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[ Background ] |
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Background
More than one billion people live in extreme
poverty. The world community has decided to change
this. All members of the United Nations, including
Switzerland, agreed to the Millennium Development
Goals (MDG). The MDG are shared objectives for reducing
poverty by half and improving living conditions
by 2015. The governments of poorer countries are
called upon to provide a stable framework for private
initiatives and to offer basic services, such as
functioning primary schools or water supply systems,
while development cooperation can effectively support
partner countries in their efforts.
In partner countries which have demonstrated
their commitment towards poverty reduction the implementation
of their economic and social policies is sometimes
directly co-financed. Budget support promotes macroeconomic
stability, such as the control of inflation, which
particularly affects the poorest segments of society.
It also strengthens structural reforms such as the
promotion of property rights or the fight against
corruption. All these factors reduce the risks for
private initiative and investments which are indispensable
for the creation of employment opportunities and
sustainable growth.
What is budget support?
Budget support strengthens partner countries
which demonstrate their willingness in the
fight against poverty by providing direct
contributions to the states’ budgets. This
allows them to fulfil their core tasks in
an effective and cost efficient manner –
for example in the areas of health or justice.
The government’s budget priorities, its
human resource management, public procurement
rules and accounting systems are decisive.
The disbursement of the external contributions
is done through the central bank to the
ministry of finance and depends upon the
fulfilment of reform goals which were negotiated
in the dialogue with the government.
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Budget support which is based on the concepts of
partnership and performance is a relatively recent
instrument of cooperation, which is why new questions
arise: What preconditions need to be met in order
for budget support to fight poverty in an effective
and sustainable manner? How is the partner government
accountable to parliament and how to donors? How
can the voices of the private sector or civil society
be considered? What measures can be undertaken by
the donor side to make budget support work optimally?
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Switzerland makes a difference
When it comes to budget support, the Swiss State
Secretariat for Economic Affairs (SECO) plays an
active role at both the national and international
level. Switzerland uses budget support in Benin,
Burkina Faso, Ghana, Mozambique, Tanzania, and Nicaragua
and even held the chair of the donor groups for
one or several terms of office in most of these
countries. By using budget support Switzerland affirms
its will to support those countries which have committed
themselves to economic and structural reforms in
their fight against poverty. This intention is facilitated
by the fact that these countries possess poverty
reduction strategies and the SECO links its budget
support as closely as possible towards their implementation.
Budget support is most effective when it is used
in combination with a mix of other instruments,
for example in combination with targeted training
projects, innovative programmes for rural development
or dialogue based on concrete experiences. The value
added by a combination of instruments is larger
than the benefits achieved by using each instrument
separately.
Budget support offers financial backing for the
state budget so that development and poverty reduction
programmes with high priority can be financed. In
addition the following elements of budget support
are important:
- Policy dialogue with authorities and other
national institutions which evaluates progress
made in the reform process, identifies the most
important difficulties and looks for amicable
solutions.
- A catalogue of reforms containing the agreed
performance criteria as well as benchmarking
data used for the assessment of reforms and
which should be based on the national poverty
reduction strategy.
- Technical assistance which aids the qualitative
improvement of the state finances, strengthens
the capacities of the public administration
as well as the mobilisation of national resources.
This website aims at illuminating chances and
risks, possibilities and limitations of budget support
in a practical manner. It contains:
- Thematically organised field reports from
Swiss partner countries in which budget support
is provided;
- A number of interviews with personalities
from Swiss partner countries in which budget
support is provided;
- Presentations of an international symposium
discussing budget support as an effective contribution
to the Millennium Development Goals organised
by SECO in 2006;
- Links to some institutions which deal with
budget support and a select number of further
publications.
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