General Budget Support - Essay Example

General Budget Support Name of the Student: Name of the Instructor: Name of the course: Code of the course: Submission date: Projects are a discredited mode of delivering development assistance. Critically assess the validity of this statement in the context of arguments that a greater proportion of development assistance should be delivered through General Budget Support. Introduction It is an apparent fact that growth in the developing economies is extensively dependent on their individual economic policies. This finding has been fortified by a wide alley of scholars based on the fact that foreign aid has been perceived not to achieve its projected target of elevating the growth rate in the typical poor countries (Burnside & Dollar, 200, p. 847). Perhaps the failure of these foreign aid interventions can be attributed to the project-based model of delivering development assistance in different countries which has been widely used in the past. This has culminated to a paradigm shift which has seen increased attention to the general budget support. This fact is epitomized by the African Development Bank (ADB) which uses policy based operations (PBOs). The PBOs exhibit great reliance on the country mechanisms and processes in the national budget. This is done while supporting the country-owned initiatives geared towards poverty reduction and improvement of service delivery and at the same time promoting institutional reforms and policy. Thus, these PBOs assist in meeting the commitments of the ADB group under the Paris declaration on Aid Effectiveness as well as the Accra agenda for Action in asserting country ownership while at the same time aligning the operations of the bank with the national processes of development (African Development Fund, 2010, p. 1). Against this backdrop, this paper will critically evaluate the assertion that projects are discredited mode of delivering development assistance in the context of the arguments that a greater proportion of development assistance should be delivered through General Budget Support. Overview of the project model in delivery of development assistance According to Easterly (2003, p. 26), a long and inconclusive literature on economic advancement and aid has been in existence in the 1960s, 1970s and 1980s. The efforts to gain formidable inference have been hindered by the limitations of available data and significant discourses in regard to the specifications and the viable systems through which development assistance would have positive effects on growth. It is also imperative to note that traditionally, donors from various countries or regions have engaged in the disbursement of foreign aid either through the provision of aid directly through specific projects (project aid) or through the provision of support to the recipient government’s budget (project financing or budget support). In regard to the project aid model, the project is singly formulated and negotiated between the authorities, either individuals or collectives who are concerned with its implementation. Nonetheless, national governments and international agencies in diverse regions have in the recent decades increased their enquiry into whether this is the best model in the delivery of development assistance (Cassels & Janovsky, 1998, p. 1777). This has culminated in increased popularity of the general budget support among different stakeholders in development assistance. This has been propelled with the realization that project aid model is confronted by extensive demerits. This is best epitomized by inference that projects result in duplication of efforts and fragmentation, especially in scenarios where there is involvement of a wide number of donors who are individually focusing their target on particular programme or geographical area among other demerits (Cassels & Janovsky, 1998, p. 1777). The subsequent analysis will critically assess the viability of the general budget support model (GBS) and fortify the argument that a greater proportion of development assistance should be delivered through General Budget Support. This is linked to the advantages of the GBS model which are explored below. Alignment and harmonization According to Lawson et. al (2005, p. 4), GBS has been considered to make significant contributions in the alignment and harmonization of the development efforts. This is best epitomized in Tanzania whereby the Poverty Reduction Budget and Support (PRBS) management arrangements have been considered as an exemplary example of the efforts aimed at the maximization of alignment to the Poverty Reduction Strategy (PRS) as well as the budget cycle while at the same time harmonizing procedures among all the donors offering development assistance. This is founded on the background that international development assistance has been considered to play a central role as a safety net for the poorest countries in the world (Tarp 2002, p. 444). The positive impact of the GBS in alignment and harmonization of development assistance has also been evident in other countries, for instance Uganda. This is against the backdrop whereby the Uganda Joint Assistance Strategy (UJAS) was developed with collaboration between the development partners and the government aimed at formulating a harmonized response to the development aspirations in the country as articulated in the Poverty Eradication Action Plan (PEAP) (AFB Uganda Mission, 2011, p. 1). As a result, this approach which is fundamentally grounded on the GBS has been key in the provision of the primary aid coordination mechanism. This has also been central in ensuring that the country’s aspirations are aligned and harmonized with the development assistance given and channelled through the national budget (AFB Uganda Mission, 2011, p. 13). This imperative role of the GBS model is founded on the weaknesses of the project