# Presentation: 094749

## General Budget Support: A New Approach from Other Donors?

**Speakers: Joe Lieberson, Diane Ray, and Brian Frantz**Tuesday, July 27, 2004

- Welcome to _**Session 5!**_

##    General Budget Support: A New Approach from Other Donors?

**Tuesday, July 27, 2004**
**Session Organizer: Joe Lieberson,**** ****PPC, USAID**
**Speakers:****	**
**Joe Leiberson****, PPC, USAID**
**Diane Ray, ****Development Information Services, USAID**
**Brian Frantz, ****AFR, USAID**
**Questions and Discussion **
**Closing **
**Fill out your evaluations!!**

## When is General Budget Support the Most Appropriate Way to Support Development? MOZAMBIQUE, MALAWI, TANZANIACOUNTRY CASE STUDIES

**SUMMER SEMINAR**
**July 27, 2004**
**Joseph Lieberson, USAID Evaluation Office**
**Diane Ray, USAID Development Information Services**
**Brian Frantz, USAID Africa Bureau**

**Notes:**
What is this

## WHAT IS GENERAL BUDGET SUPPORT (GBS)?

**Donors usually fund development projects and manage project implementation.**
**Under General Budget Support (GBS), rather than doing projects, donors provide aid funds to support the government’s budget.  Donor funds are not earmarked for specific purposes.**
**  **
**The government spends GBS funds on its own development programs using its own allocation, procurement, and accounting systems. **
**Under GBS, conditionality focuses on improving government planning, management and the effectiveness of the overall budget process.  **

## ARGUMENTS IN FAVOR OF GBS

**If a donor runs an aid program, it belongs to the donor and that may explain why so many donor projects are not sustained. **
**By moving from donor projects to GBS, LDC governments will do a better job of reducing poverty.**
**If an LDC government is responsible for the program it will identify the most critical problems and make sure they are solved.**
**GBS is less costly for donors since they don’t have to manage projects and less costly for the LDC since it doesn’t have to deal with 20 different donors, each with its own reporting and financial requirements.**

## GENERAL BUDGET SUPPORT (GBS) IS BEINGHAILED AS A GOOD WAY TO DELIVER DEVELOPMENT ASSISTANCE

**GBS has it strengths and weaknesses.   Success depends on individual country conditions and how they fit with the benefits and drawbacks of GBS.**
**The key is to determine which country**** ****conditions are needed for GBS to be successful. **

## The GBS Field Studies

**Today we’ll look at three countries where we have completed evaluations:  Malawi, where GBS has not been successful; and Mozambique and Tanzania which have had some success.**
**There are two alternative ways of assessing GBS:**
**What minimum country conditions are necessary before donors can consider GBS? That was the approach for the Mozambique and Malawi Studies.**
**Has GBS led to the successes claimed for it and are country capabilities improving?  That was the approach for the Tanzania Study.**

## IN OCTOBER 2003 USAID DID FIELD ANALYSIS OF GBS IN MOZAMBIQUE 

**Mozambique has had success with General Budget Support and some problems.  **
**The following slides look at the country conditions necessary for GBS successes.**
**They state the issues, then the findings and finally the lessons from Mozambique and what they mean for other country programs.**

## SERIOUS and SOUND MULTIYEAR GOVERNMENT PLANNING 

**Donors give Mozambique high marks for its Vision 2025 long-range plan and its medium-term poverty reduction plan (PARPA).  **
**The plans identify key problems, the causes of poverty, and an effective poverty reduction approach.  **
**LESSONS**
**A government must have a well-designed, analytically sound plan and an appropriate policy framework to promote equitable growth.**
**  **
**Must identify which services the government can realistically provide and those that can be delivered more effectively by the private sector or NGOs.**

## COUNTRY OWNERSHIP

**Mozambique’s government has a sound poverty reduction plan and is fully involved and responsible for policy and budget decisions.  It works closely with donors and NGOs.  IT OWNS THE DEVELOPMENT PROCESS.**
**	****LESSONS**
**In many LDCs, government is very cooperative.  It asks, “What do your donors want to do, how much money will we get, where do we sign, and let us know when you have completed the development program.” The donor is in charge of doing development, not the country.   **
**Development succeeds only if government is a committed and active leader of the policy and budget process.**

