Donors and recipient governments are increasingly preferring General Budget Support to other forms of aid: development aid delivered directly into national budgets. This now accounts for 20 to 40 percent of government aid in many African countries. The results for development and poverty reduction have been mixed.

Flexible funding from donors, in the form of direct support to national budgets, is expected to empower developing country governments and increase their ability to reduce poverty. This is the key principle behind ‘General Budget Support’. This approach has beeen applied to Tanzania, though poverty impacts are uncertain as there has been no household survey since 2001.

A team of researchers from Daima Associates, Tanzania and the Overseas Development Institute, UK, carried out the first major joint evaluation of a country’s experience of General Budget Support in Tanzania. The Government of Tanzania commissioned the research, along with 14 external agencies providing direct support to the national budget.

The immediate effects of funding were studied, as well as the government's ability to influence the factors behind poverty. Key findings include:

• The immediate effects of General Budget Support have been strongly positive, facilitating nationally-driven reform. However, it has failed to bring change in several key areas of local government, the public sector and the legal sector.
• General Budget Support has been associated with a major expansion in health and education services. Access to social services has improved, but poor people still use government services rarely, partly due to problems with efficiency and quality.
• There have been large improvements in macroeconomic stability, investment and growth. Public financial management has improved. Domestic debt has been stabilised and public arrears cleared.
• There are, however, few signs of increased public spending efficiency or democratic accountability.

Nonetheless, Tanzania has achieved several major changes over the last ten years. This progress has been driven by internal political commitment, but it is unlikely to have been achieved without General Budget Support. However, is it possible to generalise from Tanzania’s experience?

Tanzania differs from other countries in the region – having enjoyed a stable political regime, support for structural reforms and a capable finance ministry since 1995. But it also shares the problems of its neighbours, such as aid dependency and the fact that most aid still bypasses national budgets. The evaluation concludes with several wider lessons about General Budget Support:

• Budget funding can only have a modest influence on public sector reform and institutional development: domestic politics is also influential.
• The main contribution of budget support is to increase funding for development purposes that can be used according to government strategies – so finance has to be sustainable, predictable and timely.
• General Budget Support can reduce transaction costs.
• It can also help poverty reduction, but only indirectly and in the long term.

Source(s):
‘Does General Budget Support Work? Evidence from Tanzania’, Overseas Development Institute, by Andrew Lawson, David Booth, Meleki Msuya, Samuel Wangwe & Tim Williamson, July 2005 Full document.

Funded by: Department for International Development, UK

id21 Research Highlight: 20 January 2006

Further Information:
David Booth
Overseas Development Institute
111 Westminster Bridge Road
London SE1 7JD
UK

Tel: +44 (0)207 9220300
Fax: +44 (0)207 9220399
Contact the contributor: d.booth@odi.org.uk

Overseas Development Institute

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