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Do donors practice what they preach?. The allocation of budget support by OECD-DAC donors Susan Dodsworth, McGill University Australasian Aid and Development Policy Workshop 14 February 2014. The puzzle. Do bilateral donors follow their own policies when they allocate budget support?.

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do donors practice what they preach

Do donors practice what they preach?

The allocation of budget support by OECD-DAC donors

Susan Dodsworth, McGill University

Australasian Aid and Development Policy Workshop

14 February 2014

the puzzle
The puzzle

Do bilateral donors follow their own policies when they allocate budget support?

why budget support why bilateral donors
Why budget support? Why bilateral donors?
  • A key component of the aid effectiveness agenda:
    • Involves high risk, but offers (potentially) high returns.
    • Trades control for ownership.
  • Donor policies identify several criteria for allocation:
    • Pro-poor policies.
    • Good governance (especially control of corruption).
    • Respect for human rights, free and fair elections.
  • Little existing research on behaviour of bilateral donors.
a two pronged approach
A two-pronged approach

Part 1: Quantitative

Part 2: Qualitative

Semi-structured interviews with donor officials:

Zambia and Uganda in late 2013, early 2014.

14 core interviews with bilateral budget support donors.

Additional interviews with multilateral donors and non-budget support donors.

  • Original dataset using:
    • Donor-recipient dyads.
    • Budget support disbursements.
  • A two-stage analysis:
    • Who gets it?
    • How much?
  • Problems: Limited coverage (2010-2011), missing data.
who gets budget support
Who gets budget support?
  • Donors are more likely to allocate budget support:
    • To countries with whom they have a colonial tie.
    • To poorer countries.
    • To countries where they are a ‘big’ donor.
    • To countries with pro-poor spending patterns.
    • To countries with good governance.
  • BUT, the most influential factor is prior allocation of budget support.
    • This suggests that bureaucratic inertia is substantial.
how much do they get
How much do they get?
  • Donors tend to give a greater % of aid as budget support:
    • To poorer countries
    • To countries with pro-poor spending patterns.
    • To countries with good governance.
  • More aid dependent countries get (slightly) less budget support.
    • May be due to limits on absorptive capacity.
  • Prior levels of budget support are very influential, but don’t overwhelm other factors at this stage.
key points so far
Key points so far
  • Donors follow some aspects of policies, but not others.
    • Pro-poor spending and good governance attract budget support, but their effect is not large, nor always significant.
    • Human rights and democracy appear to have little impact (but maybe we need to look at change/trends).
  • Other factors also matter:
    • Characteristics of donors.
    • Nature of a donor’s relationship with the recipient.
  • Bureaucratic inertia is important, but what does it mean?
unpacking bureaucratic inertia
Unpacking bureaucratic inertia
  • Mechanics of budget support.
  • Desire to be a ‘good donor’ who complies with international and bilateral commitments.
  • Risk to bilateral relationship, often combined with the difficultly of detecting and measuring political change.

You make a commitment and you sign that commitment... you have to respect your commitments.

... not all donors are convinced that the human rights issue has changed. The issues might have become more visible, but we're not sure that the situation is so much worse.

is it more about donors
Is it more about donors?
  • Interactions between:
    • Public support for development aid;
    • The economic situation of the donor; and
    • Media coverage of scandals and crises.
  • Desire to buy a seat at the table.

It was a big issue in the Swedish press. And after that budget support had a really bad reputation... We [the Embassy] were ready to resume budget support towards the end of 2010, but our Government said no.... It was really in the media that Zambia was the face of corruption...

we will if they will
We will if they will

Decisions are interdependent, particularly in the case of suspensions.

  • Good news: Coordination is working (e.g. GOVNET Framework for Collective Responses to Corruption).
  • Bad news: Statistical methods assume independence.

The main reason really is that Finland tends not to go solo anywhere. We don't see the value in making a solo stand on almost any issue, anywhere, because we feel that we are a small country. It's counterproductive and detrimental to both parties.

implications
Implications
  • Bureaucratic inertia matters but is not simply red tape.
  • The complexity of donor decision making is not reflected by existing models.
    • Need to capture interdependence and interactions.
  • Donors generally abide by their own policies, but these policies are only part of the picture.
    • This may help to explain the failures of budget support.
  • Is disillusionment with budget support justified? Is the problem the modality, or the way it has been allocated?