Appendix: Government response
How much? The volume of UK aid
Conclusion 1
We welcome the fact that the Government is trying
to shift the discussion away from debt per se, and towards consideration
of countries' MDG-financing needs, including, but not limited
to, the resource needs of heavily-indebted countries. When the
leaders of the G8 meet in Scotland in June 2005, they will be
expected to deliver on debt relief; the UK Government must do
all it can to ensure that these expectations are not disappointed.
In September, the Chancellor of the Exchequer announced that
the UK would — out of the aid increases announced in July
— finance multilateral debt relief amounting to £100
million. We warmly welcome this move and hope that other G8 nations
will play their part in ensuring that debt relief will at long
last offer countries a truly sustainable exit from the burden
of debt. We in the developed world must do all we can to ensure
that developing countries do not face the impossible choice of
either servicing their debts, or improving their provision of
basic health and education. (Paragraph 13)
We welcome the Committee's comments. Part of the
increased settlement DFID received in the last Spending Review
was earmarked for debt relief. From these funds, we have committed
to covering the UK's share of further multilateral debt relief.
We have calculated this to be just over 10% of the debt service
owed to IDA and the African Development Fund by all post-Completion
Point Heavily Indebted Poor Countries and other IDA-only low-income
countries that have the systems to ensure that the resources released
can be used effectively for poverty reduction.
We recognise the need for other donors to join us
if we are to make a real development impact. This is just one
of a number of ways in which aid resources can be increased.
We are determined to use opportunities not only at the G8 Summit
at Gleneagles, but also at EU meetings, the UN's Financing for
Development conference and the Millennium Review Summit to get
others to commit to increasing the volume of aid resources to
speed up progress towards the MDGs in low-income countries, particularly
in Africa.
Where to and why? Poverty, politics and aid
THE POVERTY FOCUS OF AID AND THE MULTILATERALS
Conclusion 2
There is no room for complacency - European aid
remains insufficiently poverty-focused - but the Commission deserves
credit for the improvements which have been made to the disbursement
of EDF funds, as does the UK Government and others who have pushed
the Commission to do better. (Paragraph 16)
Conclusion 3
Progress has been made with making EU development
policy more poverty-focused, but, particularly in terms of spending,
much more needs to be done. The UK Government has to strike a
difficult balance in its relations with the EU, just as in its
relations with developing countries. Financial support can, through
policy dialogue, encourage reform. But in the absence of reform,
financial support is money wasted. We will be keeping a close
eye on the poverty focus of EC aid, and the UK's contribution
to the EU's aid effort. (Paragraph 17)
Reforming EC development co-operation to make it
more effective and poverty focused remains the main objective
for our engagement with the EC.
One of our key objectives - and a DFID PSA target
- is to increase the allocation of resources going to low-income
countries to 70% of all EC official development assistance. The
current trend is positive with recent figures reported to the
DAC standing at 56% for 2003, up from 51% in 2002. The original
figure quoted for 2002 of 42% was based on the EC incorrectly
reporting its aid. The EC has now submitted data based on correct
methodology for 2003, and also revised their 2002 data. This has
been checked and published by the DAC. Together with other government
departments DFID works to improve this poverty focus in various
ways: by lobbying for increased volumes in the annual budget negotiations;
by arguing for the next EC Financial Perspective (2007-2013) to
introduce a global resource allocation model for its external
resources based on needs and performance, with the expectation
that this would redirect funds to the poorest countries; by protecting
the low-income focus of the European Development Fund in its ongoing
revision and replenishment; and by exploring and promoting the
option of using more loans in middle-income countries while redirecting
grants to low-income countries. Further progress may be harder
to gain. The current poverty focus of EDF spending stood at 93%
in 2003.
DFID is also striving to make poverty reduction and
the MDGs the main focus of all EC development programmes. This
principle has been successfully enshrined in the draft Constitutional
Treaty, which confirms that poverty reduction is the principal
aim of EC development policy. Discussions about a new Development
Regulation to steer development expenditure in the Financial Perspective,
and an upcoming revision of EC Development Policy, may offer further
opportunities to strengthen the policy priorities of EC aid and
reaffirm its focus on global poverty reduction and achievement
of the MDGs. This will remain a challenge during the EU presidency.
