Paying for Climate Change: “How” Is as Important as “How Much”

This post was prepared by Athena Ballesteros of the World Resources Institute, and Vivek Ramkumar  of the International Budget Partnership.

Adaptation, mitigation, conservation, new technologies—when it comes to addressing the impacts of climate change and moving to a low-carbon economy, the costs will be shared and significant. As 190 countries met in Copenhagen over the last two weeks to negotiate the next global agreement on climate change, they were confronted by the question of “how much?” but also “how?”

While much of the energy so far has focused on securing contribution commitments from countries, it is critical how these commitments are managed. To get this right, resources and management must be considered simultaneously.

Regardless of how the funds are generated (private investment, bilateral and multilateral contributions, market-based carbon markets, or national budget allocations), a significant share will flow to developing countries that, because of entrenched poverty and threatened and degraded environments, are most vulnerable and less able to respond to climate change impacts.

Any consensus on finance that emerges from Copenhagen must address how to help these countries build resilience and the capacity to respond to climate change, and how to create finance architecture that is seen as legitimate; can mobilize new, additional, and predictable sources of funds; and is transparent and accountable.

A new global deal on climate finance will likely redistribute power, responsibility, and accountability significantly between traditional contributor and recipient countries, including a fair and balanced representation of developed (primarily contributor) and developing (primarily recipient) countries. This redistribution is both long overdue and necessary to ensure the national and local “ownership”—and thus effectiveness—of mitigation and adaptation actions in developing countries.

Given the potential impacts of climate change on their economic development and the lives and livelihoods of their people, governments receiving climate mitigation/adaptation funds must manage these effectively. Responding to climate change will require governments to make fundamental shifts and choices on how to grow economically and how to identify and address significant environmental and social risks that might arise. Involving civil society organizations (CSOs) and the public in these decisions can strengthen policy choices, increase buy in, and, ultimately, improve outcomes.

However, for this public engagement to be meaningful, governments must provide comprehensive and useful information and opportunities to participate. In designing a climate change finance mechanism, the parties in Copenhagen must consider ways to place appropriate pressure on recipient countries to be more open and accountable.

First, any new global climate change finance institution should incorporate practices and procedures into its operations that ensure that its finance flows are transparent, thus promoting accountability at both the international and country level.

For instance, donors often channel aid through mechanisms that are outside a recipient government’s formal budget system, and which follow separate and parallel budget and reporting procedures. Such off-budget funding is justified by concerns that existing government budget management institutions and practices may be weak.

While donors should be concerned about the proper use of their aid monies, they also need to assess the long-term impact of off-budget funding.  Off-budget financing places strains on public finance systems, inhibits effectively integrating aid funds into the regular policy- and budget-making cycle, and undermines the capacity of civil society to engage in oversight.

A global climate finance mechanism should be designed to channel funds whenever possible through government budget systems.  When this is not possible, efforts should be made to ensure that the systems and procedures for funded projects and programs are as compatible as possible with those of recipient government budget systems.

In addition to making sure its own practices are transparent, a climate change finance mechanism could place appropriate pressure on recipient countries to make information publicly available. For example, a clause could be included in financing agreements that all information on the amount and use of these resources that the recipient government provides to the finance mechanism be considered publicly available.

In countries where the main obstacle to increased transparency is a lack of technical capacity or adequate systems for producing and disseminating information, a climate finance institution could play an important role. For example, it could support the introduction of comprehensive information systems to enhance the ability to produce accurate and timely information, and the creation of information disclosure systems. Such systems would allow governments to proactively make public information on the use of these public resources.

It will also be important to recognize that managing climate change funds will be influenced not just by the overall level of transparency but also by the wider accountability environment. This includes oversight institutions with an official mandate to monitor the work of the executive, as well as a civil society and media that is able to use available information to hold governments to account for the use of climate resources. There is growing evidence that these actors can improve the overall quality of accountability and support the functioning of formal oversight institutions.

Therefore, support for strengthening recipient countries’ systems of checks and balances for how public funds are used, including strengthening the role and powers of legislatures and auditors, could be an important contribution to efforts to use climate change resources effectively.

Transparency and accountability are key challenges in negotiating the design of a future climate finance mechanism. If done properly, shifting power and responsibility to developing countries, through greater voice in decision-making, will entail greater responsibility for the outcomes of investments. Combining this with a climate change finance architecture that promotes transparent, participatory, and accountable national and international systems for decision making, measuring, reporting, and verifying funded actions may lead to stronger and deeper partnership between contributors and recipients and, ultimately, to more effective and sustainable efforts to combat climate change.

