December 3, 2010

Ensuring Transparency and Accountability in Climate Finance

Posted by Albert van Zyl under Uncategorized
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One of the most critical – and contentious – issues that the COP-16 will address in the current round of negotiations  in Cancun will be how to establish a climate change finance regime. Given the substantial investment of resources – financial, political, technical – that will be required to address climate change, and the potentially devastating impacts of failing to do so,  it is imperative that the flow and use of funds for mitigation and adaptation are transparent, participatory, and accountable.

In the latest IBP Brief, Athena Ballesteros of WRI and Vivek Ramkumar of the IBP recommend that :

  • Contributing countries should adopt a standardized financial reporting format with common definitions and methodologies to quantify climate finance based on components of existing systems.  (However, in launching an effort to either revise or initiate a new means to collect finance data, countries that are Parties to the Convention will need to determine the kinds of data a climate finance reporting system should provide, which will determine the extent of any expanded data collection effort and its likely cost.)
  • Contributing countries should establish a more robust process to review reported data. This could include launching voluntary pilot projects to establish review processes, using independent, nonpolitical technical financial experts; formally establishing clear rules and guidelines for civil society participation in the review process; and improving record keeping so that data between countries can be compared.
  • Parties to the UNFCCC should make a long-term commitment to investing in a robust reporting system.  The introduction of an improved reporting system will require this commitment and take time to implement.  In the short-term, in particular for “fast start” funding, countries need to build on the current reporting  and address some of the factors leading to inconsistent reporting in order to lay the foundation for a more transparent and accountable climate finance regime.
  • As part of overall confidence building, it is important to ensure that financial support to developing countries is accounted for in a clear and transparent manner during the “fast start” period through existing reporting systems and through short-term efforts on the part of multilateral institutions and donor countries.  Lessons learned from this experience could shape the implementation of new long-term reporting and review systems.
  • The parties should also develop a process and format for governments receiving climate funds to report complete information on their use of the funds and encourage all governments to participate in this reporting process.  These reporting formats should be aligned with donor reporting formats and should ensure complete public access within countries to this comprehensive data.

 

Click here to read their whole Brief.

 

December 1, 2010

Easterly’s utopian solution to the wastage of development aid

Posted by Albert van Zyl under Accountability, AIDS, Budget Support, Donor Aid, Governance, Health, Open Budget Survey 2010, Parliament
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The wastage of  health funding

William Easterly argues that donors should not give more development aid while so much of it is being wasted. The most recent example is the WHO report that tells us that 20-40% of health funding is wasted. Easterly questions the WHO’s calls for more health donations, asking “How do you make an impassioned plea for spending more money when we’re wasting so much?” To be sure this is not just through the sort of corruption that corpulent white businessmen moan about over drinks in Washington, London and Paris. The WHO reports that some countries pay almost double what they should for drugs and that at much of the medical equipment donated to developing countries is useless. But I digress. The point that Easterly and many others make is that donors should not send more money through the system until the leaks are fixed. And it makes good common sense. My Mom or any other non-economist would agree.

It’s the same story with general budget support

Similar debates rage around the issue of general budget support. How can you send unconditional money through governments that are broken in so many ways. One of the key assumptions of general budget support is that domestic accountability institutions are in place to keep recipient governments honest. But who would be so brave as to argue that parliaments in Tanzania and Mali have the means and willingness to hold their executives to account for how they raise and spend money? Or that the national audit institutions in these countries have the staff and clout to report mismanagement? Just have a look at the recent Open Budget Index scores for these two countries if you feel like arguing this point. Yet 11 bilateral donors provide general budget support to Tanzania: Norway, UK, Japan, Sweden, Denmark, Ireland, Canada, Germany, Finland, Netherlands and Switzerland, together with the European Commission, the World Bank and the African Development Bank. And Mali receives budget support from at least the Canadian International Development Agency (CIDA), Swedish International Development Cooperation Agency (SIDA), the Europen Comission and the AFD (Agence Française de Développement).