aid model whereby due to the lack of a common sense of purpose among the donors, this culminates in disharmony of the efforts and misalignment with national impediments confronting a particular nation. This is more evident when the number of individual donors involved is large and they focus their attention to specific geographical locations which results in duplication, fragmentation and disharmony of the assistance efforts (Cassels & Janovsky, 1998, p. 1777). On the other hand, there has been an inclination of the officials implementing the projects towards distraction by the donors’ missions who come in with the objective of identification, planning, monitoring or evaluating their activities. This has been cited as being central in limiting the time of these officials in concentrating on various strategic issuesof the project. This makes their eventual operations to be misaligned with the overall intent of the project which often results in non-performance (Cassels & Janovsky, 1998, p. 1777). This has resulted to the recommendation in the work by Cassen (cited in Ehrenpreis, et al., 2007, p. 26) that in the efforts to enhance harmonization, the donors ought to minimize the costs of transaction in terms of delivery and management of aid. This can be done through the rationalization of the division of labour and elevating the utility of the local harmonization and alignment action plans. In addition, they ought to heighten the use of the programme-based approach, reducing the number of the PIUs and integrating them into the ministries in a better manner as well as elevating the efforts of untying aid. Therefore, the GBS model has been perceived as being central in promoting the level of harmony and alignment of the development efforts when juxtaposed with the project aid model. Thus, it is plausible to infer that a greater proportion of development assistance should be delivered through General Budget Support. Sustainability and ownership of development According to the work by Cassen (cited in Ehrenpreis, et al., 2007, p. 7), the project aid model culminates in a scenario whereby the foreign solutions or development assistance attain limited absorption. This is based on the fact that in most cases, they are grafted into the local institutions without fortifying these institutions from within which is a chief prerequisite for securing increasingly imperative global collective goods (Tarp 2002, p. 443). On the other hand, the propagation of the donor-funded ‘projects implementation units’ has been revealed as being key in the provision of these grafts. This is founded on the fact that such project implementation units (PIUs) are established with the primary goal of ensuring that the projects of the donors are implemented in accordance with the specifications of the donors (Ehrenpreis, et al., 2007, p. 7). As a result, both foreign and local staffs are employed who are often remunerated above the local scales. After the completion of the project, these PIUs are disbanded leaving behind them very little in terms of sustainability of the project (Ehrenpreis, et al., 2007, p. 7). This also applies to the local ownership of the project. This is whereby the limited involvement of the wider local population in the operations of the project in the course of its implementation leaves them to feeling left out. This further erodes the sustainability capacity of the project after the PIUs have been disbanded. On the contrary, the GBS model has been revealed to heighten the level of sustainability of the growth realized in the course of utilizing the development assistance, even when the donors have left. This can be in diverse realms, for instance, pursuit of global public goods like collective benefits from minimized pollution, violence and disease which has effect on the GDP (Tarp 2002, p. 435). This fact is evidenced by Easterly (2003, p. 24) who cited the estimates which revealed that 1% of GDP in aid given to a poor country which is well managed through the GBS has the capacity of elevating its growth rate in a sustained 0.5 percentage points. The above reality is in line with the commitment of the donors under the Paris declaration and aid effectiveness (2005, p. 19). This is whereby the utility of the institutions and systems in a given country provides an assurance that the aid will be put into utility for the purposes which are agreed upon, elevating the effectiveness of the aid through making the sustainable capacity of the partner country more robust, implement and account for the countries policies both to the legislative organ as well as the citizens of the country. This elevates both the sustainability of the growth process in the country. Therefore, the GBS approach is the most ideal model in cultivating sustainability of the development initiatives undertaken using the development assistance channelled through the national budget. This supports the argument that a greater proportion of development assistance should be delivered through General Budget Support. Transparency and accountability According to Foster (2000, p. 12), in a case where the track record of the government of a particular country is good in terms of macro-economic and financial management, which is concurrent with adequacy of mechanisms to ensure that there is accountability in the utility of development assistance, this forms a robust foundation for the provision of programme as opposed to project aid. On the other hand, weakness of the macro-economic and budgetary management has been viewed as having the potential of eroding capacity as well as restraining the execution of sound policies at the sector level. The most viable intervention by the donor would thus be in supporting the reforms in the larger macro-economic realm as well as enhancing the budget mechanisms before proceeding to the development of the sector programmes. This is key in