Budget support is in the news once more. Corruption in Uganda recently spurred several Western governments to suspend their budget support to the government there. Unfortunately, for Uganda, this type of foreign aid makes up almost a quarter of its annual operating budget.
So I’m thinking about budget support again and its role in international affairs and the lives of the citizens of those countries that receive it.
One of the “perks” of my job working on policy for an organization that is primarily an international development project implementer is that I often get to go out and visit project sites and meet with community members to solicit their points of view on any number of issues. During these interactions, I usually have a long list of questions I want to ask, but I also try to make time for the people I’m meeting with to ask questions of me. And often, the questions they ask are as illuminating, or more, than whatever I have on my agenda.
One of my favorite instances of this happened in a remote farming village in dusty central Tanzania. I was visiting a small cooperative of sunflower farmers that was starting to process sunflower oil. After a long day of touring the fields we all sat down for some final Q&A in a miniature cinderblock office building. When it came time for their questions to me, the secretary of the cooperative was visibly ready and excited. “How do you feel about budget support?” he asked. “Is it really the best way of funding development and helping people with what they need?”
My jaw dropped. That was not one of the questions I had anticipated. And as I looked around the room, everyone else was nodding. They were also interested.
Budget support has been a much debated subject among the governments who give aid, the governments who receive aid, the aid effectiveness community and, apparently, at least one entrepreneurial group of sunflower farmers in the heart of East Africa.
The OECD definition of budget support is aid given by development agencies to provide financial support to government budgets to assist the recipient through a program of policy reform and implementation to promote growth and achieve sustainable reductions in poverty. This is distinguished from aid provided for specific projects, where donors retain control of financial and results reporting linked to specific project activities and outcomes.
In general, European donor governments favor budget support whereas the U.S. government, or parts of the U.S. government, dislike it and are still strongly committed to the project paradigm (although MCC and USAID Forward are both examples of efforts to try and shift that paradigm a bit without fully embracing budget support either).
One can well imagine the pros and cons associated with this topic. Budget support helps ensure development that produces public goods and public infrastructure and can improve the public budgeting process. At the same time, it can make core government budgets susceptible to aid flow fluctuation and there are concerns about both donor and domestic accountability.
So what did I tell the farmers in Tanzania when they asked about budget support? I turned the question around and asked them how they felt about budget support.
The domestic accountability question was foremost in their minds. The problem with budget support, they told me, is that we don’t really know where the money goes or how it is spent. We don’t see the results. We have something right here that we need help with and that will improve our lives and prospects for our children. We’re committing resources and time to it and, at the same time, we know there are millions of dollars of budget support flowing into our country but we don’t understand what it does.
That’s how they see budget support, at least for now. How do you see it? Is it an effective policy or not?