## GOVERNMENT TECHNICAL AND MANAGEMENT CAPABILITIES

**While Mozambique’s planning capabilities are good, its technical, financial, and management capabilities are weak.  Most donors are not ready to shift a major portion of their programs to GBS.**
**LESSON**
**It is risky to provide GBS funds when ****	****government capacity is lacking.  Skilled personnel must be in place to plan and implement a development program.  Otherwise programs will fail.**

## LONGER TERM PLANNING IS REFLECTED IN ACTUAL EXPENDITURES

**Mozambique has a well-designed development plan and medium-term expenditure framework.**
**But a plan is only as good as its results.  **
**Mozambique’s annual budgets are not directly related to policy planning objectives.**
**LESSONS**
**Annual technical ministry expenditures should reflect longer-term plans.**
**Otherwise, GBS will not have the hoped-for impact.**

## ACCOUNTABILITY

**A country needs credibility with donors **_**and**_** citizens.**
**Accounting records and audits weak to non-existent in Mozambique.**
**Financial discipline and sound budget execution lacking.  **
**Plans for decentralization will put even more strain on the system.**
**LESSONS**
**A government’s financial and accounting systems must ensure that funds are spent effectively.**
**Donors need to undertake fiduciary risk assessments to identify problems.**
**Accountability is an essential condition that must be met before GBS can be effective.**

## RESULTS

**To assure that GBS is the most effective way to reduce poverty, country must measure development performance.**
**Mozambique’s  Performance Assessment Framework includes performance indicators and expected outcomes for each sector over 5 years. **
**Some targets are overly ambitious but on balance it is a good results measurement system.**
**LESSON**
**The linkage between GBS and poverty reduction needs to be demonstrated.  GBS requires sound performance monitoring and measurement of  economic and social changes.**

## DISBURSEMENT PREDICTABILITY

**Project aid tends to be irregular and subject to unilateral decisions by donors.**
**In contrast, GBS funds should be provided in regular disbursements each year, every year.**
**However, in Q1 2003, GBS donor funds were delayed (donor policy concerns and government failed to provide needed data). Government shut down.**
**  **
**LESSONS**
**GBS disbursements may not be predictable.**
**If the government is to implement well-ordered programs, donors need to provide their promised GBS financing on time.  **
**By the same token, the government must meet its financial and policy commitments.**

## CORRUPTION...

**Corruption has severely damaged Mozambique’s financial sector.**** **
**Petty corruption is pervasive.   **** **
**In Mozambique the press, parliament, and civil society are no match for a government that allows corruption to grow rapidly.**

## CORRUPTION REDUCED (cont.)

**LESSONS**
**Petty corruption is a capricious and regressive tax on the poor.**
**The bigger danger, based on experience in other countries, is that corruption starts small but tends to increase until it creates serious economic distortions and destroys respect for the government.**
**GBS cash transfers are at high risk in such an environment and may not be effective.  Donors may want to avoid such situations.**

## COMPETITIVENESS

**Mozambique has inappropriate labor, company, and trade regulations.**
**Instead of trying to regulate markets, the government should be cutting red tape and controls.**
**The present system encourages corruption and reduces incentives to invest and export. **
** **
**LESSONS**
**GBS is ill suited to deal with these microeconomic and management problems.**
**Bilateral donor technical assistance projects and policy reform programs may be the best way to address these problems.**

## LESSONS FROM MALAWI—BASED ON A MARCH 2004 FIELD EVALUATION

- Diane Ray

## LESSONS FROM MALAWI—BASED ON A MARCH 2004 FIELD EVALUATION 

- Country conditions make it difficult to do GBS.
- Over the last two years there have been almost no donor GBS disbursements.

