SECTOR POLICY SUPPORT PROGRAMMES

A new methodology for delivery of EC development assistance.

1

Basic Concepts and Definitions

• The EC is committed to delivering "more and better aid”;

• It is committed to the principles of Programme Based Approaches (PBAs);

• EC policy is to use general and sector budget support as the favoured financial vehicle for its assistance whenever conditions are favourable.

2

Programme-based Approaches

• “A way of engaging in development cooperation based on the principle of coordinated support for a locally owned programme of development, such as a national poverty reduction strategy, a sector programme, a thematic programme, or a programme of a specific organisation”.

• PBAs must reflect the particular circumstances of individual sectors and countries.

• Also known as Sector or Sector-Wide Approaches (SWAps)

3

Characteristics of PBAs and SWAps

• Leadership by the host country;• A single comprehensive programme and budget

framework;• A formalised process of donor coordination;• Harmonisation of donor procedures for

reporting, budgeting, financial management and procurement;

• Increased use of local systems for programme design and implementation, financial management, monitoring and evaluation.

4

Budget Support 1

• The transfer of financial resources from a donor to a partner country’s National Treasury, against agreed conditions.

• Funds are part of the partner country’s global resources,

• Are administered in accordance with the partner country’s public financial management systems.

5

Budget Support 2

• General Budget Support (GBS)– Supports a national development policy or

strategy;– Government decides how it will be used.

• Sector Budget Support (SBS)– Supports a sector policy or strategy;– Government or Donors can specify use.

6

Sector Policy Support Programme(SPSP)

• The EC's aid instrument for supporting a sector programme.

• Serves as a coordinating framework for – government's own activities and – donor support.

• The EC's favoured financing method is budget support,

but sometimes the best option may be project support, or pooled funding with other donors.

7

Sector Approaches Purpose and Objectives

• To promote national ownership, • by supporting government-owned policies and

strategies,

• To strengthen orientation towards results, • by promoting coherence between policy, budgeting

and actual results,

• To coordinate donor inputs with other resources • and reduce (eventually) the transaction costs of

utilising external finance.

8

EC Perspective• By using weak government structures, incentives for

improvement can be generated. • A clear sector policy creates greater coherence,

permitting governments to assert ownership.• Reduced number of projects and their transaction

costs • stops the dissipation of administrative capacity and • allows budgetary and planning systems to become

stronger.• Oversight by Parliament and civil society encourages • improvements to efficiency and effectiveness of public

services, • strengthening of planning, budgeting and management

structures. 9

The 5 Main Elements of a Sector Programme

• A sector policy and strategy;

• The sector budget and its medium term perspective;

• A sector coordination framework;

• The institutional setting and existing capacities;

• A performance monitoring system.

10

1. Sector Policies and Strategies

.

11

What is a Sector Policy?

• The Sector Policy is the first building block of a sector programme.

• Specifies what government aims to achieve in the sector, when and how;

• Distinguishes government’s regulatory role from its service delivery role;

• Specifies the roles of non-government agents;• Outlines any necessary institutional or legal

reforms.

12

What is a Sector Strategy?

• The Sector Strategy, is a detailed plan or document, describes how the government will implement the policy.

• Usually plans for the medium-term (normally 3-5 years).

• It should be directly reflected in annual sector budgets.

13

Good Practice• A coherent and consistently applied sector policy focuses

government, donors and stakeholders on achieving collective results.

• It must be consistent with the partner government’s overall strategic objectives.

• The sector policy document will not be a rigid plan. • It will establish basic principles, objectives and strategies

for the sector. • It will accept that detailed strategies and resource

allocations will continue to evolve. • Therefore, there must be clear procedures and schedules

for regularly updating the policy and strategy. 14

EC Perspective• The sector approach requires a basic

agreement between the government and its partners about – the sector objectives, – how they should be achieved in broad terms.

• Donors should not micro-manage by specifying activities in detail.

