What do today’s top development challenges – like climate change, gender inequality, or malnutrition, have in common?
These challenges all require a lot of public resources and cooperation across a wide range of sectors to address. This poses real difficulties for public administration and finance systems, which are set up to work in sector silos, sending resources down to individual ministries or agencies, holding them independently accountable for their own specific results. This sector-wise approach is simple, effective, and near universal, being baked into global planning and reporting standards, but creates siloed ways of working that disincentivises progress on cross-cutting issues.
Earlier this year, Mokoro concluded an Evidence Review examining which Public Financial Management reforms are most effective in promoting more adequate and efficient public spending on high-impact, cross-cutting priorities.
Eager to disseminate the findings from this research, the Mokoro network convened at Oxford’s Linacre College to take a comprehensive look at these cross-sectoral PFM challenges and promising reforms to address them. The seminar was well attended both online and in-person, piquing interest in a diverse set of communities of practice, and setting the stage for greater engagement, analysis, and documentation on an important topic still in its infancy.
The Seminar
Mokoro welcomed visitors in person and online to hear more about the Children’s Investment Fund Foundation (CIFF)-commissioned evidence review[1] that looked at what constitutes ‘better spending’ and what reforms have proved successful in delivering this. Whilst this is a difficult time for aid and development globally, the opening address reminded us that there is cause for optimism when communities of people are working together to understand how spending can be made more effective on issues that matter.
The evidence review team began with an overview of the work that covered six cross-cutting issues across ten countries, and a gender review (led by co-author Debbie Budlender). This ‘What is the problem?’ segment explained that spending on cross-cutting issues can be an issue in modern public financial management (PFM) and governance systems, which are typically organised into sector silos. It requires a huge amount of effective coordination across numerous sectoral departments. There are also challenges of authority (who is lead on the cross-cutting issue?), capacity (sectors are focused on their own strategies and results), transparency (cross-cutting issues don’t appear in country budgets, which makes them difficult to track), and incentives (how do you get sectors to spend money on something that is not their core priority?).
These six key lessons were identified from the study.
The team found that a wide array of mechanisms were used to improve cross-cutting spending and results, and that these took effect at different points in the resource management cycles. However, none were effective in isolation.
Four of the case studies were presented to demonstrate how context-specific findings were used to build up these over-arching findings.
Case study 1: Nutrition spending in Ethiopia
Nutrition is a pressing concern in Ethiopia, where 4 out of 5 under fives are stunted. It has been a priority for the Ethiopian government since at least 2008, which began by defining plans, strategies and coordination structures. But gains were undermined by numerous disasters and shrinking health and agriculture budgets. Between 2008 and 2014, a mainstreaming approach yielded very little movement on nutrition spending and nutrition outcomes. From 2015, the Seqota Declaration prioritised improvement to stunting rates, funded conditional grants, and set up dedicated capacity for nutrition programming as well as resource tracking and evaluation systems. Next year there will be a nationwide scale-up, but in the two pilot areas (select woreda in Tigray and Amhara) stunting rates have reduced by up to 26 percent compared to woredas that were not part of it. A number of factors could be credited as contributing to this success in Ethiopia: involvement from the community level all the way up to the highest levels of government; ear-marked grants and matching local funding, time and expertise; results and resource tracking systems; dedicated coordination capacity at all levels; and regular evaluations to measure impact and to provide evidence for continual improvement.
Case study 2: Climate expenditure in Rwanda
Sam Moon, an independent PFM specialist, and co-author of the evidence review, spoke next on climate change as a cross-cutting sector in Rwanda. A catalyst for reform in Rwanda was a study that found climate change was costing the country 1 percent of GDP per year. Here the approach taken was mainstreaming, including the launch of a Green Growth and Climate Resilience Strategy, which was embedded climate change into existing planning and budgeting architecture and utilized existing sector working groups for discussion and coordination. Technical capacity was available to support sectors that required strengthening. FONERWA, an issue specific Climate change fund was established to leverage external climate finance and mobilise private finance, and a sustainability-linked bond launched.
Results show an increase in climate spending of 4.5 percentage points of the budget between 2009 and 2021, though there is not enough consistency in measurement to know how accurate this figure is, and the impact on adaptation and mitigation outcomes remains to be seen.
