Ghana: How Multi Donor Budget Support (MDBS) works
In early 2003, ten bilateral and multilateral donors1 agreed to provide
co-ordinated support to Ghana’s budget, to help deliver the Ghana Poverty
Reduction Strategy. France became the tenth member in 2005. The framework allows
a fixed amount to support the Government of Ghana budget with the rest dependant
on achievement of mutually agreed goals to support the Government’s own Poverty
Reduction Plan.
Under the MDBS arrangement the UK Government provided £91.7 million in
poverty reduction budget support (PRBS) from 2003 to 2005.
Government has agreed a new PRBS programme with Ghana’s Development Partners
for the period 2006 – 2008. Overall Development partner budget support is
estimated at $300 million per annum. DFID is expected to contribute £120 million
over the three year budget support framework.
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Providing Poverty Reduction Budget Support has real benefits:
- Predictability of aid and donor harmonisation – budget support now
accounts for about 40% of all aid to Ghana. DFID provided around 20% of
this (2003-2005) and has been a key architect of MDBS arrangements including the
broking of policy coherence and harmonisation between the World Bank, European Commission and
bilateral donors.
- Alongside debt relief, budget support has been central in supporting
the first sustained period of macro- economic stability creating the
conditions for economic growth (about 6%).
- In turn macroeconomic stability has supported one of the fastest and
linear rates of headcount poverty reduction in Africa. Income poverty
declined from 42% in 1999 to around 39% in 2005: 500,000 Ghanaians were
lifted out of poverty during the first Ghana Poverty Reduction Strategy
period (2003-2005) alone.
- Budget support has complemented the Government’s own resource allocation
for poverty reduction. Poverty spending (excluding donor contributions)
accounted for around 8.2% of Gross Domestic Product (GDP) in 2005. In dollar terms this
represents a 100% increase in spend between 2002 and 20052.
- PRBS has been influential to the Government's Resource Targeting:
- A recent policy to remove all fees and levies on basic
education has shown a 14% increase in enrolment in the 50 most
deprived districts.
- In the health sector supervised maternal deliveries
increased 8% in the three northern regions in 2004 under a fee
exemption pilot being rolled across the country.
- PRBS has strengthened the relevance and coherence of the budget
process – Ghana has gone from scoring one out of 16 Heavily
Indebted Poor Countries (HIPC) public
financial management benchmarks to 8 in 2005.
But support to the Government’s budget also presents risks. To mitigate
these, the MDBS donor monitors:
- The extent of domestic revenue used for poverty reduction programmes
- The timeliness and transparency of government financial reporting
and auditing
- Value for money in government spending, especially procurement
- Sound macro-economic management.
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1 The World Bank, European Commission, UK, Canada, Denmark, Germany,
Switzerland, Netherlands and the Africa Development Bank.
2 In 2002 and 2004 poverty related expenditure (excluding donor contributions)
was $29.1million and $91.3 million respectively. Source: World Bank 2005
External Review of Public Financial Management.
Last updated: 3 August 2007
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