EuropeAid aid delivery methods
EuropeAid follows three approaches to aid delivery: the project approach, the sector approach and the macro/global approach. These operative approaches are complemented by three financing modalities: the use of EC procurement and grant award procedures, the use of a common pool of funding, and the use of budget support.
The Commission promotes the sector approach to work with partner countries, other donors and stakeholders. This method of aid delivery has become increasingly important in recent years. The sector approach gives partner governments greater ownership of development policy and financing compared to the project approach. The end result is greater coherence between the allocation of internal and external resources, spending and expected results.
Where the conditions are right, the Commission is committed to providing budget support as a means to strengthening country ownership, financing national development strategies (including poverty reduction strategies) and promoting sound and transparent public finances. Budget support involves the direct transfer of funds to a partner country’s budget where they can be managed using national systems. Those receiving aid in this way must display sound macro-economic policies, and take steps to improve public financial management.
The Aid Delivery Methods used by the European Commission are summarised in the figure below:
The Commission carries out careful analysis and consultations before committing funding. The project approach is used to support initiatives outside the public sector, such as through civil society and the private sectors. Projects are also implemented where conditions do not permit the adoption of a sector approach or a budget support. EuropeAid manages projects in a way that guarantees convergence with EU and partner country policy objectives. In line with aid effectiveness principles, projects must support country-owned policies, must be sustainable and have realistic objectives. The Office is responsible for all phases of the project cycle (identification and appraisal of projects and programmes, preparation of financing decisions, implementation and monitoring, evaluation of projects and programmes) and works with partners to ensure the achievement of the objectives of the programmes established by the Directorates-General for External Relations (DG RELEX) and Development (DG DEV) and approved by the Commission.
The Sector Policy Support Programme (SPSP) is a term used to identify European Commission programmes designed to support a partner government’s sector programme. An SPSP may use the following forms of financing:
- Sector budget support is the modality of choice, wherever appropriate, and consists of a transfer of funds to the partner government national treasury to be used in pursuit of an agreed set of sector outputs and outcomes.
- Common pooled funds or common basket funding (resources from a number of donors pooled using one agreed set of procedures) in support of a specific set of activities in the sector programme. Usually one donor will take responsibility for coordinating and managing the pooled funds. Funds are released by the donor to government according to agreed criteria.
- Commission procedures that follow contracting and procurement rules.
The programme-based approach (PBA) is another concept widely used among partner countries and donors. PBA is defined in the DAC guidelines as a way of engaging in development cooperation based on the principle of coordinated support for a locally owned programme of development. It should involve leadership by the host country, a single comprehensive programme and budget framework, as well as a formalised process of donor coordination and harmonisation of donor procedures for reporting, budgeting, financial management and procurement. Another important feature are efforts to increase the use of local systems for programme design and implementation, financial management, monitoring and evaluation.
In this perspective, a sector approach is a PBA at the level of an entire sector. The PBA is a loose and flexible concept covering different types of programmes including those at sub-sectoral level or in new areas where classical sector terminology and features do not apply.
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