Aid
Evidence in aligning aid information with recipient country budgets
Exploring the link between donor aid and recipient budgets
Authors:
S. Moon (ed); Z. Mills (ed); Overseas Development Institute
Publisher:
Overseas Development Institute [ES], 2010
A large amount of donor aid in developing countries is spent without the knowledge of governments. The Paris Declaration and the Accra Agenda for Action emphasize the importance of aligning aid with recipient government priorities and delivering aid through government systems. The main concern is the ability to relate aid resources to the expenditure patterns of recipient governments. This paper explores the link between donor aid and recipient budgets, and the role that greater transparency can play in improving budget transparency in developing countries. It examines international classifications for aid to analyse the commonality between national budget structures and transparency.
The study aims to contribute by:
- Adding to the literature on aid effectiveness through examining the similarities among a sample of aid-recipient country budgets, using the Creditor Reporting System of the Development Assistance Committee (DAC/CRS) and the UN Classification of the Functions of Government (COFOG) system for describing aid and government expenditure
- Constructing a generic functional classification derived from the sample of aid-recipient country budgets and using lessons from the comparison exercise.
The paper presents the following broad findings:
- DAC/CRS codes are useful in improving alignment with recipient budgets in some sectors but may not be useful in others
- There are significant commonalities between budget structures at the lowest level of the classifications in most of the sample countries
- Neither of the international classification systems comprehensively captures the commonalities between the lower-level functional components
- The availability of national budget classifications was more limited than expected - a challenge to the integration of aid and budgets.
- It is necessary to test a much larger sample of countries in the functional structure and with regard to all other relevant parameters of budget information
- There is need to identify all funds at a granulated level to allow planning and monitoring activities in a budget cycle
- Greater effort to achieve a more comprehensive set of lowest-level classifications would enable greater accuracy in describing aid activities for better planning and monitoring
- Interfacing aid information with budgets needs to be tackled at the country level to make information relevant for a specific recipient country
- Further work is needed to gain a fuller understanding of the constraints at country level and in donor headquarters.
