What are the lessons on use of fiduciary safeguards for minimising risk in budget support and, in this context, how do bilateral and multilateral donors assess corruption? Which are the most common safeguards used to mitigate fiduciary risks and what are the strengths and weaknesses related to the use of these for partner governments as well as donors?
It is usually assumed that budget support is more vulnerable to corruption than other forms of aid, as it can be directly affected by existing weaknesses in the recipient countries’ public finance management (PFM) systems. While donors usually do not consider corruption as a prohibitive factor to the provision of budget support, there is a broad consensus that diagnostic corruption information needs to be integrated into decisions on budget support operations. This is usually done in the form of ex-ante fiduciary risks assessments. Although most of these fiduciary risk assessment tools do not comprehensively capture corruption risks, it is usually considered that conducting such assessments has a positive impact on the recipient countries’ PFM systems and reform programs.
Chêne, M. Fiduciary safeguards for minimising corruption risks when using budget support. U4 Anti-Corruption Resource Centre, CMI, Bergen, Norway (2010) 9 pp. [U4 Expert Answer 240]