Details

  • Service: Advisory
  • Type: KPMG information
  • Date: 12/18/2013

EU issues revised guidelines for budget support operations in development assistance  

In September 2012, following extensive interaction with the IBP, the European Union (EU) issued revised guidelines for its budget support operations in countries that receive EU development assistance. The revised guidelines include budget transparency and oversight as one of its four eligibility criteria. Opening up government budgets to public scrutiny makes budgets more responsive to the needs of poor and marginalised sectors of the population.
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Context and Theory of Change

 

The IBP works to make government budget systems more transparent and accountable to citizens. This work is based on the belief that transparency and accountability, apart from being a key aspect of good governance, can make budgets more responsive to the needs of poor and marginalised sectors of the population. Ultimately this will contribute to poverty reduction. While we know that many different factors influence governments’ willingness to make budgets more transparent and accountable, over the years we have identified international donor agencies as one of the actors that need to be convinced of the importance of opening up government budgets to public scrutiny.

 

In low‐income countries that depend heavily on foreign aid to finance public spending, international donor agencies play an important role in shaping public policies, including recipient government budgets. They do so through direct dialogue with recipient governments, through financing of targeted projects and programmes, and through the promotion and support of specific policy reforms. In recent years, donor agencies have increasingly focused on strengthening the quality of recipient country budget systems. This has been the case especially when donor agencies channel foreign aid through these budget systems, as in the case of sector‐specific or general budgetary support. These types of support are meant to improve fiscal management, support the recipient governments’ own policy priorities, and promote domestic accountability mechanisms. As a consequence, over the past few years, the need for more transparency and effective oversight in budget systems has received more attention in donor policies and programming. For example, the IMF first published its Code of Good Practices on Fiscal Transparency in 1998, and since then it has promoted fiscal transparency assessments and reforms throughout the world. More recently, the UK’s DFID decided to place more emphasis on budget transparency as a key precondition for receiving budget support, and to commit five percent of budget support resources to interventions aimed at improving domestic accountability.