Tackling rural poverty, together

Michael Wales, Ph.D.

Co-Chair, Global Donor Platform for Rural Development
Principal Adviser, Investment Centre, Food & Agriculture Organisation of the United Nations (FAO)

Direct budget support solves some old problems, but raises new ones

Michael Wales oversees strategy and planning at the Investment Centre, a division of FAO’s Technical Cooperation Department that employs some 80 agronomists, economists, financial analysts, and experts in irrigation and drainage, rural sociology, rural finance, the environment, forestry, fisheries and livestock. The Investment Centre helps governments and financing institutions design and put together technically and institutionally viable agricultural programmes worth about US$3 billion a year. Wales, a sharp-spoken Englishman, studied economics and geography at the University of Leeds. He lived mainly in Africa for 17 years and has led over 70 missions to developing countries on behalf of the Investment Centre and financing institutions. He discussed the new aid modalities and agriculture — and opportunities for the Global Donor Platform — with Timothy Nater in Rome.

Nater: You have said that focusing on sector-wide approaches is passé. What do you mean?

Wales: If you go for direct budget support rather than a SWAp, then the harmonisation issues — all the individual conditions demanded by donors in basket-funding — largely disappear. In general, financing institutions and donors find it easier to agree on broadly-defined development milestones than to try and harmonise detailed procedures on, say, tendering. For example, we can all agree that a government needs to show progress on introducing framework legislation for private investment, but we do not necessarily have to stipulate the details of that policy. With budget support, a donor can say, “My dollar going to the Ministry of Finance of a given country is the same as anyone else’s dollar.” If the recipient government then makes progress as agreed, you can say, “Alright, here’s another $100 million towards your budget.” Of course, this means you must rely on national systems for procurement, management, accounting and so forth. And here, things can slip if you discover that some of the money has gone on something you don’t agree with, or don’t reflect national development priorities.

But the rural sector still needs a comprehensive approach, doesn’t it?
Yes, every country requires its own, separate comprehensive and cohesive sectoral approaches, but rather than the donors stipulating what sector and what programme, the responsibility for deciding is shifted to the national level. This is fine, and all in line with more country ownership, and national responsibility and accountability for what’s being done.

Is project-based assistance a thing of the past?
The new aid modalities are partly supply-driven. If we all acknowledge that there’s broad support for increased development assistance, both through reducing debt repayments and increasing aid flows, then we should also see that it’ll be difficult to do this through the project mode. You can’t design blue-prints and projects that can absorb such quantities of money. If you’re going to effect such a huge transfer of resources, it has to be done with money, not projects. But we must always remember the major problem of limited absorptive capacity, especially in the agriculture sector, which often leaves donors with huge undisbursed resources.