Direct Budget Support (Hansard, 13 February 2004)

§ Hilary Benn

DFID continuously monitors the effectiveness in reducing poverty, and the value for money, of its direct budget support. Assessing effectiveness means both monitoring the fiduciary risks we take as we use budget support, and also evaluating budget support in terms of its actual effects on poor people.

DFID monitors fiduciary risk in order to have a basic indication of whether our budget support is being used effectively. Indicators for monitoring fiduciary risk include: whether the objectives for which funds were allocated have been achieved; whether reporting is accurate and timely; whether actual expenditure matches the agreed budget allocations; whether value for money and transparency have been demonstrated in procurement; what progress has been made towards improving financial management.

In addition to this, a joint donor evaluation of general budget support is under way, which will provide a comprehensive assessment of the effects of budget support on developing countries and their people. DFID has the lead in this process which is co-funded by 15 other donors, through the Development Assistance Committee of the Organisation for Economic Co-operation and Development.

The evaluation's indicators of effectiveness will include: whether there are macroeconomic benefits from budget support (for example: recession avoided, inflation controlled); whether the recipient Government has greater control over externally-funded activities and resources; whether public expenditure is made more efficient; whether public administration is made more effective (due to focus on national budget rather than off-budget financing); whether democratic accountability is enhanced.

Ultimately the evaluation will assess whether budget support reduces poverty and reduces social exclusion. This assessment will be made using developing countries' own monitoring systems.

Full details of the indicators used by the evaluation will be published in April in the document "Joint Evaluation of GBS: Evaluation Framework". A copy of this document will be placed in the House of Commons Library.