By the turn of the millennium, the international community had begun to realize that for development co- operation to be effective, it had to take a multilevel and multidimensional approach, and respect and imple- ment a number of core principles such as country ownership, coordination and mutual accountability. These principles were formulated in the 2005 Paris Declaration on Aid Effectiveness (OECD DAC, 2005) and else- where.
Earlier approaches to development cooperation had attempted to overcome the multidimensional develop- ment challenges in poor countries from two angles. First, by intervening through project-type interventions aimed at tackling financial and technical resource constraints at individual or institutional level, which held back the poor from engaging in more productive economic activities. Second, by providing support at a macrolevel (in particular through so-called structural adjustment programmes) in order to rectify economic fundamentals and foster economic growth in the hope that economic gains would ‘trickle down’ to the gen- eral population in the medium run.
Both approaches had limited success in bringing about sustainable large-scale socioeconomic development in aid recipient countries. The blame for this was soon laid at the highly fragmented donor landscape that had emerged over the decades as a result of these approaches being applied in isolation by each donor country. It was further criticized that each approach failed to take the multidimensional and multilevel na- ture of development challenges sufficiently into account and involved only a limited set of instruments; and that both approaches had largely failed to respect the aforementioned principles. In extension of this in- sight, a consensus emerged in the international community that effective approaches to development co- operation had to do both. They should bridge the gap between macro- and microlevel interventions by using the full range of instruments available (i.e. financial support, technical assistance, policy dialogue and con- ditionality). Further, they should apply to the largest degree possible the lessons learned from more than five decades of development cooperation by respecting the Paris principles ownership, alignment, harmo- nization, mutual accountability and managing for results.
Taken together, these lessons were interpreted to imply that a new and more effective approach to devel- opment cooperation had to be in the form of an integrated application of financial and technical support in tandem with high-level political and policy dialogue and provisions to ensure mutual accountability of do- nors and partner governments. One approach to implement this form of integrated policy-based develop- ment cooperation was in the form of multi-donor general budget support (GBS), which soon evolved into arguably the most prominent, but also most heatedly debated, aid modality in the 2000s.17 Between 2006
and 2010, European donor countries alone (either bilaterally or through the European Commission) provided some EUR 15.5 billion in budget support to partner countries (Orth et al., 2017). At the same time, donor governments came under increasing domestic pressure in view of commonly assumed risks associated with the provision of budget support, which many perceived as a way of providing large sums of money to corrupt governments with no control or accountability over the use of these funds.
Despite the fact that numerous evaluations and synthesis studies of budget support provide strong evi- dence that the integrated provision of financial and non-financial inputs was effective in supporting im- portant development outcomes and in implementing the principles for effective aid (see Orth et al., 2017), most bilateral donors in recent years as a consequence withdrew from the aid modality. By the time of exit, however, GBS had already profoundly changed development cooperation and budget composition in the countries receiving it, potentially leading to significant disruptions. Not only was the share of central gov- ernment expenditure covered by GBS of major importance for the national budgets of many recipient coun- tries, extensive accompanying structures – most prominently the policy dialogue18 – were established as
well. The consequences of ending aid for sustaining developmental effects have only recently started to
17
In a parallel development, aid donors such as Germany also had begun to implement a much more holistic – or ‘multilevel’ – approach to project- based aid by combining interventions at micro-, meso- and macrolevel in order to bridge the diagnosed gaps between earlier approaches.
18
gain attention in the literature.19
The potential effects of the exit from aid modalities on programme results remain generally under-researched despite this recent raise of awareness (Slob and Jerve, 2008).
It is therefore important to understand the consequences of the exit,20
and its implications for the future of an integrated policy-based development cooperation. Against this background, this evaluation analyses the effects21
of ending GBS on development outcomes and provides recommendations for an exit strategy and for a policy-based development cooperation.
This analysis of exit effects builds on the results of a comprehensive evaluation synthesis on the effective- ness of budget support conducted by DEval (Orth et al., 2017). Based on the systematic analysis of 95 sources, this evaluation synthesis finds that the integrated combination of financial and non-financial inputs in multi-donor GBS is an adequate instrument to achieve important development outcomes. Those positive effects include increased levels of public spending in the health and education social sectors, improved PFM, a strengthened supply-side of domestic accountability and a rise in service delivery quantity.
