South South Cooperation

Objectives of Broadening the Partnership
§ Finding convergence and common ground § Share lessons on economic growth, poverty reduction and development co-operation § Mutual interest in achieving results while respecting diverse ways to reach them § Interest in improving all forms of co-operation through inclusive dialogue, mutual learning and knowledge-sharing § Recall the enduring relevance of the Paris principles for developing countries (fragile states, MICs, LDCs)

New Themes
§ Climate Change Financing
• Avoid pitfalls of complex funding channels

§ Public Private Partnerships
• Strengthening regulatory and financial environments • Risk Management

§ Innovative Financing Mechanisms
• Additionality • Predictability

§ Aid as Catalyst towards more Effective

Outline
I. The Aid Quality Agenda and Commitments II.Assessing Progress III.Paris Declaration Commitments on PFM IV.New Actors and New Themes V.High Level Forum on Aid Effectiveness: Implications for the future Aid Quality Agenda

Where are we now?
Dili Declaration on fragile states ( 2010 )

Monterrey Consensus ( 2002 )

Rome HLF on Harmonisati on ( 2003 )

Paris Declaration on Aid Effectivene ss ( 2005 )

Accra Agenda for Action ( 2008 ) Bogota Statemen t on SSC ( 2010 )

Korea HLF ( 29 Nov . – 1 Dec . 2011 )

27

4th High Level Forum on Aid Effectiveness: A Unique Opportunity Forging a new consensus on aid and
development?
• Chance to reinvigorate the global commitment towards the MDGs; • Refresh and reaffirm Paris / Accra principles; • Recognise the role of aid as contributor and catalyst for development results and effectiveness; • Improve the quality of partnerships through embracing partner country leadership, diversity and mutual respect; • Seek convergence based on

Who? Where? When?
§ A political event that attracts ministerial attendance, with decisive outcomes § Busan, Korea. Host: Government of Korea § 29 November to 1 December 2011. §

HLF-4- Main Objectives
§ Stocktaking from the Paris / Accra process § Agreeing on features of high quality aid and its monitoring framework towards 2015 § Situating aid in its broader development context:
• More actors, development finance effectiveness • Diversified approach: MICs, LICs, FS,

Emerging Areas for Political Outcomes
qResults and transparency for better accountability qOwnership and Leadership qEffective States and Alignment (Country Systems) qDiversity at country level – fragile states, middle income countries, LDCs qClimate Change Financing qRecognise all forms of partnerships (SSC, PPPs…)

Key milestones in 2011
Working Party on Aid Effectiveness Meetings and Key Events HLF4 Evidence Country Systems

Q1

Themes for Busan Deadline: January Preliminary Menu of Options WP-EFF EXCOM (9-10 March) DAC SLM (6-7 April) WB/IMF Spring Meeting (16-17 April)

§
Q2

§ § § § § § §

WP-EFF co-chairs First Narrative Outline for Outcome Document (comments by 3 April) 1st draft outcome document

Q3 Q4

WP-EFF + ExCOM (7-9 July)

Monitoring Survey : country level data collection Evidence for “Progress Since Paris” Deadlines: 31 March Evaluation : Synthesis report (April 2011) Monitoring Survey: preliminary results 1st draft Progress since Paris (July 2011)

Task Force on Procurement ( May ) Task Force on PFM ( 6 - 7 June ) Global Partnership on Country Systems ( 9 - 10 June )

2nd draft outcome document

WP-EFF + ExCOM (5-7 Oct)

Report finalisation (September 2011)

TBC: Meeting on Effective States (Paris, October)

4 th High Level Forum on Aid Effectiveness 29 November – 1st December , Busan , Korea

www.oecd.org/dac/effectivenes WWW.BUSANHLF4.ORG

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