Budget support as a political instrument

Development Policy05 Feb 2008Wil Hout

With respect to the link that was found between budget/sectoral support and PRSPs, policy dialogue and quality of policy, it is interesting to see what the World Bank, in its Economic Growth in the 1990s: Learning from a Decade of Reform (2005), concluded about the previous emphasis on policy reform. According to the Bank, the focus on policy reform was misguided: ‘except for a very few macroeconomic policies that can be executed with the stroke of a pen and easily observed, policies are meaningless unless they are backed by controls that make the policy actors accountable’ (p.258). The Dutch approach to budget support may actually fall into the same trap as the approach of the 1990s, which is now heavily criticized by its former champion, the World Bank.

The remarks in the IOB report about the role of ‘good governance’ appear to underscore the findings of a study (Hout and Koch, 2006) of the application of good governance criteria in the selection of countries for bilateral aid. The IOB concludes that, overall, there was relatively little interest in and knowledge about governance quality. As a result, budget support became a political instrument that seems to have been used to ‘reward’ and ‘punish’ countries on the basis of political judgements. The so-called ‘track record’, which is seen by the Ministry of Foreign Affairs as its prime instrument for monitoring countries’ performance with respect to the quality of governance and policy dialogue, is discredited by the IOB, as the latter questions the objectivity and quality of the track record test. This is a rather damning qualification of the Ministry’s implementation of its good governance criteria.

The first conclusion of the IOB evaluation on Africa also gives a feeling of déjà vu. In our analysis of selectivity (Hout and Koch, 2006), we found a disturbing set of criteria for country selection. The multitude of criteria had led, in our view, to the possibility that ministers could pick countries and always find an argument on the basis of a few criteria.

The IOB’s conclusion that the Dutch Africa policy was ‘too much policy with too few priorities’ resonates well with our findings on country selection. Because of the lack of priorities (and resulting criteria), all actions can be justified, and there is little scope for parliament to check whether decisions have been made on the basis of priorities/criteria that had been put forward in prior discussions of policy principles.

The IOB’s conclusion that ownership in the Dutch Africa policy was largely an empty shell is in line with much criticism of international development assistance. This point has also been made with respect to PRSPs and the MDGs. Charles Gore (2004) has written a cogent analysis of the ‘double bind’ in which developing countries find themselves vis-à-vis the international donor community, which imposes broad goals (MDGs) and national approaches (PRSPs), thus reducing ownership more or less to an empty shell.


Charles Gore (2004) MDGs and PRSPs: Are poor countries enmeshed in a global-local double bind? Global Social Policy, 4(3): 277-83.
Wil Hout and Dirk-Jan Koch (2006) Selectiviteit in het Nederlandse hulpbeleid, 1998–2004 (Selectivity in Dutch Aid Policy), IOB Working Paper. The Hague: Inspectie Ontwikkelingssamenwerking en Beleidsevaluatie (IOB).
World Bank (2005) Economic Growth in the 1990s: Learning from a Decade of Reform. Washington, DC: World Bank.