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NAO report could risk fuelling calls for a return to old ways of working

The National Audit Office report on General Budget Support (GBS), published today, is, in most respects, very much to be welcomed.

It points out the importance of DFID being clear about its objectives in providing GBS, being systematic in weighing up the risks involved, and consistent in its approach across countries.

These are good housekeeping principles for all forms of aid. The problem is that by focusing narrowly on the risks of misappropriating GBS funds, the NAO report could risk fuelling calls for a return to old ways of working.  That is, giving projectised aid to poor countries in ways that make limited use of government systems, only to find that in the long run the essential capacity needed to properly manage public finances fails to take hold.

There is plenty of evidence to show this is exactly what can happen. Result? Underlying problems persist and aid becomes less effective in achieving its intended purpose: to reduce poverty.

GBS is still a relatively new way of working for many donors, including even DFID. GBS is making good headway by providing funds more flexibly than in the past, though there is much to be done to help enable recipients take a long-term view by providing funds on a more reliable and sustainable basis.

Yes, there are bound to be risks of misappropriation, but these need to be weighed against the risk of aid becoming less effective, forgetting lessons from the past. Aid agencies like DFID have to constantly juggle between these. Meanwhile in the public mind there is little or no distinction between the risks of misappropriation of aid funds in the short term, and the risk of aid being ineffective over the long term.

The NAO report has missed an opportunity to give clues for aid agencies like DFID on how to best juggle these different types of risk, or explaining the underlying dilemmas to a wider audience.

The ball, it seems, is back in DFID's court.