ODI’s new Budget Strengthening Initiative (BSI) has had its first success – helping national economists in Southern Sudan deliver a realistic draft budget and lay down the foundations for macroeconomic policy capacity. The BSI, which has only been in operation since June 2010, offered support to the Ministry of Finance three months ahead of schedule, building on ODI’s strong reputation and presence on the ground in Southern Sudan.
The BSI has also raised the profile and understanding of macroeconomic policy within Southern Sudan. Central to this success has been ODI’s support to high level South-South learning by facilitating the visit of the Ugandan Commissioner of Macroeconomic policy.
There is much to do as Southern Sudan prepares for the January referendum on possible independence from the north. As well as reshaping public financial management to address the needs of a region emerging from decades of war, the Ministry of Finance and other institutions must also prepare to handle a brand new and national economic scenario. This may include, for example, managing a new currency.
ODI researcher Gregory Smith says: ‘Southern Sudan is starting from scratch in terms of financial management systems. It is not, however, a completely blank slate’.
At the end of the war, the fledgeling Ministry of Finance was housed in a Portakabins and had few staff. Today, it has a proper building and a growing number of skilled civil servants – an interesting mix of former fighters and returnees from as far afield as Australia, Uganda, Ethiopia, Uganda and Zanzibar. Its systems, however, need further development, and expectations are unrealistically high.
Only 2% of the budget comes, at present, from tax revenues. The other 98% is entirely dependent on oil, which can fluctuate in price, as seen so dramatically in recent years. Can oil revenues be relied on to, for example, sustain a large government payroll and massive post-conflict public investment needs?
The BSI aims to support the strengthening of the whole process of financial management in fragile contexts such as Southern Sudan – not only the underlying concepts and principles, but the practical nuts and bolts that weld the financial architecture together.
In Southern Sudan, the BSI is supporting the development of a macroeconomic planning department and the design of an aid strategy. Rather than providing traditional technical assistance, and ‘parachuting’ consultants in to do the job, the ODI approach has been to work with and train Ministry of Finance staff, as they do their job in real time. Peer learning is also proving to be an excellent means of transferring skills and insight into successful reform processes.
The result is a budget process for Southern Sudan that has been delivered with much wider involvement across the Ministry of Finance and with greater engagement with spending agencies. Close interaction within the budget team and with others institutions helps create a more effective and realistic budget document with genuine buy-in.
As Gregory Smith says: ‘More follow-up means more shoe leather is expended, but the end result is far better.’
The macroeconomic planning department that did not exist six months ago is now staffed and benefiting from direct BSI support and links facilitated with Ugandan counterparts.
BSI is working on Southern Sudan, Liberia and a francophone country (to be determined) as the initial pillars. The next steps include looking more closely at the political economy aspects of budget strengthening to understand what motivates policy makers.
ODI’s ability to deliver in difficult circumstances has been deemed so strong that the UK Department for International Development has already agreed to supplement the BSI’s funding from £7 million over three years, with an additional £500,000 per annum for Southern Sudan. The African Development Bank may also provide support in the coming year.
The success of the BSI in Southern Sudan builds on unique ODI experience on the ground. Many of those involved are former ODI Fellows, including Marcus Manuel, Gregory Smith and Tim Williamson. The excellent work of the ODI fellows and the strong reputation of HPG in Southern Sudan has helped to smooth the way, as has advice from Geoff Handley, a former ODI staffer and expert on public financial management, now based in Juba.