Macroeconomic advising on poverty reduction

Project description

Title: Macroeconomic advising on poverty reduction
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ)
Country: Benin
Lead executing agency: Ministry of Finance and Economy in Benin, Ministry for Planning and Development, and the Monitoring of Public Project and Programmes
Overall term: 2007 to 2012

Context

The national budget survey of 2007 shows that 36 per cent of the Beninese population live below the poverty line (in 2003 it was 27 per cent). Based on the Human Development Index, which evaluates the development status of a country based on the gross domestic product, life expectancy and literacy rates, Benin is consistently among the twenty countries with the lowest index, ranked 163 out of 177 countries in 2007.

Within the scope of the Enhanced Heavily Indebted Poor Countries Initiative (HIPC II), the Beninese Government drew up a Poverty Reduction Strategy Paper (PRSP I), which was ratified in 2003 and subsequently recognised by the Bretton Woods institutions, the World Bank and the International Monetary Fund (IMF). However, implementing the PRSP I proved to be sluggish due to a lack of strategies, insufficient management in the civil sector, corruption and unwieldy procedures in public administration. In addition, the national poverty reduction strategy did not attain the desired success because there was not enough emphasis placed on boosting the economy as a form of income creation. The second Poverty Reduction Strategy Paper (PRSP II), compiled in 2007, thus focuses more on economic growth to reduce poverty in the country.

Objective

The project’s partner ministries are successful in formulating, implementing and monitoring the national poverty reduction strategy. They initiate reforms in the management of public finances and harmonise the various development projects in accordance with the Paris Declaration on Aid Effectiveness (2005).

Approach

The project supports and advises the partners with regard to efficiently developing coordination and communication processes and in formulating, implementing and monitoring the national poverty reduction strategies. The ministries’ employees receive extensive instruction in seminars and workshops on the use of instruments as well as support in implementing these instruments.

In the interest of improving the ways strategies are formulated, the relevant ministries are supported in coordinating and conforming their respective strategies to the national poverty reduction strategy. Possible effects that the reforms and new strategies would have are estimated in advance using the appropriate instruments, for example, the effect that introducing a local development tax has had on the livelihoods of small-scale producers. A pro-poor growth analysis supports various areas of agriculture production to reach their potential for large-scale economic growth.

An indispensible factor in the implementation of the sectoral and national strategies is properly integrating the programmes into the medium-term and long-term financial planning. The project thus provides advice on macroeconomic framework planning as a basis for annual budgetary planning. Planning departments at the Ministry of Finance and other selected ministries receive additional support in developing their medium-term financing planning.

The project is one of several donors which together provide funds to promote the effectiveness of PRSP monitoring. Part of this financial support is also dedicated to the local participatory impact monitoring of basic education. In this respect, the impacts of measures implemented as well as possible constraints are analysed, which involves the participation of pupils, non-school-aged children, parents, parent associations, teaching staff, school directors, mayors and the director of school authorities in the respective département.