elevating the level of accountability and transparency which is often associated with the GBS. On the contrary, the management and disbursement of resources outside the government system (exchequer) which is usually core to the project aid model has been revealed to undermine the level of accountability and transparency (Yamada, 2002, p. 10). This is based on the fact that individuals implementing these projects are bound to resolve in corrupt undertakings and embezzlement of funds in case of leniency of the donors in regular auditing. Nonetheless, the level of transparency and accountability is bound to be high in the GBS model based on the fact that the government which is the primary implementer is accountable to a wide alley of development stakeholders and institutions, for instance, the national assembly. As a result, this heightens the level of transparency and accountability in the course of utilizing the development assistance. This is founded on the fact that the government will be held into account in the utility of these funds and thus resolves to greater involvement of the citizens and parliament in the planning and assessment of the development policies and programmes (Ehrenpreis, et al., 2007, p. 26). This is not often the case in the project aid model whereby the implementation process of the project can be confronted by widespread non-accountability and non-transparency in case of the constraints of the donors to conduct periodic assessments and auditing. This reality has culminated to the recommendation by Ehrenpreis, et al., (2007, p. 26) that there is need to maximize the transparency and accountability levels in different countries. This is key in ensuring that there is efficiency in the aid flow to the destined use. This can be facilitated through the timely sharing of accurate information between the donors and the budget authorities in regard to the intended and the actual disbursements of the development assistance to various countries. Nonetheless, despite the above merits of the delivery of development assistance through the GBS model which has culminated to the inference that a greater proportion of development assistance should be delivered through General Budget Support, there are several inherent demerits which characterize this approach. These are explored in the subsequent section. Firstly, Cassels & Janovsky (1998, p. 1777) determined that in many instance, projects which are externally funded have been revealed to work well if they are properly managed. This is founded on the fact that they usually operate on a small-scale basis which creates an ‘island of excellence’ in a ‘sea’ which is otherwise underfunded. This is founded on the backdrop that majority of the donors might shy away from providing assistance through the general budget support model based on the fact that they have limited funds and these government programmes are often large scale. Therefore, this can culminate in the limitation of the support for the large scale government programmes from the small scale donors. This impediment can be overcome through increased agitation and advocacy for all the donors, whether organizational or government to come together, pool their resource and support a massive government led programme. This is key in ensuring that there will be increased output in the realization of national priorities. However, Ehrenpreis, et al., (2007, p. 26) recommended that there ought to be a clear definition of a mutual action agenda aimed at instigating the efforts to address the mutual accountability commitments between the government and the donors. In addition, there ought to be more explicit discussions on the effectiveness progress and development outcomes at the national level. This can be through the development of credible monitoring mechanisms where they are needed as well as dialogue mechanisms. Conclusion From the above discourse, it is apparent that there are two basic models of development assistance namely project aid and budget support. The GBS model has been found to be more ideal based on its primary role in increasing alignment and harmonization, enhancing sustainability and ownership of development and as well as elevating the levels of transparency and accountability. Nonetheless, the GBS approach has been cited have some shortcomings in terms of the inclination of the individual donors to shy away from providing assistance through the GBS model based on the fact that they have limited funds and these government programmes are often large scale. References African Development Bank, 2010, ‘Review of PBOs under ADF 11’Discussion paper, ADB, Cape Town. AfDB Uganda mission, 2011, ‘Aide memoires, back to office reports, appraisal and supervision reports’. Burnside, C. & D. Dollar, 2000, ‘Aid, policies, and growth, American Economic Review, vol. 90, pp. 847-68. Cassels A. & K. Janovsky, 1998, ‘Better health in developing countries: are sector-wide approaches the way of the future?’, The Lancet, vol. 352, pp. 1777-79. Easterly, W., 2003, ‘Can foreign aid buy growth?’, Journal of Economic Perspectives, vol.17, No. 3, pp. 23-48. Ehrenpreis, D., et al., 2007, ‘Poverty in Focus; Does Aid work for the MDGs?’, retrieved 28th December, 2012, . Foster, M., 2000. ‘New Approaches to Development Co-operation: What Can We Learn from Experience with Implementing Sector Wide Approaches?’, Overseas Development Institute, London, UK. Lawson, A., D. Booth, M. Msuya, S. Wangwe, and T. Williamson. 2005, ‘Does GBS Support Work?Evidence from Tanzania, ODI and Daima Associates, London and Dar-es-Salaam. High Level Forum, 2005, Paris declaration and aid effectiveness, HLF, Paris. Tarp, F., 2002, ‘Foreign Aid and Development, Lessons Learnt and Directions for the Future’, Routledge, London. Yamada, K., 2002, ‘Issues and Prospects of Aid Modalities in Africa”, Discussion Paper, Grips Development Forum, Tokyo. Read More