In parallel, DFID is pressing hard for further institutional
and management reforms as a means to improve the effectiveness
of EC aid. The arrival of the Union Foreign Minister, provided
the Treaty is ratified, could pave the way for further institutional
reform leading to a better means of managing EC aid. More coherent
management of relations with Africa, Asia and Latin America, and
a closer institutional link between policy formulation, programming
and implementation of development programmes would also contribute.
The programme to reform the management of external
action, started in 2000, is now coming to an end. There have
been some clear improvements. For example, the creation of EuropeAid
has made aid delivery more coherent and effective, and further
decentralisation of power to the field has introduced a more coherent
programming framework. There is still more to be done and, together
with other Member States, we have therefore asked the Commission
to identify ideas for further reforms based on a thorough assessment
of the programme. We will press the new Commission to pursue
this reform agenda during its mandate.
Conclusion 4
If stakeholders, including Parliament, are to
be able to assess whether sensible decisions are being made about
channelling aid through multilaterals, then the Departmental Report
must show clearly the poverty focus of the multilaterals through
which UK aid is channelled. The Departmental Report for 2004
fails to do this; such a lack of transparency unhelpfully limits
DFID's accountability. (Paragraph 18)
We have noted the Committee's comments, and will
include an assessment of the poverty focus of multilaterals supported
by DFID in our 2005 Departmental Report.
IRAQ: AID DIVERSION, SPENDING AND ACHIEVEMENTS
Conclusion 5
In order to demonstrate that UK development funds
are being spent wisely and are leading to desirable development
outcomes in Iraq, DFID must - either in its Departmental Report,
or by indicating where such information can be found - make as
clear as possible how much of its money is being spent on what,
and with what effect. (Paragraph 25)
We accept the Committee's comments and we recognise
the importance of transparency in terms of spending in Iraq. Relevant
data are available in the latest edition of Statistics in International
Development, published in October 2004. We also undertake to present
information relating to funds spent in Iraq and development outcomes
more clearly in subsequent Departmental Reports. In particular
we will distinguish between UK bilateral contributions and their
impact and those we are making as part of the wider international
effort.
IRAQ AND AFGHANISTAN: THE SECURITY/DEVELOPMENT NEXUS
Conclusion 6
It is of the utmost importance that the distinction
between humanitarian/development work, and security/military work
is maintained, in Afghanistan and elsewhere. Security is a pre-requisite
for development. Unless development workers and DFID staff can
travel around the country, beyond the capital or controlled zones,
they cannot obtain a full picture of the country's needs. Unless
women feel safe walking down the street, they will not be able
to play a full role in society. But security is not the same thing
as development. And military objectives must never encroach on
humanitarian objectives. We understand that DFID is doing some
work on the security/development nexus and look forward to seeing
the results. (Paragraph 27)
DFID strongly advocates the differentiation between
humanitarian and military work. It works closely with UK Forces
and other militaries to promote an understanding of the sensitivities
and dangers of any blurring of identities and to ensure that any
military interface with humanitarian activities is appropriate.
Maintaining the distinction between development and security
objectives, particularly in a post-conflict situation, is complex.
Poverty reduction cannot be achieved in a volatile environment.
Either by dint of their presence alone, or to extend the sway
of the legitimate government, the military may engage in activities
that contribute to stabilisation and thus lay the foundations
for social, economic and political development. DFID is supportive
of such activities and again liaises closely with military forces
to ensure that such activities are appropriate to the situation.
The DFID Security and Development Strategy is expected
to be published in the spring. The Strategy aims to show how
insecurity impacts on poor people and how poverty-focused development
assistance can contribute to security at all levels, whether individual,
national or global. It will make recommendations on how DFID
could make a greater contribution to the security of the poor
by better integrating a conflict and insecurity perspective into
its planning and programming. It will also suggest how the international
system might work better to address both security and development
objectives.
