Budget support is an aid instrument that is not linked to projects and that is freely spendable by recipient governments. Budget support volumes have declined in recent years. This report examines the extent to which this reduced interest is due to a lack of budget support effectiveness.
Methodologically, the report takes the results of the IOB policy review of budget support (Dijkstra, De Kemp and Bergkamp, 2012) as starting point. This policy review includes an extensive literature review, a systematic comparison of six recently evaluated cases and cross-country research on the effects of budget support.
The report was presented during the seminar What can Swedish development cooperation learn from the Budget Support era?
Budget support produces the following positive effects:
- Reduced poverty, particularly that which is non-income based.
- Stronger institutions that monitor corruption, which has led to the detection of corruption. There is no research evidence showing that budget support has contributed to increased corruption.
- Improved public financial management and supervision of social institutions on the part of recipients.
- More children attend school and complete their education and better access to health care, water and sanitation.
- Reduced transaction costs linked to the support.
Budget support has not been effective in
- changing the political governance of recipient countries.
- encouraging the recipient countries to respect human rights.
Geske Dijkstra is Professor in Governance and Global Development at Erasmus University Rotterdam.