Conditionality on aid – specifically on budget support – should cease. This is a key message of an extensive new Joint evaluation of Multi Donor Budget Support in Ghana. According to the evaluation, there is “no evidence that (conditionality) is generating effective incentives for the faster implementation of reforms but it is undermining the quality of dialogue, generating unnecessarily high transaction costs and diverting attention away from the fundamental issues”.

Conditionality on aid – specifically on budget support – should cease. This is a key message of an extensive new Joint evaluation of Multi Donor Budget Support in Ghana. According to the evaluation, there is “no evidence that (conditionality) is generating effective incentives for the faster implementation of reforms but it is undermining the quality of dialogue, generating unnecessarily high transaction costs and diverting attention away from the fundamental issues”. In fact conditionality has led to a dialogue that is “superficial” and “confrontational” undermining the potential for more strategic and constructive dialogue that would be an indication of a more genuine partnership.

Donor practice of providing base level grants which may then be topped up with “incentive tranches” for good behaviour also come under attack by the evaluators and they recommend that they be eliminated. The evaluation seems to suggest that donors have been tinkering around at the margins of real “partnership” with developing country governments and that it is time they grow up and develop a more mature relationship based on trust. One way of building this would be to agree upfront on eight due process principles that the government would agree to. These should be things that the government is doing anyway, and not adhering to them would indeed to be a reason to cut funding. Performance-based conditions, however, should not. The eight “due process” that are recommended are:

1. Continued respect for democracy and human rights;
2. Maintenance of fiscal and monetary policies consistent with macro-economic stability and growth;
3. Adherence to a clear poverty reduction strategy and allocation of resources in line with this;
4. Respect for national budgetary and procurement legislation and the related systems to ensure that spending is in line with the approved budget and follows required procedures;
5. Continuing reforms to improve the quality of these systems and raise value for money;
6. Transparent measurement of the results of public spending and use of these to improve sectoral policies; and
7. Continuous strengthening of the quality of governance and public administration, and periodic public assessments to assess progress

These due process principles would mean a fundamental shift away from the current donor negotiated performance conditions. According to the authors, “it entails an assessment that Government is acting in good faith and following its own legal requirements as well as international norms of transpa-rency and fiscal discipline”. 

The monitoring of results would become a key part of the process. This would not be to tie aid transfers to specific performance targets or outcome indicators but as a means of monitoring progress. Where results were not achieved and it was deemed to be a result of the government not respecting the “due process” principles, then budget support could be cut.

Results so far

The evaluation finds that budget support to Ghana has overall been quite positive. The reduction in domestic debt and the increase in poverty-related expenditures would not have been possible without it. Budget support has contributed to particularly good results in the education sector. Total enrolment of 6-11 year olds in private and public schools has jumped by nearly 20% from 2004/05 – 2005/06 and there has been a 5% growth in the number of public schools and an 8% growth in the number of teachers from 1999/00 to 2004/05.    Multi-donor budget support funds were also found to be more predictable and lower in transaction costs than other aid modalities.

Given these positive results, it is perhaps surprising that budget support has actually been declining and not increasing in recent years. In 2003, budget support represented 39% of total ODA and 13% of total spending. This declined in 2005 to 27% and 9% respectively.    

An important conclusion of the evaluation however, is that multi-donor budget support in Ghana could be greatly improved if it were conceived as a tool for budget financing rather than as a tool for leveraging policy change as is currently the case. The Ghanaian government needs to put in place a clear aid policy and strengthen the budget process and absorptive capacity of the government in order to facilitate this change in approach. Some of these reforms have already started to be instituted.  

The largest donors to the Ghanaian multi-donor budget support programme were (from highest): World Bank, DFID, African Development Bank, EU, Netherlands, Canada and Germany.

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