New directions in the quality of aid debate: Implications for support to Public Financial Management

Stephen GroffDeputy DirectorDevelopment Co-operation Directorate

Outline

I. The Aid Quality Agenda and Commitments

II. Assessing Progress

III. Paris Declaration Commitments on PFM

IV. New Actors and New Themes

V. High Level Forum on Aid Effectiveness: Implications for the future Aid Quality Agenda

Change ….? Why Change?

It’s about making aid work better where it is needed

3

A Day in the Life of…

Source; Don De Savigny & COHRED

Contra-

ceptives andRH

equipment

STIDrugs

EssentialDrugs

Vaccinesand

Vitamin ATB/Leprosy

BloodSafety

Reagents(inc. HIV

tests)

DFI

D

KfW

UNICEF

JICA

GOK, WB/IDA

Source offunds for

commodities

CommodityType

(colour coded) MOHEquip-ment

Point of firstwarehousing

KEMSA Central Warehouse

KEMSARegional

Depots

Organizationresponsible

for delivery todistrict levels

KEMSA and KEMSA Regional Depots (essential drugs, malaria drugs,

consumable supplies)

ProcurementAgent/Body

CrownAgents

Governmentof Kenya

GOK

GTZ(procurement

implementationunit)

JSI/DELIVER/KEMSA LogisticsManagement Unit (contraceptives,

condoms, STI kits, HIV test kits, TBdrugs, RH equipment etc)

EU

KfW

UNICEF

KEPI ColdStore

KEPI(vaccines

andvitamin A)

Malaria

USAID

USAID

UNFPA

E

UR

OP

A

Condoms

for STI/HIV/AIDS

prevention

CIDA

UNFPA

USGov

CDC

NPHLS store

MEDS(to Mission

facilities)

PrivateDrug

Source

GDF

Government

NGO/Private

Bilateral Donor

Multilateral Donor

World Bank Loan

Organization Key

JapanesePrivate

Company

WHO

GAVI

SIDA

NLTP(TB/

Leprosydrugs

Commodity Logistics System in Kenya (as of April 2004) Constructed and produced by Steve Kinzett, JSI/Kenya - please communicateany inaccuracies to skinzett@cb.jsikenya.com or telephone 2727210

Anti-RetroVirals

(ARVs)

Labor-atorysupp-

lies

GlobalFund forAIDS, TB

and Malaria

The"Consortium"

(Crown Agents,

GTZ, JSI andKEMSA)

BTC

MEDS

DANIDA

Mainly District level staff: DPHO, DPHN, DTLP, DASCO, DPHO, etc or staff from the Health Centres,Dispensaries come up and collect from the District level

MEDS

Provincial andDistrictHospital

LaboratoryStaff

Organizationresponsible fordelivery to sub-district levels

KNCV

MSF

MSF

Ministry of Health: KenyaSo

urce

: S. K

inze

tt (2

004)

The Aid Quality Journey…

Rome Declaration on Harmonisation

Accra Action Agenda

Busan 29 Nov – 1Dec

2011

2002

Monterrey Consensus

2003 2005 2008 2010 2011

HLF-1

HLF-2

Paris Declaration on Aid

Effectiveness

Bogota Declaration on SSC

Dili Declaration on Fragile States

Istanbul principles on CSO effectiveness

HLF-3

HLF-4

The Paris Declaration “pyramid”

Paris Declaration: what makes it different?

Unprecedented consensus;

56 action-oriented commitments for both Donors and Partners countries;

Built-in mechanism for monitoring progress at country and global levels (12 Indicators); and

Targets set for 2010 monitored in 3 separate surveys (2005-2011).

