Criteria for general budget support and general sector support. Report commissioned by the Norwegian Ministry of Foreign Affairs

Abstract

This report assesses a set of criteria for providing development aid in the form of general budget support and sector support. The criteria are suggested by the Norwegian Ministry of Foreign Affairs and relate to good governance, structural reforms, the budget process, accounting, auditing and reporting. The criteria are assessed on the background of a discussion of how general budget and sector support work from a macroeconomic view. In addition an analysis of the workings of such support in combination with the most common conditions on which it is given is provided. It is recommended that budget or sector support should be given when the recipient government has adequate administrative capacity. Macroeconomic policy measures should be left to the recipient government in cooperation with the IMF in order to ensure internal consistency. Budget and sector support should be given under the condition of accountability and transparency. If these conditions are not fulfilled, debt relief may be considered as an alternative to sector or budget support.