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Reducing the Transaction Costs of Development Assistance : Ghana’s Multi-Donor Budget Support (MDBS) Experience from 2003 to 2007

ACCOUNTABILITY ACCOUNTANT ACCOUNTING ACCOUNTING SYSTEM AGRICULTURE AID ALLOCATION ANNUAL BUDGET ANNUAL REPORT ARTICLE ASYMMETRIC INFORMATION AUCTION BENCHMARK BENCHMARKS BUDGET COVERAGE BUDGET CYCLE BUDGET EXECUTION BUDGET PROPOSAL BUDGET STATEMENT BUDGET STRATEGY BUDGET SUPPORT BUDGET SUPPORT OPERATIONS CENTRAL GOVERNMENT CENTRAL GOVERNMENT DEBT COLLECTIVE ACTION COLLUSION COMPETITIVE MARKET CONTINGENCIES CONTINGENCY CONTRACTUAL ARRANGEMENTS CONTRIBUTION COORDINATION FAILURES CREDITS DEBT DEBT RELIEF DECENTRALIZATION DECISION MAKING DECISION-MAKING DECISION-MAKING PROCESS DEVELOPMENT AGENCIES DEVELOPMENT AGENCY DEVELOPMENT ASSISTANCE DEVELOPMENT BANK DEVELOPMENT ISSUES DEVELOPMENT PARTNERS DEVELOPMENT POLICY DEVELOPMENT PROGRAMS DEVELOPMENT STRATEGY DISBURSEMENT DISBURSEMENTS DIVISION OF LABOR DOMESTIC CREDIT DOMESTIC DEBT DONOR FLOWS DROUGHT ECONOMIC ACTIVITY ECONOMIC DEVELOPMENT ECONOMIC MANAGEMENT EDUCATION PROGRAMS EDUCATION SERVICES ENFORCEABLE CONTRACTS EXPENDITURE EXPENDITURE MANAGEMENT SYSTEM EXTERNAL AUDIT FINANCIAL ACCOUNTABILITY FINANCIAL CONTRIBUTIONS FINANCIAL MANAGEMENT FISCAL ACCOUNTS FISCAL CONSOLIDATION FISCAL DEFICIT FISCAL POLICY FLOW OF INFORMATION GDP GENERAL BUDGET SUPPORT GOVERNMENT EXPENDITURES HEALTH SECTOR INSTRUMENT INTERNAL AUDIT INTERNATIONAL BANK INTERNATIONAL DEVELOPMENT LOCAL GOVERNMENT LOCAL GOVERNMENTS MACROECONOMIC STABILITY MINISTRY OF FINANCE MONETARY FUND MULTILATERAL AGENCIES NATIONAL BUDGET OIL PRICES OUTCOME INDICATORS OUTSIDE OBSERVERS PERFORMANCE EXPECTATIONS PERFORMANCE MEASUREMENT POLITICAL ECONOMY POVERTY REDUCING POVERTY REDUCTION POVERTY REDUCTION STRATEGY POVERTY REDUCTION SUPPORT PRINCIPAL-AGENT PRIVATE SECTOR PROGRAMS PUBLIC ACCOUNTS PUBLIC DEBT PUBLIC EXPENDITURE PUBLIC EXPENDITURE MANAGEMENT PUBLIC FINANCIAL MANAGEMENT PUBLIC PROCUREMENT PUBLIC SECTOR PUBLIC SECTOR DEFICITS PUBLIC SECTOR REFORM REAL RESOURCES REFORM AGENDA REFORM PROGRAM REFORM STRATEGY RENEGOTIATIONS RESOURCE MANAGEMENT ROAD TRANSPORT SANITATION SECTOR MINISTRIES SECTOR PROGRAMS SENIOR SERVICE DELIVERY SHARE OF CREDIT STATED OBJECTIVE SUM OF MONEY SUPPORT PROGRAM SUPPORT PROGRAMS TERM CONTRACTS TRANSACTION TRANSACTION COST TRANSACTION COSTS TRANSACTIONS COSTS UNCERTAINTY WORTH
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World Bank, Washington, DC
Africa | Ghana
2012-06-11T15:23:43Z | 2012-06-11T15:23:43Z | 2007-11

This paper examines whether the structure of the Multi-Donor Budget Support (MDBS) in Ghana evolved over time to minimize transaction costs commonly found in accessing and delivering development assistance in multi-donor settings. While the MDBS was expected to reduce the transaction costs involved in dealing with multiple development agencies, it created three additional sources of transaction costs: coordination failures, the costs of collective action, and measurement costs. The answer that emerges from this paper is that the structure of the MDBS evolved to mitigate these transaction costs. The problems associated with coordination was addressed by delegating the policy dialogue to sector-specific groups aimed at reaching agreements over a narrower set of issues and amongst a smaller group of participants. Also, the MDBS reduced the cost of collective action by devising rules that allowed all the participating agencies to have a role in the decision-making process, and, in doing so, encouraged these agencies to increase the share of their contribution coming through the MDBS, rather than through large projects and off-budget disbursements. There was less success in reaching a settled view on how to reduce so-called measurement costs, however. While the group of development agencies made several attempts to overcome the difficulties in measuring progress in the program supported by the MDBS, it was not able to reach consensus on the extent to which the monitoring of the program should rely on outcome indicators. The Government did not favor the use of outcome indicators, and some development agencies placed greater emphasis on maintaining a dialogue around policy actions aimed at reaching the desired outcomes.

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