At this crucial moment when Ethiopia is striving to implement the poverty reduction strategy it is essential that the government and the donors coordinate their efforts for efficient management of resources. In this regard the government has shown its willingness to make a commitment to avoid waste and to maintain transparency and accountability in its financial system. On the other hand, it requires an improvement in aid modalities from the donor community. On the part of Ethiopia budget support is desirable.
The Consultative Group Meeting Organizing Committee with the Ministry of Finance and Economic Cooperation which is entrusted with organizing GC meeting, in one of its background papers entitled “Partnership for Enhanced Aid Delivery” highlighted some of the salient problems encountered in Ethiopia’s development cooperation with respect to aid delivery.
In the paper it is stated that the development objectives of the Federal Democratic Republic of Ethiopia include building a free-market-economic system that can facilitate the attainment of accelerated and sustained economic growth benefiting the poorest segment of the population. To this effect, the government aims at attaining rapid and equitable growth by focusing on rural development and improvement in physical and human capital.
In Ethiopia, Official Development Assistance (ODA) comes mainly from multilateral and bilateral sources. For delivery, each donor applies different rules and procedures. The multiplicity of aid delivery mechanism employed by donors entails varied monitoring, evaluation and reporting modalities. Due to this, aid flow to Ethiopia can be characterized by a low level of disbursement.
External assistance in Ethiopia has largely been used to finance capital expenditure while government revenue is allocated largely for recurrent expenditure while government revenue is allocated largely for recurrent expenditure. It is obvious that the country will continue to use ODA but the government is of the opinion that ODA disburses and uses the money efficiently.
Each multilateral and bilateral donor in Ethiopia applies different rules and procedures for approval, disbursement, procurement, monitoring and evaluation as well as for reporting. These in turn increase transaction costs for the government and reduce the speed, efficiency and effectiveness of externally funded projects and programmes. As a result the overall level of disbursement per capital has remained low.
At present, particularly at this juncture where the country is grappling with the implementation of the poverty reduction and sustainable development program, improving the effectiveness of external support is the prime concern of the Ethiopian government.
Thus, moving towards budget support and harmonization of donors procedures as agreed in a number of global for a has become the major focus of the government. If Ethiopia is to conduct effective planning, aid coordination and management, donor procedures need to be integrated into the government system.
It is believed that rather than creating a parallel system for foreign assistance, development partners should adjust more to local procedures and where necessary help Ethiopia to bring its procedures up to international standards.
The introduction of a harmonized system of aid administration will reduce the burden of fulfilling cumbersome conditionalities by implementing agencies and enhance transparency and trust in accounting for the support provided.
Therefore, if poverty reduction goals are to be met, the disbursement level of external resources must be improved. To attain this goal both the government and the donors’ side must take far-reaching measures.
Rather than establishing parallel systems for foreign aid, working within government systems would substantially improve the effectiveness of resources utilization. Such an approach entails that support must be rendered to bring the procedures and management capacities of government institutions up to the international standards.
With a view to improving the efficiency of existing systems, and enhancing the accountability and transparency of public expenditure management, a wide range of reform measures are being undertaken by the Ethiopian government.
Federal and regional institutions regularly carry out monitoring and evaluation of development projects and programs. In addition, the multilateral and bilateral departments of the Ministry of Finance and Economic Development (MoFED) monitor and evaluate externally funded projects and programmes. The Sustainable Development and Poverty Reduction Programme (SDPRP) monitoring system will further revitalize the existing monitoring systems. Since donors and non-state actors are involved in the preparation of the SDPRP, they are also expected to participate in the monitoring process. The annual progress review forum held each year provides the SDPRP monitoring and evaluation process.
According to the stated document, one major weakness in the Ethiopian government system is a lack of an authoritative budget calendar with defined and scheduled budget tasks. But the budget issue has been addressed as part of the on-going Civil Service Reform.
One of the components of the Civil Service Reform Programmes is the Expenditure Management and Control Sub-program. Its activities include: the legal Framework Project; the Public Investment and Expenditure Project; the Budget Reform Project; the Accounts Reform Project; the Cash Management Reform Project; the Information Systems Project; the Internal Audi Project; the External Audit Project and the Development of Accounting and Auditing Professions Project.
In view of this, the government of Ethiopia believes that conditions are favorable and prefers to receive aid in the form of budget support. The government believes that general budget support would create a better basis for policy dialogue between government and donors.
