MULTI -DONOR BUDGET SUPPORT GHANA’S EXPERIENCE

04/19/23 Presented By DABONE ATTA SNR: Head, GRANT/MDBS, MoFEP, Ghana .ID MEP09034 1

IntroductionBackground to the MDBSObjectives of the MDBSAchievements of the MDBSHow the MDBS WorksHow Disbursements are madeFacts and figures Institutional Frame workChallenges The future of the MDBSConclusion04/19/23 Presented By DABONE ATTA SNR: Head, GRANT/MDBS, MoFEP,

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THE MULTI-DONOR BUDGET SUPPORT.

INTRODUCTION

Multi-Donor Budget Support (MDBS) is the name given to general budget support in Ghana. General budget support consists of Development Partners (DPs) transferring financial resources directly to the Government treasury to complement Government’s own domestically generated revenues and facilitate the implementation of the national budget and its associated public expenditure plans.

The MDBS group in Ghana is made up of the following eleven(11) DPs: the African Development Bank, Canada, Denmark, the European Commission, France, Germany, Japan, the Netherlands, Switzerland, UK and the World Bank.

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2002 - START OF NEGOTIATIONS AFTER CG MEETINGIn 2003 Ghana signed a framework memorandum(FM) with nine DPs to govern the budget support operations

Each year GOG and DPs negotiate and agree on a Policy Action Framework (PAF) document. This document sets out how government will be assessed within the coming year. It outlines the policy actions that government agrees to undertake as part of its growth and poverty reduction process.

In July 2008, a new FM was signed this time including eleven DPs in support of the Growth and Poverty Reduction Strategy II(GPRS II). The FM provides the guiding principles for implementing budget support.

04/19/23 Presented By DABONE ATTA SNR: Head, GRANT/MDBS, MoFEP, Ghana 4

BACKGROUND

OBJECTIVES OF MDBSThe primary objective of MDBS is to provide additional and predictable financial resources to implement the poverty reduction initiatives of the Government in a :

1.Harmonized manner= to avoid parallel systems & a lot of missions and bilateral consultation.

2. Using country systems= to avoid high transaction cost

3.Designing and executing development policies= in line with GOG priorities

4.and fostering domestic accountability and transparency= Improve PFM

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ACHIEVEMENTS OF THE MDBS

1. Donor funds can be predicted now, which has led to better planning and budgeting

2..There is quite improvement in the public financial management systems

3. There is a lot of improvement in the sector dialogue

4.Increased GoG commitments to agreed policy reform objectives

5. Lower transaction cost

6. Contributes to GoG development agenda through MDGs, and GPRS

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HOW MDBS WORKSPolicy Dialogue: GOG & DPs meet at the Sector Working Group level (SWG). CD of MOFEP co-chair this meeting. There 15 SWGs

•Progress Assessment Framework (PAF): Discussions in the SWGs result in policy reform measures and specific growth and poverty reduction objectives drawn from the GPRS II being jointly agreed as MDBS targets. All of the targets from the SWGs are collated in a matrix or framework, called the PAF. Targets are meant to be results-oriented, time-bound, specific, measurable, realistic and are achievable.

Assessment/Review: Every year, usually in May, DPs and Government assess progress against the PAF. The outcome of this assessment informs the disbursement decisions of DPs.

Organisation: The MDBS group is currently made up of 11 DPs. This group is jointly chaired by the World Bank and an annually revolving DP. There is also a vice co-chair, who will assume the DP co-chair position after a year. The current DP co-chair is Switzerland, with Canada taking the position of vice co-chair.

04/19/23 Presented By DABONE ATTA SNR: Head, GRANT/MDBS, MoFEP, Ghana 7

DISBURSEMENT OF FUNDSFunds are disbursed in two tranches (Components)The base tranche and The performance tranche

THE BASE TRANCHE The base tranche is disbursed between January to April after a positive IMF review of the macro-economy

THE PERFORMANCE TRANCHEThe performance tranche is made following a comprehensive review of GOG implementation of policy actions.

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HOW DISBURSEMENT IS MADE.

