Budget support increases transparency of use of funds in development cooperation
Press release 190/2005
14 June, 2005
The State Audit Office (SAO) has made a report about the suitability of budget support as a tool of development cooperation with Mozambique and Zambia. The Ministry for Foreign Affairs considers both the audit performed and the report valuable. The Ministry has made similar surveys into the matter. Fight against corruption is one of the areas of focus in Finnish development cooperation, and the Ministry takes fight against corruption extremely seriously in all development cooperation.
In the press release published on 14 June, the SAO concentrates on describing the risks associated with budget support. Thus the press release may give quite one-sided picture of the meritorious report’s contents. As the audit report states, both budget support and project assistance have their merits.
Development cooperation is carried out in countries where risk of corruption is higher already at the outset than in many other countries. Also project assistance has its weaknesses. "The risks should be considered in proportion to the benefits that can be achieved through budget support," emphasizes Under Secretary of State Pertti Majanen, who answers for development policy in the Ministry for Foreign Affairs. "Accordingly, Finland has started to use budget support with caution. Via successful budget support we can create mechanisms through which it is possible to reduce corruption and influence the attitudes in the cooperating countries."
In Mozambique over the past seven years the assistance donors have increased the proportion of budget support of all development cooperation. Within about the same period of time the poverty measured according to Mozambiquean standards has been reduced from 69 percent to 54 percent. Mozambique has maintained the pace it has set for reducing poverty in the country.
The Ministry for Foreign Affairs is of the opinion that the best way of supporting Mozambique’s efforts to reduce poverty is to gradually provide more and more of the financial assistance through the state’s own system of finance. The prerequisites for this are transparency of budget administration and its continued development. Funds channelled through the state budget are under public control, which all project assistance is not.
As far as Zambia is concerned, the Ministry for Foreign Affairs estimates that the current administration is seriously committed to reducing poverty. In case of Zambia Finland is only considering the possibility of budget support – to be undertaken only after thorough inquiries. The condition for this is developing the management of national economy, an engagement the Zambian government has already made.
Additional information: Director General Ritva Jolkkonen, tel. +358 9 1605 6490, and Deputy Director General Juhani Toivonen, tel. 358 9 1605 6310, Department for Development Policy, Ministry for Foreign Affairs