## MACROECONOMIC AND SECTOR POLICY REFORMS

**Malawi has sound development strategies and a good PRSP but is making little development progress.**** **
**The problem seems to be a lack of commitment and will at the top levels of the government.**
**Monetary and fiscal policies are out of control.  Government debt, interest rates, inflation and public expenditures increasing at an unsustainable pace.**
**There is a disconnect between policy and the annual budget.  It is difficult to see if development priorities are being implemented.  Donor budget support makes little sense in such a situation.**

## BUDGET DISCIPLINE AND SOUND FINANCIAL SYSTEMS

**If a donor is going to support a country’s budget, the country must have an effective budget system.  Budget transparency, execution and accounting are extremely weak in Malawi.**
**Government financial systems must assure that funds are spent for their intended purposes.  Donors find it difficult to provide budget support when they are not sure how the money will be spent.**

## BUDGET DISCIPLINE AND SOUND FINANCIAL SYSTEMS (cont.)

**Over the years in Malawi, many donor-supported financial and accounting systems have been launched with few results so far.**
**Governance reforms are needed to improve service delivery and accountability.**
**Efforts are needed to encourage domestic oversight from parliament, NGOs, media and civil society.**

## GOVERNMENT MANAGES AND OWNS THE DEVELOPMENT PROCESS

**Compared to other low-income countries, Malawi’s senior managers are well trained and highly skilled.**
**Mid- and lower-level lack skills. This is compounded by high HIV/AIDS rates (15% of adults).**
**Donors need to provide high levels of technical assistance and training.**
**Effective HIV/AIDS programs may be as important as skills training.**

## GOVERNMENT MANAGES AND OWNS THE DEVELOPMENT PROCESS (cont.)

**Corruption at the highest political levels is a rapidly growing problem.**
**When senior government officials abuse the system for personal gain, it is difficult for donors to justify aid.  Budget support cash transfers are high risk.**
**Policy reforms must have government ownership. In Malawi, USAID encouraged the Dept. of Environmental Affairs to manage the adoption of reforms.**
**Where there are skilled personnel and low levels of corruption, donors should encourage country ownership of the development process.**

## General Budget Support in Tanzania

**Brian Frantz**
- USAID/AFR/DP/POSE
**27 July 2004**

**Notes:**
This paper was prepared at the request of USAID/Tanzania to inform the development of its next Country Strategic Plan.  Since it was not conceived as part of the series of case studies conducted by USAID, the underlying analytical framework is somewhat different.  In fact, I borrowed elements from the USAID approach and the approach being used to guide a broader international effort to evaluate the effectiveness of general budget support (GBS).  I also sought to respond to some questions that were particular to the Tanzania case which the Mission was interested in having answered.  So the approach taken here combines elements of various efforts underway to better understand this issue.

## The Partnership in Tanzania

- PRS, TAS, IMG
- Net ODA over $1.2b in 2002
- Program Assistance increased from $281m in FY02 to $515m in FY04
- GBS (PRBS and PRSC) rose from $231m to $404m over this period
- Trend is to shift toward baskets/GBS
- Donors that do not typically provide GBS are doing so in Tanzania

**Notes:**
Tanzania is considered by many to be a model of donor-Government partnership.  The partnership is centered on the Poverty Reduction Strategy (PRS), and the principles governing the relationship between donors and the Government are set out in the Tanzania Assistance Strategy (TAS).  There are a lot of interesting efforts underway to further strengthen the partnership.  One of the most unique has been the creation of an Independent Monitoring Group (IMG), which every couple of years evaluates whether donors and the Government have adhered to their respective commitments.  This is the most concrete application of the principle of “mutual accountability” that I know of.

As this partnership has solidified, Tanzania has seen net ODA rise from about $990 million in 1999 to over $1.2 billion in 2002.  Program assistance – aid provided as GBS and through sector baskets – has also risen quite substantially.  GBS alone has gone from $231 million in Tanzania’s FY02 to $404 million in FY04.  Most major bilateral donors contribute GBS through the Poverty Reduction Budget Support (PRBS) facility.  The World Bank’s Poverty Reduction Support Credit (PRSC) roughly doubles the amount of assistance available as GBS to the Government.

In general, it seems that donors which have not provided program assistance in the past are shifting toward providing assistance through sector baskets.  Those that have used sector baskets in the past seem to be shifting more toward the use of GBS.  The UK, for example, has rolled its contribution to the health sector basket into GBS and expects to soon channel about 70 percent of its aid through the PRBS facility.  The World Bank will be rolling some of its support to the health sector into the PRSC.  Other donors are considering moving in this direction as well.  What makes Tanzania an interesting case is that a number of donors that do not typically provide GBS are doing so – Canada and Japan contribute to the PRBS, and Germany is co-financing the PRSC.  USAID seems to be the only major donor that has not moved in this direction.

