Annexes to COM(2011)638 - Future approach to EU budget support to third countries - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2011)638 - Future approach to EU budget support to third countries. |
|---|---|
| document | COM(2011)638  |
| date | October 13, 2011 |
- Systematic information exchange as a minimum, with coordination of responses and common approaches to budget support mechanisms being the ultimate goal.
- EU coordination should be supportive of wider donor coordination and country-led coordination.
- Coordination entails the involvement of both HQ and field level and builds on existing bodies, mechanisms of cooperation as well as existing legal frameworks.
In line with those principles, the EU should:
- share the initial assessment of the commitment of the partner country to the EU fundamental values with a view to finding a common approach;
- share, where relevant, diagnostics and assessments of eligibility conditions;
- harmonise, as far as possible, risk assessment tools and promote a coordinated dialogue on mitigating actions;
- perform joint assessments at country level and regular joint evaluations of budget support operations;
- ensure a high level of expertise for effective policy dialogue with the partner countries, including the use of delegated cooperation and transfer arrangements;
- engage jointly in high level political dialogue, including the monitoring of fundamental values and the appropriateness of pursuing the good governance contract;
- jointly communicate to local stakeholders the disbursements made and the compliance with disbursement conditions.
DESIGN AND IMPLEMENTATION
The EU should assess whether pre-conditions exist to entrust Good Governance and Development Contracts to a partner country, i.e; whether fundamental values of human rights, democracy and rule of law or a clear path towards international standards exist and whether such a Contract could clearly act as a driver to accelerate this movement.
In order to engage in a genuine high-level political and policy dialogue with countries eligible for budget support in general, and for Good Governance and Development Contracts in particular, staff resources at EU Delegations will have to be reviewed nationally and regionally, both in terms of level and expertise. To this end, the Commission will set up senior regional teams, at Headquarters and in Delegations, with the participation of relevant Commission services and the EEAS. These teams will also consult with Member States as appropriate.
Budget support eligibility criteria
i) The Commission will continue to apply the existing three eligibility criteria while reinforcing the following dimensions of each:
Stable macro-economic framework : The Commission will pay particular attention to whether fiscal policy and targets are consistent with macroeconomic stability and managed according to sound rules of fiscal transparency and debt sustainability. Domestic revenue mobilisation is also an important dimension that will be reinforced as a crosscutting issue within the macroeconomic eligibility criteria (fiscal policy) and public finance management eligibility criteria (tax administration). The assessment will be in line with the EU policy on tax and development[5].
National/sector policies and reforms . This should focus on sustainable growth and poverty reduction in line with the policy proposed in the Communication "EU Development policy – An agenda for change: increasing the impact of EU Development Policy"[6]. Moreover, a sound social fabric requires a high degree of justice and fairness in tax collection and expenditure allocation (pro-poor, gender, and children issues), effective social protection and progress in improving employment and quality of jobs.
Public financial management: Before launching a budget support programme, the Commission will assess the institutional, legislative and regulatory framework and the performance of the public financial management (PFM) system in the partner country in order to identify a baseline upon which the dynamic approach will be based and the key reforms will be addressed during implementation by policy dialogue, capacity building and disbursement conditions.
The Commission may decide, on a case by case basis whether in a weak PFM environment it should be appropriate to require some short term measures selected from the partner country's own PFM reform strategy before starting budget support operations.
The fight against corruption and fraud is a key dimension that should have greater prominence under this criterion. The Commission will pay particular attention to the fight against corruption and will promote a stronger use of anti-corruption provisions. Partner countries need to be actively engaged in the fight against corruption and fraud and be equipped with appropriate and effective mechanisms to prevent and detect fraud and corruption (including adequate inspections authorities and judicial capacity) as well as to provide adequate responses and effective sanction mechanisms. Failure to do so may lead to the suspension of EU budget support.
ii) The Commission will also introduce a new eligibility criterion
Transparency and oversight of the budget : The public availability of budgetary information is essential for promoting greater scrutiny of the budget. Based on the most relevant budget information, the Commission will define an "entry point" to assess this eligibility criterion. Countries will have to show that they either provide the relevant information to the public or are making progress in a short period to do so. This may also imply an assessment of the statistical system and in particular of the quality of budget data. Moreover, the Commission will apply a dynamic approach by focusing on the implementation of a credible reform aimed at gradually achieving full disclosure of budgetary information. The Commission will also take into account the specific features of Fragile States and SIDS/OCTs in applying this criterion.
