Supporting reforms, promoting change
EU Neighbourhood
BUDGET SUPPORT PRESS PACK
Supporting reforms, promoting change
EU Neighbourhood
BUDGET SUPPORT PRESS PACK
July 2014
EU budget support in the Neighbourhood
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The impact of budget support on citizens
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Support across the Eastern Partnership
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Supporting reform in the Southern Mediterranean
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VIDEOS Budget support for the EU Neighbourhood
PHOTO GALLERIES SUCCESS STORIES
This publication exists only in electronic format. It has been prepared by the European Neighbourhood Info Centre, a project funded by the EU. It does not represent the official view of the EC or the EU Institutions. The EC accepts no responsibility or liability whatsoever with regard to its content.
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Photo story – ENPARD: modernising agriculture in Georgia
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EU budget support in the Neighbourhood
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Budget support is a form of aid used to support reforms in partner countries in mutually agreed sectors, as well as in macroeconomic and public finance policy It also involves policy dialogue, financial transfers to the partner country, performance assessment and capacity development, based on partnership and mutual accountability. In contractual terms, budget support is a contract that involves the European Commission (EC) and the government of the partner country, a type of cooperation based on a clear set of mutually binding commitments. The key policy objective of budget support in the region is to support legislative and regulatory approximation in the European Neighbourhood. Types of reform include promoting good governance, improving conditions for trade and investment, etc. EU budget support programmes can help in creating a more favourable environment for the ultimate benefit of citizens and businesses, but the responsibility and merit for the success and the speed of reforms lie with the elected executive of the partner country.
Who can participate?
How does it work?
EU budget support is not a blank cheque, nor is it provided to every country. Underlying principles matter, and policy dialogue is a key part of the package. Moreover, eligibility criteria have to be met before and during the programme, and conditions need to be fulfilled before payments are made. This ensures that resources are used for their intended purposes, mitigates risks, and creates incentives for improved performance and results. It also creates incentives for partner countries to improve their government systems.
A Budget Support programme typically lasts three to four years. The money is disbursed based on conditions attached to annual tranches related to what the government should achieve, for example, with regard to justice reform in Georgia, healthcare system reforms in Moldova or higher education reforms in Tunisia.
The European Commission provides budget support to countries that meet the following eligibility conditions:
• a sound national or sectoral development plan; • a stability-oriented macroeconomic framework, with fiscal and monetary policies favourable to economic growth;
• verifiable commitment in improving public financial management;
• verifiable commitment in transparency and oversight of national budgets.
In this context, strengthened policy dialogue will progressively and directly involve key national stakeholders (legislature, audit bodies, civil society, etc.) active in budget transparency and accountability.
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Finally, and depending on the degree of success in terms of the results achieved, the actual disbursement related to each tranche is paid by the European Commission, which authorizes the full transfer of budget support funds when agreed commitments have been fully implemented. If this is not the case, the size of the financial transfer authorized by the EC is reduced accordingly or there is no transfer at all. So, in simple terms, budget support is “reforms done = money paid”.
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The impact of budget support on citizens Citizens do not benefit from a budget support programme in an immediate way, as such programmes focus on mediumterm structural changes. However, when Budget Support programmes favour the acceleration of structural changes, this ultimately benefits citizens and businesses, ensuring a more sustainable development of society as a whole. For example: • education reform ultimately leads to better qualifications for better jobs, contributing to the battle against unemployment • health sector reforms end up with more people having access to quality health care services • justice reform means greater access to justice, shorter waiting times, etc.
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“Drawing on the EU’s unique range of instruments, we are seeking to achieve a new, innovative style of partnership. We want to engage further in cooperation with our neighbours to support their democratic transformation. We encourage reforms in key policy areas. We offer stronger links of political association and economic integration, adapted to our partners’ wishes and capacities. EU funding channelled via budget support programmes is an important tool to achieve these goals.”
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Štefan Füle, European Commissioner for Enlargement and European Nieghbourhood Policy
• fiscal reforms deliver greater transparency and more efficient tax collection, freeing up funds to invest for a better future Why budget support? Budget support can allow for a deeper policy dialogue and more effective support for reforms than traditional, technical assistance projects. For example, budget support is a useful tool to engage with partners in the preparation and implementation of new bilateral agreements. It promotes improvements in public spending and reduces the transaction costs of EU assistance, notably by relying more on national systems. Budget support puts a strong emphasis on development strategies that are nationally owned, and in the long run, it helps countries to build their own financial resources in order to reduce dependence on aid. Having said this, budget support on the one hand, and different types of project support on the other, should not be considered as mutually exclusive, but rather mutually reinforcing, when local conditions allow.
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Support across the Eastern Partnership
BUDGET SUPPORT PRESS PACK Transforming agriculture in Georgia While nearly half of the population in Georgia derives most of its income from agriculture, the sector actually contributes less than 10% to GDP, mainly due to poor efficiency. With EU budget support through the ENPARD programme, the Georgian government aims to establish 160 cooperatives involving small farmers, expected to create economies of scale, improve market connections and enhance efficiency. Click here to visit a women’s cooperative benefitting from the programme.
EU budget support is the main form of EU assistance in the Eastern Partnership region, and all Eastern partners with the exception of Belarus benefit from budget support. The main objective of such support is to promote democratic governance, as well as sustainable and inclusive growth and poverty reduction.
