Budget support and policy/political dialogue : Donor practices in handling (political) crises

Budget support entered the aid scene at the turn of the millennium and it is considered as the aid modality par excellence to foster ownership and more effective aid through institutional reform. In 2008-2009 a number of political events in aid receiving African countries however pointed at the difficult relation between budget support and (political) governance. The paper analyzes donor policies and practices surrounding policy/political dialogue and budget support and offers a number of policy recommendations on where and how to deal with “political” issues. Based on a desk study carried in March-May 2010 at the request of the Belgian Directorate-General for Development Cooperation, the paper presents a substantial analysis of Mozambique and Zambia where two recent political crises were successfully resolved by five donor countries. The authors argue that using budget support to drive both democratic and economic change is hazardous. Acknowledging the synergy between policy and political dialogue, the paper posits that technocratic and democratic issues should be separated because there are obvious trade-offs between them. Democratic governance issues should be dealt with in a separate high level forum, and in a pro-active rather than reactive way. In addition, donors need to ensure their interventions do not undermine recipient countries efforts to democratize. In effect, they should lower their ambitions: 1) with regard to what they can do: change cannot be bought, it can only be supported; 2) with regard to what recipient governments can do: even when there is commitment, change is most often gradual, not in big leaps. If anything, politics and political savvy should be brought in more, because every reform (however technocratic) is profoundly political.