We are consulting closely with other government departments
and civil society in formulating the strategy. Copies of the
strategy will be placed in the Libraries of both Houses on publication.
ZIMBABWE AND SUDAN: RESPONDING TO HUMANITARIAN NEEDS
AND RESOLVING CONFLICT
Conclusion 7
We would appreciate further explanation of the
changes made to the way that DFID allocates funds for humanitarian
emergencies, and would like to be kept informed as to their impact.
(Paragraph 28)
The bulk of DFID's humanitarian assistance spending
comes through country programmes managing DFID's responses to
continuing humanitarian crises, through core support to humanitarian
agencies, and through our share of European Community humanitarian
assistance. In addition, central funding is provided to DFID's
Conflict and Humanitarian Affairs Department to respond to rapid
onset disasters or unexpected crises. It is this element of DFID's
humanitarian assistance allocations that has changed.
At the start of the financial year a notional allocation
used to be made to the Conflict and Humanitarian Affairs Department
for responding to emergencies. Additional resources were retained
by DFID's Contingency Reserve and released if needed later in
the year. This approach recognised that the extent of humanitarian
needs varies from year to year. However, consistent spending
on humanitarian assistance over recent years and increased pressures
on the Contingency Reserve have prompted DFID to revise its approach.
It was therefore decided that a greater allocation would be made
in the initial aid framework to the Conflict and Humanitarian
Affairs Department based on historical spending levels. This
would streamline management responses to provide funds for rapid
onset responses during the year. DFID has also set aside some
of this allocation to support better proportionality of funding
across crises, through contributing to neglected emergencies,
in accordance with the principles and practices of Good Humanitarian
Donorship. DFID still retains its scope to supplement these funds
from its Contingency Reserve in exceptional cases, as for example
in its response to the tsunami disaster in Asia.
Conclusion 8
The UK and other donors face a dilemma. Providing
humanitarian assistance to countries such as Zimbabwe may serve
to prop-up the regimes whose own policies are causing the humanitarian
crisis. In this case we believe that the UK is right to provide
humanitarian assistance to prevent more deaths. (Paragraph 30)
We welcome the Committee's conclusion. Although
food security remains elusive for many in Zimbabwe, HIV and AIDS
are now the greatest challenges facing the country. Around 25%
of Zimbabwe's 15-49 year age group is infected with HIV —
one of the highest levels of HIV infection in the world. More
than 3000 people die every week of AIDS-related causes. More than
1.3 million children (up to 14 years old) have already lost one
or both parents to AIDS. The epidemic affects virtually every
family. Life expectancy at birth is now below 35 years - one
of the lowest levels in the world — having exceeded 55 years
in the past. Zimbabwe ranks first in the world in terms of the
number of people with AIDS without access to antiretroviral therapy.
DFID's present priority is to strengthen the international
response to HIV and AIDS in Zimbabwe, including support for the
rollout of treatment and greater attention to orphans and vulnerable
children. We will also continue to provide relief to some 1.5
million of the poorest people in the country who remain vulnerable
after the humanitarian crisis of the last three years. In all
of these areas, the Department will channel its funding through
UN agencies and Non-Governmental Organisations. We will continue
to work closely with the Foreign and Commonwealth Office, and
with other countries within and outside Africa to seek an appropriate
international response to the political and economic difficulties
facing Zimbabwe.
DFID, POVERTY REDUCTION AND POLITICS
Conclusion 9
We applaud DFID for its efforts to develop a co-ordinated
and poverty-focused international approach to meeting the MDGs
in MICs. (Paragraph 37)
We welcome the Committee's comments.
Conclusion 10
Those with a commitment to international development
and poverty reduction - including ourselves, and DFID - should
remain vigilant to ensure that DFID's funds are spent on things
which will contribute to poverty reduction, and, in cases where
there is a disagreement, should encourage a wider open debate.
(Paragraph 39)
We agree. DFID staff have access to guidance and
advice on the International Development Act and all new staff
undertake an induction programme, which emphasises the need for
all spending decisions to be focused on poverty reduction.