 

THE EDUCATION MDG: IS MORE BETTER?

This blog post is a shortened  version of a Brief prepared for the IBP by Ruth Carlitz

Although the Millennium Development Goals (MDGs) have come under fire for being overly ambitious or unfair, they have mobilized resources and helped to build political will to improve the education sector in countries around the world. Now, more than halfway to the MDGs’ target end date, concerns are being voiced that progress toward achieving the goals is off track, particularly in Africa. This has led to calls for increased foreign aid and greater local investment in education and other development priorities.

However, despite spending more on the education sector as a whole, governments inevitably have to make choices about what to prioritize within the sector. Unfortunately, it appears that in some cases additional spending to achieve the education MDG has been channeled disproportionately toward quantity (dramatically increasing enrollment), possibly at the expense of quality. It could be argued that this was caused by the education MDG’s emphasis on quantity over quality.

What happened in Tanzania

Tanzania is widely considered to be an MDG “success story.” For instance, at a media briefing on a recent meeting of the UN’s MDG Africa Steering Group, UN Secretary-General Ban Ki-moon cited Tanzania as an example of progress on primary education. The World Bank has also highlighted Tanzania’s “impressive results” in boosting primary school enrollment.

However, Tanzania’s success masks some pernicious consequences of hasty efforts to boost enrollment and calls into question the longer-term impact of these reforms. An immediate consequence of increased enrollment has been overcrowded classrooms. While the government’s plans to address this problem include building classrooms and recruiting new teachers, pupil-teacher ratios remain high—an average of 54-1 in primary schools, and 37-1 in secondary schools. These averages, as high as they are, mask glaring disparities—particularly between schools in urban areas and those in more remote, rural places where teachers are often unwilling to be posted or fail to report for duty.

The impact of quickly expanding enrollment has been particularly hard on the secondary school system. With net enrollment jumping from 6 percent to 26 percent in just four years (2004 to 2008), there has been a scramble to accommodate the new primary school graduates, resulting in the recruitment of vast numbers of poorly qualified teachers. Barely out of secondary school themselves, and sometimes given just weeks of training, these teachers are providing instruction of questionable quality and, some argue, bringing down the prestige of the teaching profession.

What should Donors do?

Revising international goals for education could be an important step in creating incentives for quality. Donors might consider an alternative to the education MDG that has been proposed by the Center for Global Development. The CGD researchers suggest judging progress in terms of outcomes of the educational system, or the capabilities of all children in a given cohort. Assessing progress toward such a Millennium Learning Goal (MLG) would create incentives for improving quality in education, not just quantity.

In addition, this framework would address legitimate concerns that have been raised about a possible trade-off between quality and equity—in other words, increasing the quality, and consequently the cost, of education might lead to restricting enrollment. An MLG that is constructed to measure capabilities of children both in and out of school would create an incentive to draw more children into the formal schooling system, since such an action would presumably raise cohort learning achievement.

Donors might further contemplate the “cash on delivery” strategy, which has also been proposed by CGD. Under this approach, additional aid would be linked to evidence of progress already achieved on the ground, measured by independent assessment. Unlike traditional donor “conditionality,” aid would not be tied directly to the implementation of any specific policies or reforms. Rather, the means of achieving progress would be left to the discretion of the individual government.  “Cash on delivery” could be integrated into the MLG framework, with a given learning goal linked to aid payments for education.

What should governments do?

Planning and budgeting for increasing quality in education will require a fundamental shift from thinking about inputs to focusing on learning outcomes (what an “educated” person is able to do). Once they have identified their desired educational outcomes, governments should then work to determine the inputs needed to achieve these outcomes. Starting from inputs (simply directing more money to the education sector) will not guarantee improved outcomes. In particular, just increasing spending on physical infrastructure and other inputs has not been shown to lead to substantial increases in children’s competencies and learning achievement.

One input that flows more logically from a focus on learning outcomes is investment in teacher quality— one of the only school-related factors that consistently has been shown to influence student achievement. Many countries lag behind target teacher-to-pupil ratios and also suffer from chronic underinvestment in teacher training and professional development. Spending more on teachers implies a longer term view, as the benefits of such additional spending would not be realized immediately.  However, it could help to ensure that the newly constructed classrooms are not empty shells but, instead, fulfill their promise of expanding access to quality education.

