A Review of the Multi Donor Budget Support (MDBS)
Source: ISODEC
In the 2003 budget statement to Parliament, the Government of Ghana announced the formation of a Multi-Donor Budget Support (MDBS) scheme to deal with “shortfalls in donor inflows†and to ensure that donors “disburse funds directly into the Consolidated Fund to support government’s implementation of the Ghana Poverty Reduction Strategy through the budget.†The introduction of the MDBS was the culmination of reforms by some creditor organisations in response to complaints by various aid recipients over the erratic and often counter-productive nature of aid processes and conditionalities. In particular, the Rome Declaration of 2002 by aid providers and recipients, along with the United Kingdom’s Department for International Development (DfiD), urged some kind of direct budget support for recipient countries in order to reduce transaction costs and expedite the disbursement of foreign aid to those countries
In the first year of its implementation, the MDBS achieved a modest success by eliminating the problem of shortfalls in donor inflows and in fact registering a surplus. Data from the Ministry of Finance and Economic Planning indicates that the disbursement of programme loans and grants from external sources in 2003 exceeded the budget forecast by about 4.0 percent, a sharp contrast to the shortfalls of 45.0 percent in 2001 and 2002, respectively. By this result, the MDBS can be adjudged successful in the government’s attempts to deal with the problem of delays and shortfalls in “donor inflows.†This success, however, has important implications for Ghana’s capacity to finance development in the future, because it further deepens the country’s dependence on external sources of development finance, a situation which makes Ghana vulnerable to any future disruptions in such financing and renders it susceptible to the political manipulations of external creditors. In the absence of any viable “exit strategy†from Ghana’s “dependency syndrome†in terms of improved domestic resource mobilisation, this success may well turn into a major disappointment and a problem for economic management in the not-too-distant future.
Already, pledges for 2004 under the MDBS are about 7.0 percent lower than they were in 2003. Although these are only indicative pledges and may be increased by the creditors in line with their various aid policies, the possibility also exists that they would remain the same or be reduced further. Any celebration of the success of MDBS in its first year of operations must, therefore, be tempered with the possibility of such setbacks in the future.
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