Where issues arise about consistency with the Act,
these are carefully considered both within the Department and,
where necessary, with others in Government, including the Law
Officers.
Conclusion 11
The Permanent Secretary was, in giving evidence
to us, right to defend DFID's role as an agency focused on poverty-reduction.
But DFID's role and relative autonomy is proscribed in part by
the Government of which it is part. Operating as part of the
Government which determines its role, DFID needs to strike a careful
balance between protecting its autonomy as a poverty-reduction
agency, and promoting development issues and policy coherence
for development across Government. (Paragraph 41)
DFID's mission is clearly stated as the elimination
of poverty in poor countries; and our PSA targets, by which we
judge progress, are firmly rooted in the internationally agreed
MDGs. Decisions on where UK aid is to be spent are based on political
judgments, levels of poverty and aid effectiveness criteria.
All DFID's interventions are strictly governed by adherence to
the International Development Act, as explained in the response
to Conclusion 10.
The Committee is right to emphasise the fact that
poverty is multi-faceted. Our response to poverty reduction must
necessarily therefore be broad ranging and appropriate to the
particular circumstances in the country or region.
The promotion of development and increasing policy
coherence across the Government is a fundamental part of DFID's
engagement. This is expressed most clearly in our joint PSA targets
with the DTI, HMT, FCO and MoD but is also reflected in our engagement
with other government departments on a wide range of international
programmes. All of these play an important role in reducing insecurity,
promoting wider trade opportunities and contributing to meeting
the MDGs. We will therefore continue to strike a balance between
our role as a bilateral donor and our role within the UK Government
and the wider international community.
HIV/AIDS AND SEXUAL AND REPRODUCTIVE HEALTH
Conclusion 12
Transparency and accountability are important,
not least because they can lead to improved performance, but
the organisation of efforts to tackle HIV/AIDS and sexual and
reproductive health must be driven by realities on the ground
rather than by a desire for a clear audit trail. Targets, transparency
and accountability matter; results matter more. (Paragraph 43)
We welcome the Committee's comments.
Conclusion 13
It would be better if the USA's Emergency Plan
on HIV/AIDS did not create rigidities and obstacles to be worked
around at country-level, but given that it does, we were pleased
to hear that at country-level, a pragmatic response is beginning
to produce results. (Paragraph 45)
We welcome the Committee's comments. The Three Ones
was chaired by the UK, US and UNAIDS and provides a policy framework
we will build on in 2005. The US/UK Task Force provides the opportunity
to work more closely at country level.
Conclusion 14
DFID's work on HIV/AIDS and on sexual and reproductive
health is about introducing the linkages between sexual and reproductive
health and HIV/AIDS on the one hand, but also recognising that
there is a distinct agenda on sexual and reproductive health which
is not subsumed within the HIV/AIDS agenda. There are two connected
but separate agendas. We support, and encourage DFID to maintain
this approach. (Paragraph 49)
Our plans for 2005 will be to deliver this further.
One of the areas we will focus on is maintaining prevention momentum
and this includes bringing together AIDS and sexual and reproductive
health as appropriate.
HOW? POVERTY REDUCTION BUDGET SUPPORT
Conclusion 15
In future Departmental Reports, DFID should provide
a list of the countries receiving PRBS, the amounts of aid they
receive and the proportion received as PRBS, and the levels of
commitment for future years. (Paragraph 54)
We will publish a table setting out the requested
data in the Departmental Report 2005.
Conclusion 16
While we understand the Department's enthusiasm
for PRBS, it must be applied using appropriate risk considerations
to determine whether it is the most suitable way of delivering
aid, and whether the potential development benefits outweigh the
risks that are being taken. Most importantly, future decisions
about PRBS must be based on evidence of whether or not PRBS has
produced the developmental benefits expected of it. Any future
rollout of PRBS must be evidence-based. (Paragraph 57)
We agree that future decisions to provide PRBS must
be evidence-based. As DFID's PRBS Policy Paper notes, any proposal
for PRBS must include a careful assessment of country circumstances,
including an assessment of whether the potential development benefits
outweigh any fiduciary risk.
