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A way to help governments reduce poverty
7 January 2008
Our mission is to reduce poverty overseas and to this end we deliver aid to poor countries in various ways. One way of doing this is poverty reduction budget support (PRBS). This involves directly supporting a partner government’s budget – giving them money to spend on reducing poverty.
Why we use budget support
PRBS stops countries being dependent on aid forever, and builds countries'
own systems from the inside to help them reduce poverty and sustain this in the
long-term. Supporting governments directly means the government and citizens are
better able to manage their own plans and budgets, get results, and have a say
in how and where the money is spent.
This method of aid improves the government’s capability to deliver. Plus it facilitates change in individual sectors: for example, we often support education directly by helping to develop teacher training and build schools. PRBS enables countries to improve water and sanitation, train doctors and provide services throughout the country:
- In Malawi, budget support helped finance an increase in health spending from $15 million in 2000 to $46 million in 2005;
- In Ethiopia, it helped the Government to almost triple spending to tackle poverty, allocating 60% of its budget to poverty-targeted sectors. This has resulted in, for example, falling infant mortality, and much greater access to clean water - up from 19% in 1996 to 47% of the population in 2006/07.
It also reduces inefficiencies in the aid system, for example making it easier for donors to work together without the need for complex processes and structures.
Because of budget support, millions of people have been lifted out of poverty, and gained access to clean drinking water, better healthcare and new schools.
When we use budget support
We only provide budget support after a careful assessment of the partner government’s commitment to poverty reduction, human rights, good governance and public financial management.
If we have questions about the partner government’s use of this aid - for example concerns about corruption or progress towards agreed goals - we immediately reassess the situation. We may also reduce or suspend aid, or deliver it in a different way. In 2006/07 we reduced PRBS in two countries (Ghana and Sierra Leone) because of concerns about the progress towards building public financial management systems. We do not tolerate misuse of our aid.
However, we believe poor people should not suffer due to the actions of a few and work to ensure that the poor's interests continue to be served. And in the long term, building effective public financial systems, which PRBS helps to do, will reduce misuse of aid.
Furthermore, we do not use this method of aid alone. We use other methods to target specific areas of a country’s systems to complement budget support.
Budget support works
In 2006/07, DFID is providing £433.5 million of poverty reduction budget support to 14 partner countries: nine in Africa and five in Asia.
Many country governments prefer budget support as a method:
- “The advantage of budget support is that the Government will have greater flexibility to allocate resources to programmes and projects.” Zambian Minister of Finance, January 2005
- “The historic debt relief received in 2006 and the increased budgetary support from our cooperating partners helped to strengthen the external position.” Zambian Minister of Finance, February 2007
- “The Tanzanian Government’s preference for general budget support stems in part from the fact that it allows harmonisation among donors to be achieved without the need for complex co-ordination structures.” Source: OECD Survey on Monitoring the Paris Declaration, Tanzania report 2006.