Outline

I. The Aid Quality Agenda and Commitments

II. Assessing Progress

III. Paris Declaration Commitments on PFM

IV. New Actors and New Themes

V. High Level Forum on Aid Effectiveness: Implications for the future Aid Quality Agenda

Progress on track 2005-2008

36%

59%

88%

Targets requiring efforts but within reach (2005-2008))

49%

1483

45%

36%

59%

88%

Targets requiring very special efforts (2005-2008))

9%

22% (No progress)

49%

1483

45%

36%

59%

88%

43%

42%

42% (slippage)

20%

44%

22%

Outline

I. The Aid Quality Agenda and Commitments

II. Assessing Progress

III. Paris Declaration Commitments on PFM: Key Messages

IV. New Actors and New Themes

V. High Level Forum on Aid Effectiveness: Implications for the future Aid Quality Agenda

Total donor PFM support, 1995-2008

Evaluation of Donor Support to PFM Reform in Developing Countries, ODI, 2010

Paris Declaration and PFMDONORS committed to: Provide reliable commitments of aid over a multi-year framework Disburse aid in a timely and predictable way

Rely on transparent partner government budget and accounting mechanisms

Adopt harmonised performance assessment frameworks

PARTNER COUNTRIES committed to: Publish timely, transparent and reliable reporting on budget execution Ensure that national systems are effective, accountable, and transparent Take leadership of the public financial management reform process Mobilise domestic resources, strengthen fiscal sustainability Create an enabling environment for public and private investments

Evidence on PFM: Mixed

49%

1483

45%

36%

59%

88%

45%

43%

47%

21%

44%

9%

26%

24%

ACCRA AGENDA FOR ACTION: Commitments on PFM (2008)

DONORS will:

– Use country systems [including PFM systems] as the first option in the public sector.

– Be transparent when they don’t use them.

– Support country-led reform programmes.

– Develop corporate plans for using country systems.

– Channel 50% (or more) of government-to-government aid through country fiduciary systems (i.e. PFM + Procurement)

PARTNERS will:

-lead in defining reform programmes.

-Strengthen their budget planning processes

-Facilitate parliamentary oversight including through more transparency in PFM

PARTNERS & DONORS will jointly assess quality of country systems.

What are the different components of thePFM system that aid can “use”?

Source: Mokoro (2010)

Challenges in Implementation Many factors lead to donors bypassing country PFM

systems Varying perceptions of risk

• Emphasis on fiduciary risk

• Developmental risk of not using country systems

Incentives and capacities in donor organisations Political constraints: visibility, traceability... Quality of partner country systems Shifting transaction costs from partner government to

donor

Some common myths Using country systems means providing budget support

• Not necessarily: all aid modalities can make use of country systems

An “all or nothing” approach?

• Different components of country systems can be used Pooled funds are a move towards use of national systems

• They might be, but this is more about harmonisation Technical co-operation cannot make use of country systems

• Need a flexible approach

Working Party on Aid Effectiveness support to PFM Assessing progress (Quality and Use of PFM Systems)

Global Partnership on Country Systems

• Dedicated Task Forces on PFM and Procurement

• Identifying and disseminating good practice

• Developing and supporting common tools (e.g. procurement assessment)

Country Level Work

• Lending political support, monitoring, sharing experiences

Outline

I. The Aid Quality Agenda and Commitments

II. Assessing Progress

III. Paris Declaration Commitments on PFM

IV. New Actors and New Themes

V. High Level Forum on Aid Effectiveness: Implications for the future Aid Quality Agenda

Broadening the Partnership Shaping the global development architecture – i.e. G20

Development Consensus G20 discourse (June 2010) on the need for greater transparency,

accountability and institutional governance including use of country systems

Development actors beyond the DAC:

• Non-traditional providers of development assistance (i.e. Middle Income Countries, Emerging Economies, Arab donors etc)

• Civil society organisations

• For-profit private sector and foundations Bridging the divide: DAC Statement on “New Partnerships”, Bogota

Statement on South South Cooperation

Objectives of Broadening the Partnership Finding convergence and common ground Share lessons on economic growth, poverty reduction

and development co-operation Mutual interest in achieving results while respecting

diverse ways to reach them Interest in improving all forms of co-operation through

inclusive dialogue, mutual learning and knowledge-sharing

Recall the enduring relevance of the Paris principles for developing countries (fragile states, MICs, LDCs)

