To what extent and under what circumstances is Partnership General Budget Support (PGBS) an effective aid mechanism? This study for a large group of bilateral and multilateral donors synthesises findings on the experience of PGBS from Burkina Faso, Malawi, Mozambique, Nicaragua, Rwanda, Uganda and Vietnam. PGBS is not a development strategy in itself, but an approach that supports the development aims of the partner country.
PGBS is a response to dissatisfaction with earlier aid instruments, and eschews imposing external solutions through conditionality in favour of supporting government-owned development. It is closely linked to the Heavily Indebted Poor Countries (HIPC) initiative and the introduction of Poverty Reduction Strategy Papers (PRSP). There are high expectations of the instrument, which include: improved harmonisation and alignment of aid, increased efficiency and effectiveness of public administration, greater predictability of funding, and improved domestic accountability. Analysis of the seven study countries found that PGBS was a relevant response to each individual context. It has evolved and become more relevant in each case over time.
PGBS has significant effects through financial empowerment, strengthening incentives within government, and improving coherence and coordination among international partners. Key findings of the study were:
- Improvements in harmonisation and alignment in every case. However, there is still significant scope for further harmonisation
- Technical assistance was the least well integrated input
- Political context was generally not well analysed and adapted to
- The variety of international partners, their differing interests, and high expectations make PGBS inherently complex to manage
- PGBS supported increases in PRSP priority expenditures. However, better poverty analyses of public expenditures are required everywhere
- Budget support is not more vulnerable to corruption than other forms of aid.
Deciding whether PGBS is an appropriate modality is not a simple decision. It requires assessing the size, scope, scale, design and role of the instrument. Variables may have simultaneously positive and negative implications. PGBS is a long term exercise, and requires donor stamina. Design and implementation must consider the interplay between different aid modalities. It should reduce dissonance and exploit complementarities between them. Although incremental approaches are best in introducing PGBS, there is no standard evolutionary sequence leading to adoption. In addition:
- Objectives should be realistic and the central role of strengthening public expenditure management should be kept in focus
- Government systems should be utilised as early and as completely as possible
- PGBS is vulnerable to political risk. Governments must both want and be able to engage with partner agencies, and there needs to be basic trust
- PGBS is more likely to be attractive to countries that are heavily aid dependent. In these cases, macroeconomic stability and elementary fiscal discipline are essential
- There is scope for a limited number of sector focussed and more general PGBS instruments to be mutually reinforcing. Aligning such budget support instruments with different general/ sector orientations is an important practical issue.
