Europese Rekenkamer: effectiviteit beleid Commissie omtrent begrotingssteun aan ACP-landen, Latijns-Amerika en Azië kan beter (en)

EUROPEAN COURT OF AUDITOR Luxembourg, 16 February 2011

Special Report: The effectiveness of the Commission's management of General Budget Support in ACP, Latin American and Asian Countries

Budget support is the European Commission’s preferred aid modality. Almost 50 per cent - or about €11 billion during the period 2008-2013 - of the 10th European Development Fund is planned to be disbursed in this manner. In practical terms budget support entails the transfer of large amounts of funds directly to the state budgets of selected partner countries.

The delivery of aid through budget support has several potential advantages over the traditional project approach. Larger volumes of aid can be supplied in a more predictable manner. Since the funds support the national development strategies of partner countries, the latter tends to have more ownership. Moreover, this form of aid can be used to encourage improvement of public financial management and help increase accountability. Budget support can also facilitate and strengthen policy dialogue with recipient countries as well as improve coordination between donors.

The European Court of Auditors has analysed whether the Commission’s management of general budget support in African, Latin American and Asian countries is effective. The overall conclusion is that the Commission has made considerable efforts to develop and improve its approach to budget support. However, there are still weaknesses in how it sets up and manages its programmes. Effectiveness could thus be improved:

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  A positive feature of the Commission’s approach is the systematic inclusion of macroeconomic and public financial management objectives in the programmes. However, the objectives of the programmes do not take sufficient account the specific circumstances and changing priorities of partner countries. In particular, the Commission’s approach does not adequately reflect the fact that the national development strategies of some countries have moved in recent years to growth-targeted approaches. Within the national priorities the Commission should focus more on the specific areas where the value added is highest.

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  The Commission has not yet developed a sound risk management framework to assess and reduce the risks of its programmes. This is of particular importance in view of the high risks involved for bad financial management, corruption, etc. when large sums are channelled directly through public budgets in developing countries. Better protection against leakage, waste and inefficiency is needed. To achieve this, structured and explicit assessments of fiduciary and development risks are needed.

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  The rationale followed by the Commission in deciding on the amount of funds to be allocated to general budget support in each country is not clear. The Commission should demonstrate that the amount allocated to individual programmes is appropriate in view of the objectives and the framework for dealing with risks and benefits.

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  The support given to help strengthen financial management is not based on an appropriate assessment of needs., The Commission should carry out - with the partner country and in coordination with other donors - an assessment of priority capacity-building needs and focus on the areas where its support can provide most value added. Insufficient attention has been given to the need to strengthen oversight bodies such as Parliaments, civil society organisations and Supreme Audit Institutions, seeking to monitor government use of budgetary resources.

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  The performance-based conditions (e.g. policy actions to be adopted or results to be achieved in areas such as public finance management, health or education) attached to the disbursement of general budget support are relevant. However, they are unlikely to achieve their intended incentive effect, because it is often difficult to formulate targets which are insufficiently challenging or overly ambitious. It is also often difficult to assess whether or not conditions have been met, in particular because of a lack of clarity over what constitutes satisfactory progress. The Commission should strengthen its management of performance-related conditions. This should include a clear and structured process for assessments and disbursements..

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  Policy dialogue is rightfully considered by the Commission to be a key component of its budget support programmes but is not used to its full potential. In order to strengthen its approach to dialogue, the Commission should define for each programme a dialogue strategy that sets out the objectives, content and modalities. The Commission should also ensure that sufficient expertise is available at Delegations for the dialogue.

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  The Commission’s external reporting on general budget support tends to focus on how it potentially can improve aid delivery. There is relatively little information on the actual impact. An evaluation methodology, which provides evidence on whether, and in what circumstances, budget support can make an effective contribution to poverty reduction has not yet been established. The Commission should improve its reporting on the effectiveness of its budget support programmes.

The Commission has launched a revision of its internal guidelines to address most of the issues concerning general budget support raised in this report.

Note: The purpose of this press release is to give a summary of the special report adopted by the Court of Auditors which is available on the Court’s Internet site (www.eca.europa.eu) and will be published shortly in a printed format.