Managing risk
Commission services and where appropriate the EEAS will develop an improved risk management framework adapted to the specific risk profile of budget support, covering political governance, macroeconomic stability, development risk, public financial management, corruption and fraud. This framework will be an important complementary tool in programming, designing and implementing programmes and to inform policy dialogue. It will identify, assess and manage risks in line with levels judged acceptable by the Commission. Risk response and mitigating measures will be proposed according to the balance between risks and benefits.
How much EU budget support to provide to a partner country
The Commission will make a broad qualitative assessment of the following need and performance criteria:
- Financing needs of the partner country assessed on the basis of its medium term fiscal framework and/or the national/sector development strategies.
- Commitment of the partner country to allocate national budget resources in line with development strategy and objectives.
- Effectiveness, value for money and impact of the specific added value that budget support will bring in achieving the partner country's policy objectives.
- Track record and absorption capacity of past disbursements and how effectively agreed objectives were achieved with budget support operations.
- Result orientation in the partner country's development strategy including a monitoring system.
Policy dialogue
Policy dialogue should be consistent with the EU's overall political dialogue conducted with partner countries. The Commission will strengthen policy dialogue to ensure that major reforms are discussed and fully resourced, objectives are identified and results assessed. Policy measures and verifiable results should be at the core of a more strategic and focused dialogue.
The scope of policy dialogue at country level will depend on the specific objectives of budget support operations and will include eligibility criteria. The Commission will continue to broaden its access to the expertise necessary for effective policy dialogue by signing delegated cooperation agreements and/or accepting financial transfer arrangements with Member States.
Performance incentives and conditions
Budget support should continue to involve a combination of base tranches linked to eligibility, and performance tranches linked to progress against indicators in addition to eligibility criteria. The indicators should be drawn from each country's national and/or sector development policy or reform programme and should generally contain a mix of process, output and outcome indicators. Indicators and targets should be reviewed as part of each annual review, and may be adapted in the light of lessons learned. For Good Governance and Development Contracts, conditions may be attached to supporting democracy and human rights.
Predictability
The Commission will make EU budget support programmes predictable by ensuring that eligibility conditions, and the processes for their assessment, are specified as clearly as possible. Furthermore it will make longer term commitments in countries that have demonstrated a strong track record in implementing budget support, taking account of lessons learned from the MDG Contracts.
Strengthening domestic and mutual accountability
Domestic and mutual accountability on budget support should be further enhanced by:
- Strengthening the openness, transparency and accountability of the budget process;
- Supporting a participatory budget support approach;
- Systematically integrating programmes to support national legislative and oversight bodies, as well as sub-national authorities and civil society organisations;
- Increasing transparency by publishing relevant information on budget support financing agreements and performance reviews.
Capacity development
Capacity development needs will be assessed systematically to enhance government's capacity to implement policies and deliver services to final beneficiaries; to promote the active engagement of all domestic stakeholders and to strengthen the national statistical system. The Commission will provide support to capacity development based on demand, linked to clear outputs, and through harmonised and aligned initiatives.
Monitoring, evaluation and communication
The partner country should have a credible and functioning system in place for monitoring and evaluation (M&E) of results. If weaknesses are identified actions should be agreed to strengthen the M&E system. The Commission will pay particular attention to the following elements:
- Institutional setup of an M&E system.
- Existing M&E plan linked to policy development objectives and key processes.
- Quality, regularity and reliability of data, including official statistics, information systems, indicators (input, process, output and outcome) and reporting documents.
- Capacity development to support M&E functions.
The M&E system should contribute to strengthening the voice and legitimacy of national stakeholders in the partner country's budgetary process and ensuring that factual and verifiable information on budget support operations is placed in the public domain.
The EU should communicate better on both EU and bilateral budget support, based on analytical work, performance assessment frameworks, the results of actual evaluations and lessons learned.
CONCLUSIONS
The Commission calls on the Council to endorse the proposed Communication, which seeks to:
- make EU budget support more efficient and effective in delivering development results, and to endorse these proposals, in relation to bilateral budget support, as a means to
- equip the EU and Member States with an EU Coordinated Approach on Budget Support.
The guiding principles set out in this Communication will be incorporated in programming and implementing EU budget support.
[1] Defined as budget support for which the Commission is responsible.
[2] COM(2000) 58, 2.2.2000.
[3] COM(2010) 586, 19.10.2010.
[4] COM(2011) 25, 2.2.2011, and Council doc 7029/11, 10.3.2011.
[5] COM(2010) 163, 21.4.2010 and Council doc 11082/10, 14.6.2010.
[6] COM(2011) 637.