General budget support

This presentation is taken from the outcome assessment of the results and lessons learned of Swedish development cooperation with Nicaragua 2001 – 2008 – for full text and detailed references see document Outcome Assessment 2001-2008.

GENERAL BUDGET SUPPORT

(2002-2006; 310 MSEK)

The budget support cannot be directly linked to any of the three main themes of the Country Program for Nicaragua 2003-2007 (see Outcome Assessment 2001-2008), but was given as a general support for poverty reduction. From the information available it is not possible to determine if the budget support contributed to the reduction of poverty. However, an effect of the support mentioned in reports was improved coordination and harmonisation among donors.

Sweden provided general budget support to Nicaragua 2002 - 2006 in total amounting to 310 MSEK. The objective of the budget support 2002- 2004 (60 MSEK per year) was to implement the Poverty Reduction Plan adopted in 2001. In 2002, Nicaragua signed a new agreement with IMF and the follow-up, monitoring and disbursements of the Swedish support was linked to the programs of IMF and the World Bank.

An evaluation of the general budget support in Nicaragua in 2006, notes that it still was in a formative stage which is reflected in limited findings on causality. At the same time, it was pointed out that the support is taking place in a difficult institutional and political context. The support emerged from HIPC and earlier program aid, and effects were in many areas intermingled indistinguishably with these earlier forms of aid. The evaluation also noted that the budget support was part of a move towards more coordinated and country-led aid management (roundtables, program-based approaches etc). The effect so far of the support was the boost it had given to harmonisation among the donors involved the general budget support.

In 2005, Sweden entered into a more advanced system of general budget support together with six other bilateral (Finland, Norway, Germany, Holland, Switzerland, UK) and two multilateral donors (EU, WB). The support was based on a Joint Financial Arrangement and a Performance Assessment Matrix with indicators and actions as a follow-up instrument. The Swedish contribution for 2005–2006 was 130 MSEK. Results reported in mid 2006 were considered good in the areas macro-economy, public finance and productive sectors, and weak in the governance area.

In 2007, Sweden decided to discontinue the general budget support. This decision was motivated by non-fulfilment by Nicaragua of several fundamental principles for general budget support included in the agreement. These principles include respect for human rights, democratic principles, rule of law and independence of the judiciary, macroeconomic stability, and commitment to combating poverty and corruption. The assessment made jointly by all participating donors concluded that there had been no progress in the independence of the judiciary, accountability and poverty reduction, and that there had been a set-back with respect to human rights (the issue of abortion).