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The pro-poor spending agenda: Can we evaluate its success?

Rebecca Simson, Research Officer

27 June, 2012

From Lost Decades to Decades of Recovery

1980s and 90s:• Spending in LICs not meeting the needs of the poor, high debt

burdens crowded out social spending

2000s:• Since the late 1990s, economic and political conditions have

improved:– Average annual growth of 5% in LICs– Reduction in debt burden– Poverty reduction performance mixed, but very significant in many

countries– Democratic transitions and an end to a number of civil wars

• Paralleled by a concerted global effort to place poverty in the spotlight

• Has this led to a “pro-poor” composition of expenditure?

International efforts to promote pro-poor spending

• International advocacy• Debt relief• PRSPs• Budget support and other aid for poverty reduction

priorities• Conditionality• PFM reforms• Programmes to build domestic accountability• Research to inform policy-making

Pro-Poor Spending: Theories of Change

• Removing the debt burden will make fiscal space for pro-poor spending

• Sound economic rationale for of pro-poor spending will encourage policy makers to shift expenditure composition

• Conditionality will induce policy makers to adopt pro-poor spending reforms

• TA and other support for planning and budgeting processes will lead to an orderly and transparent budget process where citizens (many of whom are poor and therefore favour pro-poor policies) can hold elected officials to account

• Improving economic and political conditions will lead to domestic demand for more equitable spending: aid/TA provides a helping hand through knowledge-sharing, assistance, best practice

What change?

• Has the composition of expenditure changed?• If it has changed, what factors appear to drive

those changes?

• At country level, there are lots of examples of successful expenditure reforms...

• But across LICs, we know surprisingly little about how and why spending composition changed

Poverty Reducing Expenditure in HIPCs

Source: IDA and IMF (2010) HIPC Initiative and MDRI – Status of Implementation Report

*Excludes incomplete series and countries with more than 150% growth in pov reducing expenditure as % of GDP

-2

0

2

4

6

8

10

12

14

Increase in poverty reducing spending (% of GDP)

2001-03 (ave) - 2007-09 (ave)

What is poverty reducing expenditure?

• Services that directly benefit the poor? (e.g. primary education and healthcare)

• Spending that promotes long-term growth and development? (e.g. education, infrastructure, agriculture)

• Direct transfers to the poor? (safety nets, cash-for-work)

• Spending that ensues when poor people have a voice in budgeting?

From theory to practice

• We’ve spent a lot of time debating the definition of pro-poor spending without reaching a consensus– Progressive, growth-enhancing, political voice etc.

• Its time to ground this question in empirical evidence:– How do LICs allocate and spend public resources?– Differences/similarities between countries– What factors appear to drive changes in expenditure

composition?

What questions should we be asking?

• What categories of expenditure rose as a result of the falling debt burden?

• Conditionality: is it correlated with a permanent change in expenditure composition, or do countries revert to the status quo once donor attention dwindles?

• Aid:GDP ratio: how does this affect the composition of government expenditure?

• Budget credibility: outturns versus budgeted amounts – where are the discrepancies? Are they correlated with conditionality?

• Education and health versus infrastructure? Is there a trade-off?

ODI is the UK’s leading independent think tank oninternational development and humanitarian issues.We aim to inspire and inform policy and practice toreduce poverty by locking together high-qualityapplied research and practical policy advice.

The views presented here are those of the speaker,and do not necessarily represent the views of ODI orour partners.

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r.simson@odi.org.uk