Proposals for PRBS in countries which have already
been receiving PRBS are required to provide a Project Completion
Report (PCR), which describes the impact of the previous PRBS
programme. For example, Uganda's recent PCR concluded that provision
by DFID and other donors of budget support, coupled with effective
policy dialogue and technical assistance contributed significantly
to the objectives agreed with the Government of Uganda (continued
macroeconomic growth and stability and improved outcomes from
public spending).
The ongoing OECD Development Assistance Committee
(DAC) Evaluation exercise will also gather evidence on the impact
of PRBS in seven countries (Burkina Faso, Malawi, Mozambique,
Nicaragua, Rwanda, Uganda and Vietnam).
Conclusion 17
We would welcome further information from DFID
about how the donor harmonisation agenda is progressing, at the
OECD level, and on the ground in particular countries. (Paragraph
59)
The OECD DAC is currently preparing a report on Aid
Effectiveness for submission to the Paris High Level Forum in
March 2005, which will review progress since the last High Level
Forum in Rome in 2003. This will be based on evidence from a survey
on harmonisation in 14 countries, a report on donor progress against
their own action plans and a study on incentives for harmonisation.
Initial conclusions are that there is a trend towards increased
alignment with country priorities as identified in Poverty Reduction
Strategies. In a few cases, donors are developing strategies jointly.
There has also been an increase in joint funding of projects and
programmes, and a growing number of donors providing budget support.
However, despite an increasing number of good examples, progress
more generally has been slower than desired.
To encourage faster progress the OECD is drawing
up a list of priority areas for action, which will have a realistic
set of monitorable indicators of best practice against which all
donors will be held to account. This will be submitted to the
High Level Forum in March. The OECD Working Party on Aid Effectiveness
will continue to take forward the harmonisation agenda.
Progress on harmonisation in country varies widely;
the following examples are drawn from the DAC's 14-country survey.
In Vietnam, the government is taking a strong lead
in setting priorities; two thirds of donors are aligning with
government strategy, and progress against the Poverty Reduction
Strategy is reported as good. The proliferation of harmonisation
initiatives has highlighted the need for streamlining; one initiative
has been the establishment of a number of ad hoc donor groups
to provide a focus for further harmonisation activities.
In Mozambique, the number of projects across sectors
and provinces is making it difficult for the government to take
a strong co-ordinated lead. The establishment of a Memorandum
of Understanding with 15 donors linked to the provision of budget
support should help. Potential obstacles to harmonisation include
poor communication among donors at country level, and high levels
of fiduciary risk within the government.
In Ethiopia, there is a common understanding that
greater harmonisation and alignment are required. The government
capacity to lead the agenda is weak. Budget support is still
in its infancy and fewer than 10% of donor missions are carried
out jointly. Nevertheless, initiatives such as the development
of a Harmonisation and Action Plan, the creation of a joint Task
Force on Harmonisation and the development of a common framework
for budget support all indicate progress.
Conclusion 18
We welcome the fact that DFID is paying close
attention to the risk that PRBS might lead to more volatile and
unpredictable aid flows. (Paragraph 60)
The UK's draft policy paper 'Partnerships for poverty
reduction: changing aid conditionality' highlights predictable
funding as a key element of the aid partnership. The policy seeks
to establish clear, transparent criteria and monitoring systems
for provision of DFID's aid. DFID is also looking into other
ways of increasing aid predictability, such as the introduction
of rolling, multi-year (three to five year) PRBS arrangements
and, wherever possible, early and predictable disbursement. Through
the OECD-DAC Working Party on Aid Effectiveness, DFID has been
encouraging donors to work together to improve the predictability
of overall aid flows.
Conclusion 19
New skills are needed to support the increased
use of PRBS. The Department must ensure that it has staff with
the necessary skills and experience to support the shift towards
PRBS. (Paragraph 61)
DFID's Training and Development Strategy is reviewed
annually and updated as necessary to ensure that it remains consistent
with DFID's policy objectives.