Yet all of this doesn’t mean that I agree with Easterly and the aid skeptics

He preaches Karl Popper’s pragmatism and crucifies “Planners”, who supposedly impose top-down big plans in favour of “Searchers”, who heroically pursue bottom-up solutions to specific needs. Searchers who are more realistic because they focus on piecemeal interventions. But not on this issue. Don’t spend more money until the leaks are fixed, he tells us. Sounds kind of top down and utopian to me.

The searcher’s solution to wastage

So why should we spend more while 20-40% of health funding is wasted? Any ‘searcher’ will tell you that we need to spend more because 60-80% of this funding is not lost. And this is money that buys ARVs, mosquito nets and other things that searchers care about. The realist, pragmatic approach to this conundrum is to fix the leaks even as we increase aid. But no, Easterly wants a nice utopian solution that cleans up the world before we spend more.

 

November 11, 2010

Are balanced budgets still necessary in the fight against global recession and poverty?

Posted by Albert van Zyl under Balanced Budgets, Deficits, Fiscal Policy, IMF, Poverty
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post prepared by Andy Wynne of www.idilmat.com

Most OECD countries are now running significant budget deficits in an attempt to ensure a rapid end to the global recession.  The Managing Director of the IMF, Dominique Srauss-Khan, praised the G20 countries for adopting the fiscal stimulus that was needed, whilst warning that more may be required. The IMF appears to be taking contradictory positions with governments who are adopting budget deficits in order to reflate their economies.  This is being welcomed in the case of the industrial world, but still being discouraged in countries which have turned to the IMF for support.

However, the risks of a prolonged recession or depression remain significant. In March, the Wall Street Journal asked about 50 economic forecasters for their views. Around 55 per cent predicted an L-shape, or a prolonged recession, a further 20 per cent suggested a depression (a reduction in output per person of more than 10 per cent) was the most likely outcome.  In this situation, what is needed is a concerted effort by all counties in the world to push-start the global economy.

Despite this, the IMF seems to be stuck in the old school of thought that balanced government budgets are one of the most important pre-conditions for its support.  All nine standby agreements negotiated since last September have required spending cuts.  Ukraine has had to battle with the Fund over public spending cuts, despite the fact that its GDP is expected to fall by 9 per cent this year and it has a low public debt.   Pakistan is struggling with a Taliban insurgency in its North West Frontier Province in addition to the usual problems of developing countries which need a healthy and well educated work-force to be able to compete when the economic up-turn eventually comes.  A moderate budget deficit would enable both of these challenges to be confronted more effectively.

The economic histories of the US and the UK over the last sixty years demonstrate that high levels of government debt with a following economic boom do not appear to be a handicap and may in fact be beneficial.  Both of these countries had government debts of over 100% of their GDP in the late 1940s, but this was followed by one of the most sustained economic booms either country has experienced before or since.  In the US the Federal debt alone (excluding state or local government debt) reached over 120% of GDP in 1946(1) and in the UK Government debt peaked at nearly 250%(2) at around the same time.  The sustained international economic boom of the 1950s and 1960s meant that these levels of debt were sustainable, could be accommodated and were eventually repaid.

The IMF should take a consistent view of government deficits in the current climate.  If these are to be welcomed in the case of the governments of industrial countries they should also be accepted in The emerging nations.  Otherwise southern governments could see this as another example of northern governments saying “do as we say, not as we do”!

 

November 4, 2010

Does budget transparency flatter to deceive? Evidence from Brazil

Posted by Albert van Zyl under Governance, Open Budget Survey 2010, transparency
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Does budget transparency flatter to deceive?

Arguing that the public has a right to information about government finances is fairly easy. One can use tax payer status, Bills of Rights etc to do this. But more and more questions are being asked about what budget transparency is good for. Researchers often find it hard to show a convincing link between budget transparency and other desirable outcomes like the Millennium Development Goals, appropriate budget allocations or even active legislatures and citizens. It is proving deceptively hard to show that budget transparency is “good for anything” except informing the public, and even that is not self-evident, as we shall see below.