Governments could also strengthen “value-for-money” auditing of the education sector to ensure that additional investment is having an impact.  Facilitating public expenditure tracking studies would also help to ensure that money spent on education is spent well.

And Civil Society?

In a few countries, civil society has started playing an important role in monitoring and measuring the impact of spending on education.

For instance, the Uganda Debt Network (UDN) has supported community monitoring groups to track the impact of spending under the country’s Universal Primary Education Programs.  The UDN organized citizens, empowering them to gather relevant budget information and monitor the quality of expenditure and new services. The groups then held public hearings to raise concerns about poor quality school construction and other misspending.

In Malawi, the Civil Society Coalition for Quality Basic Education has implemented public expenditure tracking surveys to monitor education spending at the district and school level.  The coalition’s efforts spurred the government to launch its own expenditure tracking survey and address issues raised by the coalition, such as the late or incomplete disbursement of teacher salaries. In Tanzania, HakiElimu has engaged in similar efforts through the development of a PEDP Monitoring Tool—a questionnaire that community volunteers implement at the school and local government level.

CSOs also can help to measure the extent to which children are learning and building cognitive skills. For example, the CSO Pratham in India produces an Annual Status of Education Report (ASER) that uses data collected by a huge corps of citizen volunteers that  is dispatched across India’s rural districts, where they administer simple tests to school-age children in basic reading, simple comprehension, basic math, and English. The volunteers also visit schools to gather information on enrollment and infrastructure and record other general observations.

 

How can foreign aid donors help, not hinder, transparent budgeting?

This post was prepared by Porter McConnell of OxfamAmerica.

Development aid, used in smart ways, can save lives and help people get themselves out of poverty.  But sixty years of foreign aid have shown that donors cannot fix the problems of poor people by themselves.  Poor people themselves are demanding accountability and performance from their governments, and our aid is most effective when it invests in strengthening this relationship.

Oxfam recently released a paper calling for specific reforms that emphasize recipient ownership—making US foreign aid support the efforts of governments and citizens to lead their own development.  In particular, reforms should follow these three principles:

Information:  Let countries know what donors are doing

•             Be transparent, publishing what the US gives overall every year in a form that recipient governments can use and their citizens (and US taxpayers) can access and understand.

•             Be predictable, providing countries with regular and timely information on three-to-five-year forward expenditure and implementation plans with at least indicative resource allocations.

Capacity:  Help countries lead

•             Better align technical assistance with what governments and citizens need, including by untying aid.

•             Support local efforts to improve domestic accountability, including by using public financial management systems when appropriate and supporting efforts by citizen groups, parliaments, and auditing agencies.

Control:  Let countries lead

•             Limit earmarks and Presidential initiatives that are inconsistent with country priorities.

•             Give recipient governments and citizens incentives to manage their own development effectively and hold each other accountable, including direct budget support in appropriate contexts.

As the report is careful to point out, every country is different, and donors should view the above as a continuum.  Where governments are corrupt or non-responsive, donors can provide information and work primarily with civil society groups.  However, where governments have a record of transparency and providing services to their citizens, donors can and should let countries control the development agenda.

To subscribe to Oxfam’s Aid Reform updates, click here.

Read a related IBP paper: Improving Budget Transparency and Accountability in Aid Dependent Countries: How Can Donors Help?

 

How to drive Public Finance Management reforms in poor countries

The PFM Blog recently posted a fascinating Q&A with the IMF’s Richard Allen Apart from a serious faux pas where he refers to the IMF as an ‘honest broker’ that can provide ‘genuinely impartial advice… and its implementation’, he shares some stunning insights that reflect his years of experience in the field

First he argues (admits?) that there is no ‘consensus mode’ for sequencing Public Finance Management (PFM) reform. In plain English: there is no recipe for where to start or how to string together such reforms. After a comment by Sanjay Vani, Allen does however agree that ‘a solid accounting and reporting is as a precondition to any other reform. In Vani’s words:  “If the Ministry of Finance cannot accurately tell how much money has been spent and for what purposes, no other PFM reform has any chance of success.”

According to Allen, this is not just a gap in our knowledge about how reform works; he also argues that the political, administrative and financial incentives for rapid PFM reform do not exist in most developing countries. He goes even further by arguing that “there are much more prevalent incentives against reform. Budgetary institutions are particularly difficult to reform because they are a primary source of rent seeking’.”