## Policy Dialogue

- Partnership Framework outlines general rules and objectives of GBS
- PAF specifies benchmarks used by donors to make disbursements
- Mid-year and annual reviews of PAF, budget review, annual PER
- Other reforms: LGRP, PFMRP, Poverty Monitoring System, etc.

**Notes:**
A Partnership Framework Memorandum outlines the general objectives of GBS in Tanzania and the rules governing its provision.  It aims “to minimize transaction costs, to harmonize performance benchmarks and dialogue between the parties and to link funding commitments by the donors to achievement of set targets.”  It also seeks to increase the predictability of donor flows to Tanzania. 

Benchmarks against which donors disburse general budget support are specified in a Performance Assessment Framework (PAF).  Importantly, the Partnership Framework does not permit donors to disburse against benchmarks that are not specified in the PAF.  The PAF is basically a list of policy actions and seems to emphasize the development of laws, strategies, plans, and reports. There is some movement toward more outcome-based disbursements.  60 outcome indicators were recently added to the PAF.  The EC has explicitly tied a portion of its GBS to progress on 10 of these indicators.  Donors hope to rely on the annual reviews of the PRS to guide future disbursements, but currently the reviews do not offer the breadth and quality of information donors require to serve this purpose. 

So the PAF is the basic document that underpins the policy dialogue between the Government and donors providing GBS.  Many donors view the access they obtain to the policy dialogue as one of the most important elements of the GBS arrangement.  The PAF is reviewed and updated twice per year by the Government and donors, and there is an annual budget review soon after the Government’s budget is made public.  An annual Public Expenditure Review (PER) has opened up the budget process to many actors beyond the Ministry of Finance – not only to other parts of the Government, but also to research and academic institutions, NGOs, and other elements of civil society.  

All of these processes provide significant space for donors to influence the policies and budget priorities of the Government.  There are a number of reform efforts underway that enter into the policy dialogue.  Some examples include the Local Government Reform Program (LGRP), whose aim is to decentralize service delivery; a Public Financial Management Reform Program (PFMRP), which includes the introduction of an Integrated Financial Management System (IFMS); the development of a Poverty Monitoring System to improve routine data collection; and the development and implementation of a National Anti-Corruption Strategy.  Donor assessments of progress are therefore determined by actions undertaken by many Government actors even if the main interlocutor for donors is the Ministry of Finance.  This raises some questions about the capacity of both the Government and donors to effectively engage in the dialogue that I’ll return to later.

## Public Expenditure Management

- Is public expenditure consistently allocated to PRS priority sectors?
- Are sectoral allocations appropriately divided between central/local levels?
- Are allocations for local level equitably divided among districts?
- Are allocations for local level making their way there?
- Are funds being spent appropriately?

**Notes:**
Public expenditure management is important to donors providing GBS because the budget is considered a tool for poverty reduction.  There are a hierarchy of questions that a donor providing GBS might ask about the Government’s approach to managing public expenditure, though I’m sure I did not cover all of them.

First, is public expenditure consistently allocated to PRS priority sectors?  In Tanzania, real per capita expenditure has increased steadily since the adoption of the PRS.  However, because of increased assistance, the Government has not had to re-prioritize its expenditure toward priority sectors to achieve this.  In fact, spending in priority sectors has not consistently grown faster than expenditure in non-priority sectors, and this was a major issue debated during the 2003 budget review.  In addition, the share of the budget devoted to priority sectors seems to have stagnated or fallen slightly since peaking in FY02.  While this is troubling to some donors, others are content to note that a constant share in the context of a growing overall budget translates into higher absolute levels of expenditure in priority sectors.

Second, are sectoral allocations appropriately divided between the central and local levels?  Since a great deal of service delivery takes place at the local level, it is important to understand the extent to which public resources remain in the capital.  A number of people felt there is a tendency for an inappropriate share of the funds to remain at the central level, but there is some research that suggests Tanzania has already achieved a significant amount of decentralization.  What is clear is that there has not been an effort to cost the responsibilities of the various layers of government to inform what an appropriate central/local mix of public resources might be.

