No.50 Is GBS Still a Preferable Aid Modality?
This paper attempts to assess the effect of General Budget Support (GBS) in developing countries by using panel data on government revenue, expenditure, and social indicators for the 10-year period from 1997 to 2006. We focus on the health sector as a representative social sector.The results show that GBS in fact increases the budget allocation for the health sector more than tax revenue does. However, the effect of government health expenditure on health indicators is not necessarily improved by the introduction of GBS, which indicates that the introduction of GBS alone has limited impact. The paper suggests that the complementarity between GBS and projects/programs focusing on human and institutional capacity development should be seriously considered.
Keywords: General Budget Support, fungibility, intergovermental transfer, aid modality,complementality