The direct transfer of financial resources to national treasuries is intended to enable recipient countries to implement their national development strategies autonomously. Existing multi-donor evaluations indicate improvements in government spending towards addressing poverty, as well as a strengthening of public financial management systems in countries receiving budget support (see also the evaluation synthesis by Orth et al. 2017).
However, despite its development policy potential and the overall positive findings, budget support remains a controversial instrument, mainly because of the associated fiduciary risks. These include the risk of the misappropriation of budget support funds, as well as the danger of funds being used inefficiently and for purposes other than combating poverty.
In addition to the financial contribution, the standard package of budget support programmes includes non-financial elements such as conditionality, an intensive policy dialogue between donors and the partner government, and accompanying measures. In the short to medium term, accompanying measures aim to reduce the fiduciary risks of budget support. This can be achieved, for example, by financing additional audits.
In the medium to long term, accompanying measures to budget support aim to strengthen government institutions of public financial management, such as the court of auditors, the national tax authority or decentralised units of financial administration. Furthermore, accompanying measures can enable parliaments and civil society to exercise democratic control in national budget processes more effectively.