Third, are allocations for the local level equitably divided among local government units?  This is an issue that I did not explore in great depth, but research suggests there is a pro-wealthy and pro-urban bias in allocations to local units.  However, new approaches are being considered for allocating resources among local units that would be more consistent with the generally pro-poor and pro-rural policies set forth in the PRS.

Fourth, are allocations for the local level actually getting there?  A couple of public expenditure tracking surveys (PETSs) have been undertaken in Tanzania.  These showed that considerably less than half of the funds allocated for service delivery stations actually arrived.  Based on the results of the PETSs, a decision was made by the Ministry of Finance to regularly publish the amounts and intended uses of transfers from the center to the local level in the media.  Perhaps because of this, the general view seems to be that things are improving, though quite slowly and certainly not in the dramatic fashion witnessed in Uganda.

Finally, are the funds being spent appropriately when they arrive at the right place?  Just before I arrived in Tanzania, a couple of donors visited several districts to perform a “reality check.”  They found that large shares of the districts’ budgets were spent on cars, copy machines, per diems for travel and training, etc. – in other words, items that may be useful for building the capacity to deliver services but not service delivery itself.

## Capacity Constraints & Corruption

- Capacity constraints - especially financial - and corruption go together
- Is GBS a good instrument to deal with both?
- Are projects less affected by capacity constraints and corruption?
- Are capacity constraints and corruption less prevalent in non-governmental sectors?

**Notes:**
The results from the PETSs and other work suggest that the Government is not fully able to account for how it is spending public resources.  It is difficult to pinpoint how much of this is attributable to the limited ability to apply sound financial management practices and how much is attributable to outright corruption.  But one can probably argue that capacity constraints provide ample space for corruption.  And we know that corruption is a big problem in Tanzania; in fact, it was the main reason Tanzania was not deemed eligible for assistance from the Millennium Challenge Account.

However, a key question is whether the twin weaknesses of capacity constraints and corruption mean the environment in Tanzania is bad for GBS.  Some donors argue that GBS is actually a good instrument for dealing with both.  GBS allows the Government to better utilize its existing capacity and further challenges it to strengthen its capacity to manage resources in ways that are acceptable to donors.  With respect to corruption, a number of donors believe that, by using the Government’s whole financial system, GBS helps donors identify where there are leakages in the system, and the accompanying policy dialogue provides the forum for discussing with the Government ways in which the leakages can be plugged.  The introduction of the IFMS is supposed to alleviate some of the capacity constraints and reduce the scope for corruption.

Another interesting question is whether assistance provided as projects to the Government is less affected by capacity constraints and corruption.  Projects might be able to draw more capable staff, but the question is, “At what cost in terms of sustainability?”  However, with respect to corruption, Cooksey (2002) has convincingly argued that “aid, in the form of project loans in particular, creates many opportunities for patronage, including project location, hiring project staff, training opportunities, procurement and purchases, and consultancy.”  I’ll return to the issue of patronage in Tanzania in a minute.

A related question is whether capacity constraints and corruption are any less prevalent in the non-governmental sectors.  In Tanzania, the short answer seems to be no.  Civil society and the private sector also suffer from these twin weaknesses, and we’ll explore these a little bit in the next slide.

## Democracy & Sustainability

- Has GBS strengthened democracy?
**Capacity constraints within Parliament and civil society to exercise oversight**
**Effect of patronage networks**
- How does GBS reduce the need for future aid?
**Macro stability and private sector development in the PAF**
**Tax effort**

**Notes:**
Some people believe that democracy will be strengthened as an intermediate outcome of GBS.  The idea is that a more open and transparent budget process should provide the Parliament with greater scope for exercising its oversight responsibilities and influencing the budget in accordance with the preferences of its constituencies, leading to better service delivery.  A similar argument could be made about civil society.