DFID staff receive specific guidance on PRBS through
policy documents such as the 'PRBS Policy Paper' and draft 'Conditionality
Policy Paper' as well as How to notes, such as 'Managing Fiduciary
Risk when providing PRBS', 'Assessing the Fiscal Stance', and
'Macroeconomic Issues for Scaling-Up Aid Flows'. In addition to
learning on the job, there are regular office seminars and workshops
on implementing PRBS. Policy Division's Development Effectiveness
Group (which includes teams focusing on poverty reduction strategies,
poverty monitoring, and public financial management and accountability)
is a source of specialist support to DFID's country programmes.
Conclusion 20
We hope that a shift to PRBS will enhance the
effectiveness of DFID's aid to developing countries, and we broadly
support DFID's policy in this area. We are concerned however,
first to ensure that the effectiveness of PRBS is assessed and
such assessments inform policy, second to ensure that DFID and
its partner governments are supporting the complementary measures
which are needed alongside PRBS, and third to ensure that DFID
is paying close attention to the implications and risks of increased
use of PRBS. (Paragraph 62)
We welcome the Committee's broad support for DFID's
policy on PRBS.
As noted in response to Conclusion 16, we are giving
priority to assembling evidence on the impact of PRBS. Since
PRBS supports multi-year strategies, it will be several years
before the full impact can be assessed. In the meantime, DFID
is continually reviewing evidence on progress (including evidence
gathered from DFID programmes, from the World Bank and other donors,
and by independent researchers). We are adapting aspects of our
policy in the light of emerging findings.
The multi-donor evaluation mentioned in the response
to Conclusion 16 is assessing to what extent, and under what circumstances
or in what country contexts, PRBS is relevant, efficient and effective
for achieving sustainable impacts on poverty reduction and growth.
The results are due towards the end of 2005.
DFID will continue to work with other donors and
partner governments to support complementary measures needed alongside
PRBS. These include policy dialogue around budget priorities,
technical assistance and project support. A particular priority
is supporting partner governments to strengthen their public financial
management systems, including through training or other support
on planning, budgeting, procurement or audit.
We agree that close attention is required to the
implications and risks of increased use of PRBS. DFID's policy
on fiduciary risk and budget support was agreed with the National
Audit Office and formally set out in a policy note issued in March
2002. The policy acknowledges that in most of the poorest countries
which DFID supports, public financial management systems fall
well below internationally accepted standards of good practice,
but makes clear that, even in such circumstances, budget support
may still offer the most effective way of delivering development
assistance. It may be provided by DFID, if:
· A
thorough evaluation of fiduciary risks has been carried out
· The government
has a credible programme to improve standards of public financial
management
· The potential
development benefits justify the risks, taking into account any
safeguards that can be put in place
· These assessments
are explicitly recorded as part of the decision making process
to provide assistance.
Thus, the decision on whether to provide budget support
is based on relating the risks (taking into account evidence of
improvement and plans to address current problems) to the anticipated
benefits. It is in the first instance the responsibility of the
DFID country office to make the benefit-risk judgment, often working
collaboratively in a multi-donor budget support exercise. But
approval of senior management is required for all substantial
PRBS proposals.
As the volume of budget support has increased, DFID
has taken steps to refine and to standardise the processes for
dealing with fiduciary risk. A guidance note was issued in September
2004. This sets out how fiduciary risk assessments will be carried
out and introduces a central scrutiny process for these assessments,
to introduce greater consistency.
WITH WHAT RESULTS? MONITORING THE IMPACT OF UK AID
Conclusion 21
Where DFID is failing to meet its PSA targets,
or where future slippage is anticipated, the Departmental Report
should specify what actions are being taken - by DFID, and by
others - to attempt to get progress back on track. (Paragraph
66)
We will endeavour to set out this information in
the Departmental Report 2005.
