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News from 2019-02-11 / KfW Research

From budget support to reform financing

Development in Brief

Budget support is viewed as the most consistent development policy instrument for implementing the principles of the "Paris Declaration". However, it was unable to meet many expectations regarding increasing the speed or comprehensiveness of development steps and is also subjected to the allegation of (implicitly) promoting corruption and mismanagement. Many donors have thus more or less withdrawn from providing budget support. At the same time, policy-based financing ("reform financing") is gaining significance due to good experiences with policy loans in international development cooperation.

The current issue of Development in Brief summarises the differences between reform financing and budget support and, in the process, discusses the success factors for reform financing.

From budget support to reform financing