Budget transparency and elections

To illustrate: In a well-functioning democracy, citizens hold politicians accountable for their performance. One of the preconditions is that voters have access to information that allows them to evaluate politician performance. By enabling citizens to monitor policy makers and hold corrupt politicians accountable, improved information would force governments to act in the best interest of the public.

But information about politicians’ performance seldom comes to all members of the public equally and directly. Instead, it is typically acquired and influenced by voters’ efforts, personal traits, characteristics of the community, or the level of political competition. Even worse, because information is  often politically manipulated, it may be potentially discounted or even ignored by the public.

Hope on the horizon?

A 2008 article by Claudio Ferraz (Instituto de Pesquisa Econômica Aplicada) and Frederico Finan (University of California) provide solid data that the release of audit reports had a significant impact on mayors’  performance in elections. Here are some of their key findings:

  • Voters are sensitive to corruption and the amount of corruption: Municipalities where two audit violations associated with corruption were reported, the distribution of the audit report reduced the mayor’s likelihood of reelection by 7 percentage points  The effect increases to almost 14 percentage points in municipalities with 3 violations.  This shows that the electorate is not just sensitive to corruption, but also to the amount of corruption.
  • The media helps to amplify the effect: In those municipalities with local radio stations, the effect of disclosing corruption on the mayor’s likelihood of reelection was more severe. The distribution of the audit report decreased the likelihood of reelection by 11 percentage points among municipalities with one radio station and where two violations were reported.
  • Non-corrupt mayors were rewarded: Although radio exacerbates the audit effect when corruption is revealed , it also promotes non corrupt mayors. When corruption was not found in a municipality with local radio, the audit actually increased the likelihood that the mayor was reelected by 17 percentage points.

Click here to read the paper.

If it can be shown that budget transparency can get rid of poorly performing elected officials, it should not be a bridge too far to show that it also leads to better service delivery and ultimately better development outcomes.

 

November 1, 2010

“Please, sir, can I have some more?” What happened when activists from 80 countries asked their governments for more budget information

Posted by Albert van Zyl under Accountability, Ask Your Government, Donor Aid, Governance, Health, Participation, transparency
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What happened when activists from 84 countries asked their governments for more budget information?

The Open Budget Survey documents what budget information is routinely made available by governments. But what happens when the public asks for budget information that is not routinely released? The International Budget Partnership, Access Info Europe, and the Centre for Law and Democracy decided to find out.

The Ask Your Government initiative coordinates a network of civil society organisations that asked 80 governments the same 6 questions using a standard protocol. The 6 questions asked for specific budget information on spending for interventions to prevent maternal mortality, funds flowing to national environmental agencies, subsidies for activities that pose environmental risks, and the transparency and predictability of development aid.

Results were disappointing… Governments clammed up

The disappointing part is that governments did not respond at all or with insufficient information. In fact only one of the 80 countries provided substantive answers to all six questions. Click here to read the dreadful truth.

The reality is possibly even worse. These questions were asked by activists that know the machinery of government and how to navigate it. If they couldn’t get answers, it is even less likely that an average member of the public would find such a requests answered.

And Surprising…  a few governments surpassed all expectation

The surprising part was that some governments performed better than one could have expected.  It seems good practice is possible even in contexts of low capacity and scarcity. Here are some examples:

  • Namibia provided answers to all six questions, albeit with incomplete answers for some.
  • Guatemala provided substantive answers on the amount of money spent, the drugs purchased, and the number of midwives trained during the last two years.
  • Malawi and Ecuador responded substantively to questions pertaining to past aid disbursements, and Ecuador also responded  comprehensively with information on future aid commitments.
  • While the process for obtaining information was convoluted, India ultimately provided a good answer to the questionabout fossil fuel subsidies – one of the most complicated questions to answer.

Go listen for yourself

As part of the initiative, five partners in Kenya, Malawi, South Africa, Uganda, and Zambia recorded audio diaries of their efforts to request and obtain budget information from their governments.  Based on their audio diaries, the IBP produced a five-part series of radio programs. Click here to listen to their stories.

Want to know even more?

Mail the IBP: info (at) internationalbudget.org or the Open Budget Blog: openbudgets (at) gmail.com

 

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