Risks
The risks for donor governments and recipient governments are very different. The literature describes a range some of which are summarised below.
For the donor government the risks include:
- Political risk of a recipient government doing something high profile and unpalatable
- Fiduciary risk of putting resources into weak systems or supporting poor policies (but this is partly the point of budget support also). This type of risk includes that of corruption in the recipient government.
- Loss of profile- donors tend to like to be able to report on specific outputs that they are responsible for, which is not possible with budget support
For the recipient government the risks include:
- Much greater levels of intrusion by donors in your budget process
- Reduced levels of flexibility about the allocation of resources, which with time may undermine the incentives for improving the efficiency of public spending
- Increased volatility and unpredictability of aid flows
- Increased vulnerability to ‘aid shocks’ if donors decided to withdraw funding
Read more about this topic: Budget Support
Famous quotes containing the word risks:
“There are risks which are not acceptable: the destruction of humanity is one of them.”
—Friedrich Dürrenmatt (1921–1990)
“The amount of it is, if a man is alive, there is always danger that he may die, though the danger must be allowed to be less in proportion as he is dead-and-alive to begin with. A man sits as many risks as he runs.”
—Henry David Thoreau (1817–1862)
“In America any boy may become President, and I suppose it’s just one of the risks he takes!”
—Adlai Stevenson (1900–1965)