On the trail of ‘disappearing' aid

What is budget support?

Development aid comes in two basic flavours, budget support and project financing.

Budget support goes directly to a recipient country's national treasury. In order to qualify, recipient countries are required to have fully articulated general development strategies (in the case of general budget support) or strategies in particular sectors such as health or education (for sectoral budget support). They also have to demonstrate that they have sound public financial management systems. Procurement and accounting is run by recipient governments according to their own rules.

General budget support is provided through a recipient country's finance ministry, while the primary interlocutors for sectoral budget support are the relevant ministries.

Around 25% of the European Commission's aid committed in 2003-09 was given in the form of budget support; in Africa, the Caribbean and the Pacific, the share was 56%. The EU is the international donor with the highest share of budget support.

International donors still provide most aid through project financing. Donors set the parameters of such projects and apply their own procurement rules. Projects are typically implemented by private – often international – aid agencies.