This evaluation assesses the effects of ending GBS at two levels: 1 The consequences of ending GBS; and
2 The robustness of budget support effects by comparing the effectiveness of budget support with the effects that remain after the exit by asking the following two evaluation questions:
Question 1: How do aid portfolios and the relationship between donors and partners change in the context of ending GBS?
Question 2: Are proven effects of budget support robust against the exit from the modality?22
To answer the evaluation questions, a case specific-approach was chosen, analysing the effects of the exit from GBS in four country case studies – Malawi, Rwanda, Uganda and Zambia.
While this evaluation sheds light on the consequences of the exit and the robustness of budget support effects, the exit from the modality can also serve as a means to confirm that budget support programmes were responsible for the observed changes in the first place (quasi-counterfactual). Due to methodological difficulties, the attribution of effects to budget support programmes is normally a challenge in evaluations. Although the exit from the modality is not a real counterfactual, it can provide more certainty that budget support programmes caused or at least contributed to the observed effects. The team can infer the origin of the effects by comparing outcomes during ongoing budget support programmes with the effects after the exit. To illustrate this with an example: there is very strong evidence of a positive correlation between budget support and improvements in countries’ public financial management (PFM), yet in theory, a third variable might be causing the improvements in PFM. Now, if the exit-effect on PFM is negative, this provides additional confidence that the correlation between budget support and PFM is positive and causal, i.e. budget support leads to improvements in PFM.
In conjunction, the evaluation synthesis mentioned above (Orth et al., 2017) and this evaluation on the exit from GBS aim to contribute to a better understanding of the effectiveness and robustness of the modality, and the consequences of donors’ exit from GBS. Budget support successes, failures and the exit case are used to provide recommendations on suitable design and implementation for future integrated policy-based approaches as well as strategies for an exit from on-budget aid instruments.
The findings and recommendations from this evaluation are directed towards policymakers in Germany, other bilateral donors and multilateral institutions, as well as towards implementing agencies. The results
19
See for example the evaluation by de Kemp and Lobbrecht, 2015 on the effects of cuts in bilateral aid and the withdrawal of countries.
20 Situation in countries where GBS has been suspended for a prolonged period or completely stopped while other forms of programme and/or
project-type interventions are still provided.
21
The term ‘effects’ comprises all levels of the intervention logic for budget support: outputs, induced outputs, outcomes and impacts.
22 The evaluation team employs a narrow definition of sustainability from the Development Assistance Committee of the Organisation for Economic
Co-operation and Development (OECD DAC) criteria for evaluating development assistance. According to this definition, sustainability is achieved if the benefits of a programme or project ‘continue after donor funding ceased’ (OECD DAC, 1991:2).
of this evaluation are also relevant for stakeholders in partner countries who may need to proactively man- age donors’ exit from budget support or other forms of integrated policy-based development cooperation, as well as academia, in the wider field of aid effectiveness research.
Structure of the report
In order to understand both history and current situation of budget support, Chapter 2 provides context information on the modality as well as the results on the effectiveness of it as found by DEval’s systematic evaluation synthesis (Orth et al., 2017). Chapter 3 explains the evaluation design and the methodology of the evaluation. The exit from GBS in the four case study countries and its impact are described in Chapter 4. Chapter 5 presents summary findings, discusses the consequences of the exit from GBS along main the- matic areas and analyses which proven budget support effects were robust against the exit across the four case studies. Conclusions and recommendations for future forms of integrated policy-based approaches are presented in Chapter 6. To provide a summary of relevant background information and findings per country, the evaluation team further produced ‘country sheets’ for each of the four country case studies. These coun- try sheets can be found on DEval’s website at www.deval.org.
This evaluation addresses a large variety of readers ranging from policymakers, to bi- and multilateral donors and implementing agencies. Therefore, some chapters might be more relevant for some readers than other chapters. To facilitate a more efficient reading experience, this report can be read from beginning to end or selectively according to the reader’s prime interest. Figure 3 provides reading instructions for the selective reader.
Figure 3 Reading manual
Are you interested in...
Findings by topic? Chapter 5 Findings by country? Chapter 4 and country- sheets A quick readthrough? Read the bold headers Methodology (process tracing)? Chapter 3 and for results 4.1.2 and 4.4.2 A brief historic overview of budget support? Chapter 2, 4.1.1, 4.2.1, 4.3.1 and 4.4.1 Conclusions and Recommen- dations? Chapter 6