This may look like pessimism about the possibility of any PFM reform at all, but Allen actually argues for a more cautious and modest approach to such reforms: “Even developed countries normally tackle only one major reform a time, compared with the dozens of items typically found in a platform approach document.” But “unfortunately, such scaled-down approaches to PFM reform are not very appealing to some governments and donors.”

After this Allen takes some delicious sideswipes at donors, recipient governments and technical assistance (TA) providers:

“They (donors) are reluctant to say ‘no’ to ministers who ask for the ‘wrong’ types of reform, such as MTEFs and performance budgeting, that are way beyond the capacity of most countries to implement, and contravene the principle of getting the basics right first―Allen Schick’s famous motto ‘look before you leapfrog’.”

“World Bank teams and other donors have pushed IFMIS (Integrated Financial Management Information System) and similar high-tech projects on countries as a way of disbursing loans, and with too little thought to the real needs of the country.”

“Many TA providers have a vested interest in maintaining existing approaches and instruments. TA providers are not sufficiently held to account for the imperfections of the models they use, and the advice they offer.”

Is this fair criticism? In my experience many donors, government officials and TA providers are as perplexed as Allen about what to do next in countries that have seen wave upon wave of reform. So what to do?

If we have learnt anything over the last 30 years, it is that PFM reforms cannot be approached as a series of technocratic projects. For this reason the ‘political turn’ in the thinking of donors is an encouraging development (see DFID’s Drivers of Change studies, for example ). It seems obvious that an understanding of why things are the way that they are, is a necessary first step to any reform. Introducing reforms without changing the political balance of power will doom these reforms to failure or the permanent reform limbo that so many developing countries are stuck in.

With this insight in mind, more and more donors have started working with audit institutions and legislatures. More and more donors also understand that citizens and civil society organisations can provide the political impetus to support technical reforms. See for example DFID, SIDA, DANIDA’s large investments in civil society policy advocacy.

Of course there is no standard recipe for such politically streetwise reforms either. The liberal assumption that the rebalancing of power will emanate from the countervailing forces of the legislature, judiciary, media and civil society is not always true. Those trying to support change cannot avoid have to search for people that have the wider public interest at heart. Sometimes the people driving change are in the Executive. In a few recent cases we have even seen expatriates play this role through the electronic media.

We should also stretch Vani’s point wider. Few of the political processes supporting PFM reforms will get traction if the information produced by ’solid accounting and reporting’ is not made publicly available. The people and institutions that may change the balance of power will need to know what government is doing with public resources before they can change anything about it.

 

What next for Aid? Double or nothing or new conditionalities?

The International Aid debate has been raging between people like Jeffrey Sachs, William Easterly and more recently Dambisa Moyo, who take extreme positions for phasing out Aid or massively increasing Aid. As Kaufmannn summarises in a recent blog:

“Aid is dead:  it is worse than merely useless, since it abets and perpetuates mis-governance and dependency by Africa.  No, to the contrary, massive additional infusions of aid are crucial for all of Africa.  This massive transfer of aid to governments in Africa is particularly urgent right now, in the midst of the financial crisis, which is bound to inflict permanent damage everywhere in the continent.”

The day to day business of poor governments and donors is more complex and less clear cut than these extremes. In practice there is little opposition or choice between governance reforms and increases in Aid. Pursuing either of the extremes on offer will undoubtably end in fiscal collapse or massive wastage. Neither the suspension of Aid nor the indiscriminate multiplication of Aid will lead to the development nirvana that their prophets promise. If the 20th century taught us anything, it must be that such ‘final’ solutions invariably end in tragedy.

The reality of government and development work is much more incremental and less sensationalist than this. As Kaufmann explains in the same blog:

“It is far less appealing for a media story to have to report that aid can work effectively and can help, but only under certain conditions — in particular where there is a serious commitment to improved governance by recipient country government and by donors.  And not otherwise…”

As Kaufmann acknowledges in his blog, the problem that donors and governments come up against much more regularly is how to encourage such governance reforms without using aid conditionalities. While the wide support for budget support has already limited the scope for the use of conditionalities,  it is also common knowledge that conditionalities are not an effective instrument for influencing recipient governments. Recipient governments seem to find no difficulty in deferring, misreporting or negotiating past such conditionalities. The proliferation and growth of new donors has made it even easier for poor governments to dilute the power of conditionalities.

What can create the domestic political will needed for the governance reforms that make Aid effective? Greater aid coordination? More emphasis on domestic accountability? What do you think?