Budget support

This article needs additional citations for verification. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. Find sources: "Budget support" – news · newspapers · books · scholar · JSTOR (April 2007) (Learn how and when to remove this message)

Budget support is a particular way of giving international development aid, also known as an aid instrument or aid modality. With budget support, money is given directly to a recipient country government, usually from a donor government. Budget support differs from other types of aid modalities such as:

1. Balance of payments support, which is currently mainly the domain of the International Monetary Fund. With balance of payments support the funds go to the central bank for foreign exchange purposes, while with budget support they generally go to the Ministry of Finance (or equivalent) and into the budget for public spending.
2. Project aid, where development assistance funds are used by donors to implement a specific project, with donors retaining control of the project's financing and management.

In practice, budget support varies dramatically and is done in a large range of different ways. One of the broadest distinctions is between general budget support and sector budget support.

General budget support is unearmarked contributions to the government budget including funding to support the implementation of macroeconomic reforms (structural adjustment programmes, poverty reduction strategies).

Budget support is a method of financing a recipient country's budget through a transfer of resources from an external financing agency to the recipient government's national treasury. The funds thus transferred are managed in accordance with the recipient's budgetary procedures.

Funds transferred to the national treasury for financing programmes or projects managed according to different budgetary procedures from those of the recipient country, with the intention of earmarking the resources for specific uses, are therefore excluded.

Sector budget support, like general budget support, is an un earmarked financial contribution to a recipient government's budget. However, in sector budget support, the dialogue between donors and partner governments focuses on sector-specific concerns, rather than on overall policy and budget priorities.^{[1][full citation needed]}