In Tanzania, it seems to be generally agreed that this has not happened.  One interpretation might be that Parliament and civil society, like most institutions in Tanzania, simply lack the capacity to play their roles in holding the Government accountable.  An alternative, and more disturbing, interpretation advanced by some scholars is that Parliament and civil society simply are not willing to exercise their proper roles.  According to this view, Tanzania remains fundamentally a one-party state dominated by a complex web of patronage networks that assures the interests of ordinary Tanzanians are marginalized in the pursuit of rent-seeking opportunities.  Cooksey (2003) notes the prevalence in Tanzania of what he calls “straddlers” – people who have a foot (or hand) in different sectors and move rapidly from one to another.  “For example, senior civil servants become politicians, politicians join the private sector, their wives run donor-funded NGOs,” and so on.

How does GBS reduce the need for future aid?  Some people also believe that macroeconomic stability will be maintained and the environment for private sector development will be improved as a result of GBS.  Averaging more than 5 percent over the last 5 years, growth in Tanzania has been very respectable recently.  The issue has been that growth has not resulted in much poverty reduction, which, according to several analysts, requires that certain structural barriers to private sector development be addressed.  Actions related to macroeconomic stability and private sector development are included in the PAF, but this is an area in which the PAF emphasizes the development of laws, strategies, and plans without giving much attention to developing the capacity for enforcement and implementation, as well as the capacity of the private sector itself to respond to an improved business environment.

On the tax effort, I will just mention that Tanzania’s, measured as revenue-to-GDP, is one of the lowest in Africa, leading some donors to argue that aid, and particularly GBS, has dampened the incentives for the Government to further develop its own revenue sources.  Some scholars argue that this discourages governments to remain accountable to its citizens.  But others have noted that a blind focus on raising the revenue-to-GDP ratio can have corrosive consequences on state-society relations if not accompanied by efforts to address the main reasons for poor tax compliance, which often have to do with poor quality of services, corruption, mismanagement, and waste.

## Predictability & Transaction Costs

- Is GBS associated with improved predictability of aid disbursements?
**Donors sanction poor performance with reductions in GBS the next year**
**Donors seek to disburse GBS as early as possible in Tanzania’s FY**
- Has GBS lowered transaction costs?
**Same or higher for both donors and Government**
**But is this really a negative outcome?**

**Notes:**
One of the often-cited objectives of GBS is the improved predictability of donor disbursements even though GBS is arguably more prone to unpredictability than other aid instruments.  This is because it is easier to hold up disbursements of GBS in the face of changing political circumstances when compared with projects.  The Partnership Framework specifies predictability as an important objective of GBS in Tanzania.  In spite of the difficulty in doing so, donors seem to have succeeded thus far as a result of two key strategies.  First, donors endeavor to sanction the Government for poor performance in the current fiscal year with reductions in GBS in the subsequent fiscal year.  They also seek to disburse GBS as early as possible in Tanzania’s fiscal year.  

Another often-cited objective of GBS is the reduction in transaction costs of aid.  This too is specified in the Partnership Framework.  However, most donors seem to think transaction costs have not fallen, neither for the Government nor for donors, and others believe they may have risen, at least in the short term.  On the side of Government, transaction costs have most clearly risen for the Ministry of Finance, whose capacity is being stretched by the de facto responsibilities it has for a number of reform programs throughout the Government that are of interest to GBS donors.  Donors, too, have experienced the challenges associated with engaging in policy dialogue with the Government and each other and monitoring the numerous activities taking place that are expected to translate into the effective use of GBS.  A GBS arrangement requires different skills on the part of donor staff than the skills valued under a primarily project-based mode of aid delivery.

But is this really a bad thing?  One could argue that the Ministry of Finance should be taking more responsibility than it might have in the past for some of the Government-wide reform programs that are underway.  Likewise, if donors are providing assistance as GBS, they should be concerned with the full range of activities that affects whether their input is being used effectively.  While it may still be reasonable to hope for an aggregate reduction in transaction costs associated with a shift away from individual projects toward GBS over the medium term, my feeling is that the discussion of transaction costs needs to be more nuanced.  Greater attention should be given to the distribution of transaction costs in an aid arrangement, and not all transaction costs should be seen as unproductive burdens.

