Transcript Economic Governance

ADE’s 25th anniversary
Economic Governance:
Key to Development ?
Introduction
Bruxelles – Bibliothèque Solvay – 5 October 2015
What is economic governance ?
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Concept belonging to the firm theory, extended to the field
of public affairs at the end of the 1980s
Governance and Development, World Bank (1992) :
“ the manner in which power is exercised in the
management of a country's economic and social resources
for development ”
Four dimensions :
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Public finance management
Accountability
Legal and regulatory framework
Transparency and information
We will mainly focus on the Public Finance Management
(PFM) dimension
Source: ADE
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Evaluating economic governance
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Governance is the stickyard by which donors assess
the quality of institutions and policies in the countries
which benefit of their aid. Therefore the need for
measure instruments.
World Bank - World Economic Indicators
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World Bank – Country Policy Institutional
Assessments
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Indicator of government efficiency
CPIA 13 : quality of budget and financial management
Multi-donors
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Source: ADE
Public Expenditure and Financial Accountability (PEFA)
Performance Measurement Framework
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Why do donors care about the quality of PFM in
beneficiary countries ?
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A good quality PFM is assumed to ensure :
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Fiscal discipline
Allocation of resources that reflects the priorities of the
growth and poverty reduction strategy
Close correspondance of the executed budget with the
voted budget
Close follow-up of budget execution
Strict implementation of the procedures governing
public expenditure
Equitable and transparent taxation
Accountability of the government to citizens
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… and accordingly effectiveness of aid
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Is also ensures the accountability of donor agencies to
their constituents
Source: ADE
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Which actions by donors ?
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There is evidence of an increasing volume of aid aimed at
improving economic governance
World Bank :
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Diagnosis of public finance management systems
Institutional Development Grants
Financing of programmes including PFM reform actions
European union (Budget support programmes) :
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Source: ADE
PEFA diagnosis
Technical assistance to the formulation of PFM reform programmes
Costs of PFM reforms taken into account in the budget of budget
support programmes
PFM performance indicators linked to the variable tranche of the
budget support programmes
Policy dialogue on PFM
Technical assistance to the implementation of PFM reform actions
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Does donor aid contributes to improving
economic governance ?
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Econometric researches suggest that :
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PFM quality is closely related to socio-economic factors : GDP per
head, GDP growth rate, etc.
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… but there is however no mechanical determination of PFM by
structural socio-economic factors
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Aid targeted on PFM and budget support have a positive although
modest contribution to the improvement of PFM quality
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Aid to PFM improvement contributes to progress (i) on the upstream
phases of the budget cycle ; (ii) on the introduction of new
procedures ; (iii) on processes involving a limited number of central
actors
Evaluations suggest that development aid contribues to
improvements of the PFM quality but with uneven results
and without avoiding cases of failure
The most significant progresses are achieved in countries
where donor aid meets a strong political commitment of
governments to reform their PFM system
Source: ADE
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Which results of an improved economic
governance ?
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Improvement of the PFM quality as well as more
specifically the implementation of a medium term
expenditure framework deliver positive results on
fiscal discipline, the budget credibility and on the
correspondance between the allocation of resources
and the priorities of the development strategy
But a positive contribution of PFM improvement to the
efficiency of public expenditure has not been
demonstrated either by econometric analysis nor by
evaluations
Source: ADE
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Questions for the debate
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On the basis of experience, does supporting development
through the institutions in charge of economic governance
remain an appropriate choice or even a previleged entry
point to development aid ?
Do other forms of aid, targeting private actors rather than
state actors, or reinstating the driving role of donors
through the recourse to basket funds or even to classical
projects, emerge as possible alternatives?
In this respect, is the strengthening of economic
governance institutions - when it takes place - mainly a
response to donors’ requests or is it really the driving force
of a development project owned by the population?
If it is a necessary but not sufficient condition, which
additional efforts are needed? Have they been sufficiently
taken into account ?
Source: ADE
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