European Commission launches a consultation on the future of EU budget support to third countries (27/10/2010)

The European Commission launched on 19 October a public consultation on the future of EU budget support to developing countries. Budget support entails the transfer of aid directly to the budget of partner countries in order to allow the financing of key government functions. The broad consultation among all interested stakeholders seeks to draw lessons from more than a decade of providing budget support. It invites views and evidence on both the opportunities of this tool for the future and on challenges remaining to improve its quality, value for money and impact. With five years to go on the 2015 deadline of the Millennium Development Goals, the Commission wants to ensure that EU development assistance reaches its full potential in our partner countries.

Since the beginning of the last decade, the European Commission has been using the transfer of money to partner countries on a large scale as one of its main development instruments, supporting governments in financing their own public policies by using their own public financial management systems. One important reason for channelling funds into partner countries' budgets instead of development projects has been to help them setting up long-term oriented, coherent and predictable public policies, notably in social sectors, while reinforcing the accountability on both sides. The funds have thus helped governments to build schools and hospitals, pay for teachers and health care staff, build infrastructure and improve security and the rule of law. It has also been used as a way to avoid high transaction costs and fragmentation.

Budget support is, however, not a blank cheque. Policy dialogue constitutes a central part of its provision. Nor is it paid to every country. Eligibility criteria and disbursement conditions have to be met.

The Commission now wants to gather views and evidence on how to address challenges and exploit opportunities in order to improve EU approach to budget support. The Green Paper published today seeks views on a full range of questions such as:

        • How should it best be decided how much budget support to provide and how to combine it with other types of support to the same partner country?

        • How can budget support contribute to lower aid dependency by promoting growth and securing the mobilisation of domestic revenues?

        • What are the advantages and disadvantages of providing both general and sector budget support within the same country, or having one single budget support instrument? In which context would Sectoral budget support be considered a more effective type of budget support?

        • How can budget support be used to enhance domestic and mutual accountability?

        • How can donors meaningfully respond to any deterioration in the underlying principles while protecting the development benefits and predictability of budget support?

        • How can progress in policy dialogue, conditions and monitoring of results best be promoted and captured?

        • How can risks best be assessed and mitigated?

        • How can budget support be used in situations of fragility?


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