Budget Support Module 1 Core Concepts introduction Outline

Budget Support Module 1 Core Concepts (introduction)

Outline Module 1 1. Objectives of Budget Support 2. Three types of contract 3. Fundamental values and rights-based approach 4. Intervention logic 5. Complementary measures 6. Support to BS governance 7. Policy Dialogue 2

Interview Erica Gerretsen https: //www. youtube. com/watch? v=y 804 c. JFKGp. M 3

European Consensus on Development 2017 Joint programming, joint actions, but also “The EU and its MS must be united in diversity, using a variety of experiences and approaches” 4

Rationale Budget Support is to address 5 challenges (‘vectors of change’): Ø Improving PFM, macroeconomic stability, sustainable and inclusive growth and the fight against corruption and fraud Ø Promoting sector reforms and improving sector service delivery Ø State-building in fragile states, and addressing development challenges of SIDS and OCTs Ø Improving domestic revenue mobilisation (and reducing dependency on aid) Ø Promoting human rights, democratic values, peaceful societies, and gender equality Guidelines 2017 5

General objectives of EU Budget Support § Eradication of poverty and reduction of inequality (= primary objective) § Promotion of sustainable, inclusive economic growth and job creation § Consolidation of democracies and peaceful societies and promotion of gender equality § Sectoral impacts 6

EU approach to Budget Support BS is a financial assistance modality: it is a means to deliver more effective support to national and sector policies It • • • involves: Financial transfers Policy Dialogue Performance assessment • Capacity development Policy Dialogue Capacity development Progress / Performance assessment Financial transfers 7

Responsibility for results remains but fiduciary responsibility stops with BS transfer Fiduciary Responsibility Stops EC External Assistance € Conditions for disbursement Partner country’s Central e. Bank u g o al i D Foreign y lic Treasury Exchange o P Account Reserves € Tax & non tax revenue s (incl. financing ) Budget implementation through the partner country's PFM System, subject to its previous positive eligibility assessment 8

Donor’s dilemma: fungibility and accountability 9

Two principles for the specific objectives of a BS contract Formulation of specific objectives to be based on two principles: § Alignment and harmonisation; § Consistency with EU external action policy (2017 Consensus and EU enlargement and neighbourhood policies) Specific objectives should also reflect the key challenges addressed by the operation Specific objectives to be specified by type of contracts 10

BS commitments worldwide (2016) Average BS commitment in 2016 was EUR 144 million per country (increasing: 2015: 135) Source: Budget Support. Trends and results, 2017. 11

Outline Module 1 1. Objectives of Budget Support 2. Three types of contract 3. Fundamental values and rights-based approach 4. Intervention logic 5. Complementary measures 6. Support to BS governance 7. Policy Dialogue 12

The three types of BS contracts: • • Sustainable Development Goals Contract • (SDG-C) • • Sector Reform Performance Contract • (SRPC) • • State and Resilience Building Contract • (SRBC) 13

Specific objectives of a SRD-C Sustainable Development Goals Contract supports partner countries to implement their national development policies and strategies, based on fundamental values such as human rights. § Support to the attainment of the SDGs § Supports higher-level strategic development objectives § Adherence to Fundamental Values as pre-condition 14

SDG-C 15

Specific objectives of a SRPC supports sector reforms and improved service delivery in a specific sector or interlinked sectors Supports legislative and regulatory approximation and/or policy convergence process with the EU (ENI/IPA) (the Union’s standards, policies and practices) § Emphasis on equitable access and quality of public service delivery. § Financial additionality may be a feature, but increase in sector expenditure is not the unique goal. 16

17 • Combining modalities Blending with loans, global funds, others Domestic revenues Budget Support Through Treasury 'Pool Fund' Donor X Donor Y Co-financed activities Donor X Donor Z Internally Generated Funds Projects PPP 17

Public and private funding • BS linked to private / public investment climate • Focus at Africa and ENI: EU External Investment Plan 18

Specific objectives of a SRBC Used in situations of fragility and transition, also to build up state and societal resilience. v SRBC to help partner countries: § to improve financial capability of Govt to restore peace and macro-economic stability; § to ensure vital state functions and deliver basic services; v SRBC to be based on forward looking political commitment and on institutional reforms (not on track records). v SRBC requires a stronger political and policy dialogue. 19

New in the 2017 Guidelines: § More flexibility and broader concept than previous SBC (State Building Contract) § SRBC can be for more than 2 years § National level SRBC can be combined with (sector) SRPC, if and when convenient 20

Situations of conflict and fragility Possible policy responses that can be supported by EU Ø Security issues: chronic violence, illegal trafficking Ø Capacity issues: low capacity to deliver services Ø Legitimacy issues: weak legitimacy (violation of agreed rules) Ø Multiple issues • Investing in economic, social and political inclusion • Supporting meaningful dialogue with citizens and across social groups • Developing or reforming the security and justice systems • Developing capacity to deliver services • Investing in the business climate (incl. the judiciary) • Increasing domestic revenue mobilisation • Supporting civil society and the media • Supporting the complete electoral cycle and political parties Holistic and sequenced approach: • Focus on humanitarian assistance and security 21 • Establish the basis for legitimate politics

Budget support as per 31 st Dec 2016 Average size of the BS contracts per type (in millions of Euros) Type of Contract Number of Amount of On-going BS BS programmes commitment SRC/SBS Average size 218 8, 605. 6 39. 5 GGDC 10 747. 0 74. 7 GBS 11 1, 107. 7 100. 7 SBC 24 2, 227. 2 92. 8 265 12, 687. 5 48. 2 All SRC = 81% SBC = 9% GGDC + GBS= 10% Average size remained constant as compared to 2015; more SBC 22