## Conclusions

- Few of the positive intermediate/process results often attributed to GBS are automatic (OPM and ODI, 2002)
**Conscious efforts to include discussion of certain issues in policy dialogue**
**Some postulated results (e.g., predictability) may be more difficult to achieve under GBS**
**Others (e.g., strengthened democracy) are unlikely to result at all**
**Still others (e.g., reduction of transaction costs) may not necessarily be desirable**

**Notes:**
With respect to the intermediate or process results that are often attributed to GBS, I would argue that very few of them are automatic based on the experience in Tanzania.  This is the conclusion reached by OPM and ODI (2002) as well.  Rather, I would argue that most of them resulted from the conscious decisions of donors and the Government to include discussion of certain issues in the policy dialogue.  Some postulated results, such as enhanced predictability, may be even more difficult to achieve under a GBS arrangement and thus require stronger efforts from the parties involved.  Others, such as strengthened democracy, are unlikely to result at all, and still others, such as the reduction of transactions costs (at least as commonly depicted), may not be desirable in the first place.  

## Conclusions (Cont.)

- Non-GBS complementary investments are needed for GBS to deliver impact results
- “Demand side” of service delivery (Pritchett and Woolcock, 2004*)
- Parliamentary, NGO, and citizen oversight; media development (Kaufmann, 2003)
- Capacity building
- *http://www.sciencedirect.com/science/journal/0305750X **http://tinyurl.com/48x4g**

**Notes:**
Discussions of GBS focus a lot of attention on improving accountability, especially accountability between budget allocation authorities and authorities to which public resources are allocated.  GBS limits access to extra-budgetary finance and thus reinforces budget discipline within a recipient government.  But the ultimate objectives to which GBS aspires, often improvements in service delivery, requires that a web of accountability relationships be strengthened – not simply those within a recipient government.  As noted by Pritchett and Woolcock (2004), “the provision of key, discretionary, transaction-intensive services through the public sector is the mother of all institutional and organizational design problems ... Multiple levels of interaction must be addressed simultaneously: between citizens and the government, between government and agencies, between agencies and its employees/contractors (the providers), and between citizens and providers, and public authorities.”  

Historically, recipient governments and donors – for both good and bad reasons – took what Pritchett and Woolcock (2004) describe as the “needs/supply/civil service” approach to service delivery.  That is, “need” is the problem, “supply” is the solution, and the “civil service” is the vehicle for implementation.  But this approach, they argue, has failed massively due to “the lack of feedback mechanisms and modes for engagement of citizens in either controlling the state or directly controlling providers.”  My concern is that the shift toward the use of GBS in Tanzania and possibly elsewhere is reinforcing the needs/supply/civil service approach to service delivery and not taking adequate account of the “demand side” of service delivery.

So what are donors to do?  Kaufmann (2003) has suggested that “focusing more on parliamentary, NGO, and citizen oversight is crucial, as is the transparent use of new tools such as citizen scorecards; diagnostics based on survey reports from public officials, public-service users, and firms; and tools to track public expenditures in detail ... Where it has not been captured by monopolistic state’s or elite’s vested interests, the media can play a key role in pro-transparency governance reforms.”  The effectiveness of service delivery will depend to a great extent on these various actors being able to play their appropriate roles in holding the Government accountable, disseminating accurate information to citizens, engaging in informed policy debate, and contributing to a growing economy.  GBS offers little assistance to these entities for strengthening their capacities for this.

In addition, it is likely that there are limits to the capacity building effects of GBS within the Government.  For example, GBS requires that line ministries develop greater technical capacity to more effectively make their cases to the Ministry of Finance for budget allocations since they lose access to extra-budgetary finance.  Technical assistance can help in this regard.  Even when it comes to improving public expenditure management – perhaps the most automatic benefit arising from providing assistance as general budget support – technical assistance is often needed.  Some practitioners have suggested that technical assistance might be more effective if it is provided by donors which themselves do not provide budget support.  This would prevent governments from believing that budget support is conditioned upon the adoption of the recommendations provided through the technical assistance.

The main point I want to make is not that GBS is an inappropriate instrument for aid delivery, but rather that it requires various forms of complementary investments to deliver the kinds of benefits to which it aspires.

## For More Information...

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## HIV/AIDS: Mitigating the Impacts on Development and Complex Emergencies

**Session Organizer: ****Anne Ralte, ****PPC **Tuesday, August 3, 2004

- Be at the CAL Conference Room next week for _**Session 6!**_