New Themes Climate Change Financing

• Avoid pitfalls of complex funding channels

Public Private Partnerships• Strengthening regulatory and financial environments

• Risk Management

Innovative Financing Mechanisms• Additionality

• Predictability

Aid as Catalyst towards more Effective States

Outline

I. The Aid Quality Agenda and Commitments

II. Assessing Progress

III. Paris Declaration Commitments on PFM

IV. New Actors and New Themes

V. High Level Forum on Aid Effectiveness: Implications for the future Aid Quality Agenda

Where are we now?

Monterrey Consensus

(2002)

Rome HLF on Harmonisation

(2003)

Accra Agenda for Action

(2008)

Bogota Statement

on SSC (2010)

Paris Declaration on

Aid Effectiveness

(2005)

Dili Declarationon fragile states

(2010) Korea HLF (29 Nov. –

1 Dec. 2011)

27

4th High Level Forum on Aid Effectiveness: A Unique Opportunity

Forging a new consensus on aid and development? • Chance to reinvigorate the global commitment towards

the MDGs;

• Refresh and reaffirm Paris / Accra principles;

• Recognise the role of aid as contributor and catalyst for development results and effectiveness;

• Improve the quality of partnerships through embracing partner country leadership, diversity and mutual respect;

• Seek convergence based on complementary strengths and differentiated responsibilities.

Who? Where? When? A political event that attracts ministerial

attendance, with decisive outcomes Busan, Korea. Host: Government of Korea 29 November to 1 December 2011.

HLF-4- Main Objectives Stocktaking from the Paris / Accra process

Agreeing on features of high quality aid and its monitoring framework towards 2015

Situating aid in its broader development context:• More actors, development finance effectiveness

• Diversified approach: MICs, LICs, FS, regions

• Catalyst dimension: trade, security, climate…

• Results and right-based approaches

Emerging Areas for Political Outcomes Results and transparency for better

accountability Ownership and Leadership Effective States and Alignment (Country Systems) Diversity at country level – fragile states, middle

income countries, LDCs Climate Change Financing Recognise all forms of partnerships (SSC, PPPs…) Role of CSOs, Parliaments and local government

Key milestones in 2011Working Party on Aid Effectiveness

Meetings and Key Events HLF4 Evidence Country Systems

Q1

Q2

Q3

Q4

4th High Level Forum on Aid Effectiveness 29 November – 1st December, Busan, Korea

1st draft outcome document

Monitoring Survey:country level data collection Evidence for “Progress Since Paris”Deadlines: 31 March

Evaluation: Synthesis report (April 2011)Monitoring Survey: preliminary results 1st draft Progress since Paris (July 2011)

Report finalisation (September 2011)

Themes for Busan Deadline: January

Preliminary Menu of Options

WP-EFF EXCOM (9-10 March)

WP-EFF + ExCOM (7-9 July)

WP-EFF + ExCOM (5-7 Oct)

2nd draft outcome document

DAC SLM (6-7 April) WB/IMF Spring Meeting (16-17 April)

WP-EFF co-chairs First Narrative Outline for Outcome Document (comments by 3 April)

Global Partnership on Country Systems (9-10 June)

Task Force on Procurement (May)

Task Force on PFM (6-7 June)

TBC: Meeting on Effective States (Paris, October)

www.oecd.org/dac/effectiveness/pfmWWW.BUSANHLF4.ORG

Do donors use your country systems?

1 2 3

31%

44%

25%

1. Yes2. No3. Sometimes

Does your country refuse aid because of complex donor requirements?

1 2 3

4%

47%49%1. Yes2. No3. Sometimes

Is aid effective in your country?

1 2 3

19%

48%

33%

1. Yes2. No3. Sometimes