DISBURSEMENTS – LOANS VRS. GRANTS

04/19/23Presented By DABONE ATTA SNR: Head, GRANT/MDBS, MoFEP, Ghana

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Aid Type 2001 2002 2003 2004 2005 2006End Sep,

2007

Project Loans 34.81 50.02 37.53 34.09 36.28 36.58 38.45Project Grants 27.72 19.68 19.04 29.14 33.38 25.84 22.84Programme Loans 18.68 6.74 20.16 12.60 17.51 20.78 15.49Programme Grants 18.79 23.56 23.27 24.17 12.83 16.80 23.22Total 100.00 100.00 100.00 100.00 100.00 100.00 100.00

Total Loans 53.49 56.76 57.69 46.69 53.79 57.36 53.94Total Grants 46.51 43.24 42.31 53.31 46.21 42.64 46.06Total 100.00 100.00 100.00 100.00 100.00 100.00 100.00

Total Project 62.53 69.7 56.57 63.23 69.66 62.42 61.29Total Programme 37.47 30.3 43.43 36.77 30.34 37.58 38.71Total 100.00 100.00 100.00 100.00 100.00 100.00 100.00

Percentage Distribution of Project and Progamme Loan and Grant Disbursements

PERCENTAGE OF GRANTS TO GDP & DOMESTIC BUDGET REVENUE

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DONOR INFLOWS 2003-2007

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DevelopmentPartner Aid Type Committed Actual $ Committed Actual $ Committed Actual $ Committed Actual $ Committed Actual $AfDB Loan 32.00 32.00 14.00 15.77 30.00 31.51 31.90 32.28 Canada Grant 6.50 3.00 17.30 17.60 13.28 13.38 14.88 13.90 17.20 17.20 Denmark Grant 1.50 1.50 2.53 2.48 3.50 3.48 4.12 5.82 4.17 6.21 European Union Grant 48.00 48.00 33.66 34.50 30.68 29.30 25.14 12.09 18.00 26.28 France Grant - - - - 8.67 9.53 8.40 8.00 20.40 23.82 Germany Loan - - 7.59 7.22 8.52 8.11 12.82 11.68 4.78 14.60 Netherlands Grant 8.40 8.40 20.45 20.39 12.78 12.65 18.32 18.59 18.32 33.97 Switzerland Grant 5.00 5.00 7.14 7.63 7.90 6.97 7.20 6.53 7.20 7.30 United Kingdom Grant 52.00 52.00 71.99 75.94 45.00 43.95 61.25 60.36 77.94 79.49 World Bank Loan 128.00 128.00 127.50 127.50 125.00 123.00 140.00 143.09 100.00 110.08

281.40 277.90 302.16 309.03 285.33 281.88 324.03 312.34 268.01 318.95 NBGermany joined the MDBS programme in 2004France joined the MDBS programme in 2005

200720062005MDBS DISBURSEMENT (2003-2007) IN MILLIONS OF USD

20042003

INSTITUTIONAL FRAME WORK- MOFEP

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LEGAL FRAMEWORK• Clause 7: The Minister responsible for finance shall, at such times as Parliament

may determine, present to Parliament any information concerning any discrepancies relating to:-

a. The granting of loans, their repayment and serving;b. The payment into the Consolidated Fund or other public fund of moneys derived from

loans raised on institutions outside Ghana.

Article 182 of the 1992 Constitution

• Clause 1: The public debt of Ghana shall be charged on the Consolidated Fund and other public funds of Ghana

• Clause 2: For the purposes of this article, the public debt shall include interest on that debt, sinking fund payments and redemption moneys in respect of that debt and the costs, charges and expenses incidental to the management of that debt.

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MOFEP, CABINET AND PARLIAMENT

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CONTROLLER & ACCOUNTANT GENERAL’S DEPT. AND AUDITOR GENERALS’S

OFFICER

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BANK OF GHANA

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Coordination between the MOFEP,MDAs and Donors

MOFEP

AGRIC EDUC HEALTH ENV

DONORSDONORS

MDAsMDAs

BEFORE MDBS

Presented By DABONE ATTA SNR: Head, GRANT/MDBS, MoFEP, Ghana

Coordination between the MOFEP,MDAs and Donors

MOFEP

AGRIC EDUC HEALTH ENV

SECTOR WORKING GROUP

DONORSDONORS

MDAsMDAs

MDBS SECRETARIAT

GPRS GPRS

AFTER MDBS

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THE CHALLENGES

GOG loses a large proportion of expected ODA if it fails to meet agreed performance criteria.

DPs on the other hand give up significant individual visibility than under their respective development.

Further reducing the transaction cost.

Improved implementation of policy actions

Better ownership of the process by all government agencies

How to get the remaining donors to sign on.

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THE FUTURE OF THE MDBS

More efficient Public Financial Management System (PFM) to merit increase in quantum of resources through the MDBS.

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CONCLUSION

There is no doubt that the MDBS mechanism is a significant improvement in aid delivery.Programme aid is a preferred option for any recipient country and when is harmonized it is even better.

Since its inception, MDBS has contributed approximately USD 2 billion to the Government of Ghana budget

The MDBS constitute about thirty percent (30%) of total donor inflow to Ghana.

The remaining seventy percent (70%) is project type funding, sector wide assistance(SWAP) and basket type funding.

THE END