Case study 3: Disaster resilience spending in the Philippines
Stephanie Allan, an independent PFM specialist, and Deputy Team Leader of the evidence review, shared the findings of the Philippines case study, which focused on disaster resilience and climate adaptation. The approach here was the introduction of cross-agency budget programmes, under a reform named ‘program convergence budgeting’ in the Philippines. In this system, a cabinet cluster identifies priorities and assigns a lead agency (the Department of Environment and Natural Resources in the case of the Risk Resiliency Program). They convene and lead a group of contributing agencies, who between them come up with a single, cohesive and comprehensive budget programme, which they deliberate together before proposing to the Department of Budget Management for additional funding. This has resulted in a steady growth in funds allocated to the Risk Resiliency Program, but has also improved the quality in spending as funds are directed to evidence-based investments and the most disaster-vulnerable provinces.
Case study 4: Early Childhood Development spending in Peru
Stephanie also shared the results of the Peru Early Childhood Development (ECD) case study, which was led by John Kruger (Mokoro Principal Consultant). Peru financed ECD through a results-based financing initiative. The system comprised budget floors – minimum amounts received – and ceiling amounts, which gave performance incentives for agencies achieve certain targets. This was backed by strong political commitment and extensive institutional processes for prioritising and costing interventions as well as results tracking.
In Peru, spending on children has grown and child stunting declined markedly (from 28% to 13% between 2008 – 2016), but this has happened within the context of economic growth and social change, which will have also contributed.
To conclude Stephanie described the four building blocks the evidence review team identified as important:
- Seek a clear mandate from central government for the issue in question
- Set and review the agenda to agree what is trying to be achieved, for example a multi-sector plan
- Decide how this will be achieved and how the agenda will be embedded into the budget system, such as mainstreaming, earmarked funding or raising external finances. Being anchored in multiple phases of the resource management cycle (agenda setting; implementation and review) is critical.
- Decide how effective coordination will be done, building on existing structures wherever possible.
Respondents
Jennifer Asman, health financing specialist at UNICEF East Asia and Pacific responded to the presentation by commending the team on this work on an under-studied, and under-recorded area. She shared three reflections on the presentation based on her significant experience of improving the availability, flow and utilization of resources for essential services:
When an issue has high-level authority, such as from the Office of the Prime Minister, or President, there have been greater successes than if led by a sectoral ministry. Thus, the political economy context is important to consider.
Systemic mainstreaming should deal with the difficult issue of consistent monitoring and reporting on cross-sectoral programming. Most progress to date has been on integrating into upstream PFM process, with more to do on these downstream elements. Ex-post reviews are widely used but are expensive and take time. Budget tagging is becoming more frequently used but is shown to be focused on budget allocations more than executed expenditures. This is an area for improvement.
The sub-national level is a key area for further investigation of cross-cutting spending. There may be fewer barriers to coordination at the sub-national level, but it can come up against siloed sectoral funding.
Prudence Cele, Director of Budget Reform at the South African Treasury, shared key insights from her involvement with the research, her experience within the Treasury’s Budget Office and previous roles working directly with sectoral departments gave a different perspective. She shared that these ideas on cross-cutting spending are not new for the South African context, but that different language may have been used. Recently the needs have changed to focus on climate and innovation. Prudence introduced the function of international reporting commitments and how this often determines the departmental lead. These departments are responsible for setting agendas, leading initiatives and ensuring the cross-cutting issues is included in the medium-term plan. This makes mainstreaming hard, but it remains necessary. She emphasized that it is important to include cross-cutting priorities in policies and strategic plans, and reminded us that plans need to be tailored to country needs and contexts.
Prudence offered interesting insight from the South African Treasury.
Prudence also spoke about incentivising through funding. Department commitment is more to do with capacity and policy priorities, but if no funding is available there will likely be no take up. Mainstreaming requires working within existing plans, but any new initiatives require associated funding.
Adam Leach, Mokoro Principal Consultant, then took questions from the floor for panel members and respondents. Questions related to the reduction in funding available to governments, institutionalisation for sustainability amid political volatility, the role of external advisors, and applicability to fragile and low-capacity contexts.
The Evidence brief and full Synthesis report can both be downloaded here from the Mokoro website.
This write up was co-authored by Mokoro staff members Sarah Candy & Sam Boyle.
[1] All views expressed in the seminar were those of Mokoro and the evidence review team, and not attributable to CIFF, though we are very thankful for their funding without which the research wouldn’t have been possible.
Sarah Candy