• The EC is interested in the expected results. 15

2. The Sector Budget and its Medium Term

Perspectives.

Basic Requirements for SPSP

16

• A credible, comprehensive and transparent sector budget - essential for the proper implementation of the sector policy.

• A clear budget classification is key to the proper elaboration of a sector budget.

• Such a budget should – take into consideration all resources available to the

sector (including external resources) and – list all expenditures (capital as well as recurrent

expenditures) necessary for the achievement of the sector’s expected results.

17

• The annual sector budget should increasingly reflect sector priorities and strategies.

• Progress towards policy based budgeting, covering all resources for the sector, with realistic medium-term sector expenditure plans.

• Eventually, sector budgets will become part of a coherent national medium-term budget and expenditure plan.

18

Good Practice

• Sector policies and sector budgets are the two faces of the same coin.

• In order to obtain the desired results, policies and budgets must be coherent.

• Well prepared budgets supporting weak policies will not achieve better sector results.

• Well designed policies and strategies are helpless if they are not reflected accurately and clearly in the budget.

19

EC Perspective

• Within Sector approaches the EC promotes the link between policy and budget.

• Sector budgets need to fit into government’s own

disciplined overall expenditure plans, • Annual spending needs to be derived from medium-term

projections of resource availability, priorities and recurrent and capital expenditures.

• Eventually, this would become a Medium Term Expenditure Framework, and the central part of the government’s political and budgetary process.

20

3. Sector Coordination

.

21

Framework

• Special attention must be given to sector programme management.

• Led by the government; it should cover– coordination of national stakeholders, i.e. all

concerned government ministries and agencies; – non-governmental participants; – coordination with and among donors.

22

Good Practice• Basic Principle:

“Sector coordination mechanisms must not override the established structures and responsibilities of Government”.

• Beneficiary Ministry is responsible for implementation of the sector programme;

• MinFin must be involved and have a clear role;

• Sector coordination mechanisms must support the wider framework of the country’s own development strategy.

23

EC Perspective

• Experience shows – the importance of a clear government-led

management and sector coordination framework.

• Donor coordination is regarded as a means of achieving – improved ownership and coherence – reduced transaction costs .

24

4. Institutional Setting and Capacity Development

.

25

Basic Concept

• The sector approach aims to use national systems where possible and to reinforce them by using them.

• A clear capacity development strategy led by the government should be in place.

26

Paris Declaration Statement 1

• "Capacity development is the responsibility of partner countries with donors playing a support role".

27

Paris Declaration Statement 2

• "Partner countries commit to integrate specific capacity strengthening objectives in national development strategies and

• to pursue implementation through country-led capacity development strategies ……”

28

Paris Declaration Statement 3

• "Donors commit to align their analytical and financial support with partners’ capacity development objectives,

• make effective use of existing capacities and

• harmonize support for capacity development accordingly."

29

EC Perspective• CD must be owned and led by those wishing

to develop their capacity; • Supply driven and fragmented support to CD

is usually only marginally effective; • Support to CD must respond to a clear

demand;• Be designed and implemented under partner

government leadership; • CD must be driven by results, not by donor-

funded inputs. 30

5. Performance Monitoring System

.

31

Characteristics• Provides key elements to steer policy dialogue and is part of the

overall policy review process.

• Focuses on results and provides feedback to management.

• Might be a performance assessment framework (PAF) containing indicators for– inputs, – outputs, – outcomes,– impacts.

• Clear procedures and schedules for regularly updating the policy and strategy need to be in place.

32

Two Additional Elements

.

33

Macroeconomic Policy

• Essential for a stable environment for the sector; • Assures predictable resource levels.

34

Public Financial Management (PFM).

• Ensures that policy priorities are reflected in budget allocations;

• Promotes efficiency (“value for money”) in public spending;

• Ensures that actual expenditure complies with the approved budget and does not exceed available resources.

35