Examples of budget support programmes in the EaP region include:
Armenia EU support of justice reform Through this € 18 million programme, implemented from 2009-2012, the EU has assisted the government of Armenia in implementing its own programme of justice reform, with the ultimate goal of developing a more independent, transparent, accountable, accessible and efficient judicial system. A follow-up programme will support the next stage of justice reforms from 2014. www.enpi-info.eu/maineast. php?id=30912&id_type=1&lang_ id=450
Moldova EU support of economic situation in rural areas The € 59 million programme (20102016) contributes to job creation and business development in rural areas by promoting access to investment grants, loan guarantees and start-up funds.
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Georgia EU support of reforms in the criminal justice system This budget support operation aims at enhancing the implementation of new laws, building institutional capacity of the Ministry of Justice and improving coordination with key institutions from the justice sector. Juvenile justice is one of the sub-sectors of the overall reform of the criminal justice system in which most progress has been observed.
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A comprehensive overview of budget support programmes in the Eastern Partnership is available in the EU publication, Eastern Partnership: Supporting reforms, promoting change
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Supporting reform in the Southern Mediterranean
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Five countries in the southern Mediterranean neighbourhood benefit from budget support – Algeria, Egypt, Jordan, Morocco, and Tunisia. Since 2012, no new budget support programmes have been approved for Egypt due to the lack of reform implementation, while disbursement levels of on-going programmes have decreased due to the on-going instability in the country and the noncompliance with agreed conditions.
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Examples of budget support programmes in the southern Mediterranean region include:
Jordan
Morocco
Tunisia
Support to the employment and vocational education and training strategy This four-year € 35 million programme contributes to Jordan’s National Employment Strategy by supporting reform of the national Employment and Technical Vocational Education and Training (E-TVET) system, aiming to improve its relevance, efficiency, equity, as well as institutional and financial sustainability over the long term.
‘Hakama’ (‘governance’) programme This € 75 million fiveyear programme supports government reforms aiming for a fairer and more effective mobilization of public funding and to enhance the performance and transparency of public expenditure management. The programme also contributes to an improvement in the quality of public services.
Support to economic recovery Building on earlier EU support for Tunisia’s economic recovery in the wake of the 2011 revolution (€ 100 million in 2011, and € 68 million in 2012), a third € 65 million phase of budget support for economic recovery was announced in November 2013, supporting reforms in the fields of democratic and economic governance. Actions target support for measures that accompany the process of democratic transition, as well as measures to improve the management of public finances, and to boost access to credit for the poorest in society.
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EU Neighbourhood Library Our online database Action plans Agreements Country reports Declarations Resolutions Strategy documents
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Useful Links
BUDGET SUPPORT PRESS PACK
EuropeAid webpage on Budget Support
http://ec.europa.eu/europeaid/how/delivering-aid/budget-support/index_en.htm
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EU Neighbourhood Info Centre Interview – Supporting budget, supporting change
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www.enpi-info.eu/files/features/N_Budget%20Support_OrianiEN.pdf
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EU brochure on budget support in the Eastern Partnership
http://ec.europa.eu/europeaid/where/neighbourhood/regional-cooperation/enpi-east/documents/eapbrochure-budget-support.pdf
EU Neighbourhood Handbooks From the EU Neighbourhood Info Centre website, a number of different handbooks can be downloaded, offering tips to media professionals for improved coverage of EU cooperation activities, but also providing information on how to access EU funding or to navigate through EU jargon. A wealth of knowledge at your disposal, just a click away on www.enpi-info.eu.
European Commission Communication on the European Union’s future approach to budget support to third countries (2011) The future approach to EU budget support to third countries www.enpi-info.eu/library/content/future-approach-eu-budget-support-third-countries
European Commission budget support guidelines
http://ec.europa.eu/europeaid/what/economic-support/documents/guidelines_budget_support_ new_2012_en.zip
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press packs Other Info Centre press packs are available online: EAST and SOUTH
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BUDGET SUPPORT PRESS PACK The EU: a major donor for the Neighbourhood
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EU support to the region is mainly channeled through the European Commission’s Directorate General for Development and Cooperation – EuropeAid. http://ec.europa.eu/europeaid
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The European Neighbourhood Instrument (ENI) funding approved for the period 2014-2020 is € 15.4 billion. The ENI replaces the European Neighbourhood and Partnership Instrument (ENPI), for which the funding was € 11.2 billion for the period 2007-2013. The new instrument provides faster and more flexible funding, allowing for incentives for best performers, to 16 partner countries to the East and South of the EU’s borders.
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East: Armenia, Azerbaijan, Belarus, Georgia, Moldova, Ukraine. South: Algeria, Egypt, Israel, Jordan, Lebanon, Libya, Morocco, Palestine, Syria*, Tunisia. * EU Cooperation with Syria is currently suspended due to the political situation The EU Neighbourhood Info Centre is an EU-funded Regional Communication project highlighting the partnership between the EU and Neighbouring countries. www.enpi-info.eu
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EU Neighbourhood Info Centre An ENPI project The EU Neighbourhood Info Centre is an EU-funded Regional Communication project highlighting the partnership between the EU and Neighbouring countries. This presspack has been produced by the EU Neighbourhood Info Centre.
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Photos: AFP/EPA for the EU Neighourhood Info Centre Copyright EU/EU Neighbourhood Info Centre 2014
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