Promoting Open Budgets: How Should Donors Intervene?

Oct 03, 2013

This post was written by Paolo de Renzio, senior research fellow with the International Budget Partnership’s Open Budget Initiative.

Honduras, Afghanistan, and the Democratic Republic of Congo (DRC) are among the countries that have seen dramatic increases in levels of budget transparency in recent years, as documented by the Open Budget Survey. In all three countries, international institutions and donor agencies have played an important role in encouraging governments to open up their budgets to public scrutiny, as documented in the International Budget Partnership’s (IBP) recent case studies.

In Honduras, the Millennium Challenge Corporation linked negotiations for a new agreement with the government to a series of improvements in the country’s governance, public resource management, and fiscal transparency. In Afghanistan, major international donors highlighted the need to improve budget transparency both as a key component of public financial management and as an anti-corruption measure, promising to channel more resources through the budget if the government made it more transparent. In the DRC, the International Monetary Fund and the World Bank started pushing for fiscal transparency under the HIPC Initiative. More recently, these and other donors have supported the government in implementing budget transparency innovations.

In all three countries, however, donor pressure mostly worked because it was coupled with domestic pressure from civil society and the media, and because it could count on some degree of commitment and leadership within the government. In fact, donors’ record at pushing countries to make specific kinds of policy and institutional reforms more generally is not a particularly successful one. The use of conditionalities has been criticized for being negotiated by a restricted group of officials, for distorting domestic policy processes, and for undermining domestic ownership through the imposition of “one-size-fits-all” models drawn from foreign experience, which often do not make a real difference in government performance.

In recent years, DFID, the European Commission, the World Bank, and the U.S. government all introduced policies that include the use of specific benchmarks and incentives linked to recipient countries’ level of budget transparency in their aid programs. Other donors may soon follow suit. This surge in donor interest in promoting budget transparency deserves to be further discussed, so that the pitfalls associated with the past use of conditionalities can be avoided.

In an effort to stimulate such a discussion, the IBP and the ONE Campaign have jointly produced a note putting forward some basic principles that donors interested in promoting a more effective approach to improving budget transparency and accountability in countries receiving aid could adhere to. These principles are:

  • Budget transparency benchmarks and incentives should be founded on country-based dialogue, developed and monitored in a transparent manner, and adapted to country context;
  • Budget transparency benchmarks and incentives should include minimum standards, but also adopt a graduated approach that can promote improvements;
  • Budget transparency benchmarks should be linked to positive incentives aimed at promoting budget transparency, such as the provision of an increasing share of aid through government systems, or of targeted technical assistance; and
  • The use of budget transparency benchmarks should be coordinated among all donors, and linked to donor improvements on aid transparency.

More details on each one of the principles can be found in the full text of the note.

The application of these principles could serve to promote a more constructive – and potentially more effective – approach to opening budget systems in developing countries to public scrutiny, based on fostering an environment in which public debate and accountability on fiscal matters can flourish, and bringing on board different actors at country level, including parliaments, civil society, and the media. For donors interested in promoting the cause of fiscal transparency and participation, the application of the principles could be adapted and tailored to existing policies, priorities, and aid portfolios, helping to write a new chapter in multistakeholder collaboration in support of deeper and more sustainable governance reforms.

One comment:

  1. Incentives for transparency, from the developing country perspective, seems to be a moving target.

    The promise of country-led development and more efficient direct budgetary support thanks to improved transparency and fiscal discipline seems to be illusive. So, great work by OBI, Revenue Watch, IATI and the PEFA secretariat and others that demonstrate improvement seems to go for (virtually) naught. It’s almost as if countries need to improve transparency in order to receive the same donor benefits as before.

    It is very rare, for example, to see a mark better than D+ on any of the 3 donor measures on PEFA assessments.

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