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Sector Support

Paying for Performance in Budget Region Sector Support

IntroductionDonor agencies distinguish between General Sector Support and Sector Budget Support. However, as many evaluations conclude, the differences between these two are modest and both budget supports are increasingly used in parallel. This seems to be because, more bilateral donors favour sector budget support as that is easier to explain and justify to their governments and voters. However, because both General and Sector Budget Supports focus on increasing transparency and accountability in public expenditure management, they share their interest in having both the Ministry of Finance and the Treasury performing well. A sector does not have a specific budget for the treasury to channel budget support to. Often more budget entities are active in the same sector based on their geographic and special functions: In the education sector for instance research centres and universities have at central level their own budget responsibility and at regional/local level, schools may have their direct account/link with the central treasury. The word sector also allows room for interpretation: What makes a regional, a rural, a water or a agricultural sector different? What are their main key-actors and what are their main responsibilities? How should they perform and how do they address and support improvement? This means that sector support is limited in the number of agencies it supports. In this example of regional development, the Ministry of Economic Development is the key agency. In other countries it could be the Ministry of Agriculture or a Ministry of Regional Development that is in charge of regional development.

The structureThe 'Head part of the choice is structured as a logical framework with as its main goal that the Ministry of Economic Development (MED) performs efficiently and effectively in developing the regional sector. It is showing three specific objectives and for each a number of results and for each result Milestones (MS) and Verifiable Indicators (VI). In the PDF file the details on this performance matrix are shown.

The Milestones are comparable to points on a policy roadmap for the development of the sector.1) The first objective is institutional: MED able to coordinate and present rural development policies, strategies and programmes with use of indicators and statistics."2) The second focuses on enterpreneurship: Improved business climate and expanded opportunities in the regions for potential entrepreneurs including the establishment of incubators and access to relevant statistical information."3) The third concerns credit: Improved access to credit in remote regions from specialized agrarian credit institutions with effective lending guidelines and well trained staff."

The "Guts" part of the choice is the weighting of each of the objectives, the results, MSs and VIs. At ministry level the Minister assigns weights to each of the three objectives. At Result level, the person responsible for a specific result like a Deputy Minister, or a Head of a Department, is best positioned to determine the weights of the relevant results, MSs and VIs. The weighting and scoring have effect on the actual size of budget support and because in the determination of a weight, both policy considerations and the likelihood of a low scoring are playing a role, weighting requires special attention. It makes it a useful and transparent instrument in negotiations.The example also makes use of VIs that are taken from the World Bank's annual "Doing Business" report. They are useful indicators of a government's political will to enhance regional development and can be obtained from an objective, easily obtainable source of verification.A MS Excel workbook contains all this information. The contents of that workbook is shown in the PDF file here on the left. Its last pages show examples on how the changing in Weights and differences in Scoring have an effect on the actual budget support. To open this PDF file, click on the button at the left. A click on the "Movie ON" buton will show in a movie the Exel sheets and the effects of weighting. The Excel file also can be obtained. A click on the button opens a secured "PayPal" site where after having paid €10 for the file with Paypal or a credit card, it will be possible in a "Click2Pay" site to download the file.

In ConclusionThe difference between General Budget Support and Sector Budget Support is small. Both should have entities that claim ownership and both should focus on performance. It is important that the owners are able to indentify this performance, to indicate to what extend they want to achieve and to have this achievement measured in a transparent manner. Both donor and recipient will have to understand and to agree on this. This example provides a decision structure based on Logic Framework principles. It has one sheet with the matrix for 'Weighting' at the various levels, one for 'Scoring' also at the different levels and because both 'Weighting' and 'Scoring' determine the value of support, one sheet is with the composition of the budget support. This shows how a decision maker is able in the beginning to define direction of the policy and later to monitor progress and evaluate performance.

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