Conclusion 22
We appreciate the difficulties involved in developing
country data and welcome DFID's work to improve statistics in
this area. This work is very important and must remain a focus
of DFID's attention. Reliable data is essential if realistic
and meaningful targets are going to be set and progress is to
be monitored. (Paragraph 69)
We are committed to our important work in improving
the quality of statistics in developing countries. In our partner
countries, we are increasing resources towards building policy-relevant
statistical systems, with an emphasis on poverty monitoring. Internationally,
we are working with the PARIS 21 (Partnership in Statistics for
Development for the 21st Century) consortium of donors, partner
countries and multilateral agencies to raise awareness of the
problems linked to inadequate statistics. We also provide targeted
support to help countries assess their priority statistical requirements.
We are working with the International Financial Institutions and
UN system to increase the resources devoted to building statistical
capacity in partner countries. We are also beginning work
to establish indicators of data quality, which would alert users
to the reliability of particular indicators used in the international
system.
Conclusion 23
While we welcome the use of the traffic light
system, its usefulness could be improved by providing more information
on how progress, particularly likely or anticipated, has been
assessed. More information should also be provided on the action
DFID is taking to address targets where progress has slipped,
along with an indication of how long it might take to get progress
back on track. (Paragraph 71)
We have noted the Committee's comments. The traffic
light system is indeed a useful tool and could be enhanced by
greater explanation of how progress has been assessed. We will
try to provide further clarity in the Departmental Report 2005.
CONCLUSIONS: LEARNING TO BE MORE EFFECTIVE
Conclusion 24
The information provided in the Departmental Report
for 2004 on administration costs is of little or no use to the
reader. Subsequent Departmental Reports must present such information
more transparently. (Paragraph 74)
The table on administration costs in the Departmental
Report is one of the common core tables that the Treasury require
to be included in Departmental Reports. Its format is largely
determined by the way that information about DFID's budgets is
held on the Treasury's Public Expenditure Survey database.
DFID will provide additional commentary and analysis
of our administration costs spending in future Departmental Reports
to make the reasons for changes in the totals more transparent
to readers of the Report.
ADDITIONAL COMMENTS
DFID policy on PRBS for governments with problems
of corruption and human rights abuses (paragraphs 33-35)
The Report notes that donors and recipients must
be clear about the point or threshold beyond which a country's
record on corruption or human rights is simply unacceptable.
DFID provides PRBS on the basis of a government's
commitment to poverty reduction. It considers the extent to which
the government is taking poverty reduction seriously and not infringing
on the rights of the poor to participate in economic, social and
political life. It also carries out a careful assessment of the
fiduciary risks associated with problems of corruption. Where
DFID does not consider the development benefits to outweigh risks
associated with corruption, it does not provide PRBS.
The UK's draft policy paper 'Partnerships for poverty
reduction: changing aid conditionality' notes that judgments in
this area must be considered carefully. Should there be concerns
about political governance, we immediately bring these to the
attention of our partner government and initiate a process of
dialogue about our concerns to seek a negotiated resolution.
In determining whether the basis of the partnership
has broken down, it is important to assess whether there are special
mitigating circumstances, such as the existence of firm evidence
that the breach will be reversed, or that the government is making
efforts to address the problem in question. Each case must be
considered individually, looking at the opportunities for influencing
the situation and whether reducing funding or adding conditionality
will be effective or counter-productive. It is critical to ensure
that there is a good understanding of the long-term direction
of change, and that good monitoring systems exist to distinguish
minor from more serious breaches.
PROVISION OF PRBS TO GHANA (PARAGRAPHS 55 AND 56)
DFID's approach to PRBS in Ghana, as elsewhere, is
based on assessment and management of risks. There has been considerable
improvement in public financial management over the last three
years. A decision on a three-year programme of budget support
in June 2003 was backed by a fiduciary risk assessment that concluded
that the conditions for budget support were met. Since then a
range of fiduciary risk assessments has been carried out, including
one by the International Monetary Fund that reports significant
progress in reducing the level of risk. In the meantime budget
support from all sources has led to direct benefits for domestic
borrowing and interest rates, poverty related expenditure, and
releases to local authorities for development projects.
Department for International Development
20 January 2005
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