COMRADES OR CULPRITS? DONOR ENGAGEMENT AND BUDGET TRANSPARENCY IN AID-DEPENDENT COUNTRIES PAOLO DE RENZIO 1 * AND DIEGO ANGEMI 2 1 International Budget Partnership, USA 2 Independent Researcher, Malawi SUMMARY Budget transparency has come to be considered a key aspect of governance. Over the past decade, donors have invested increasing resources in strengthening processes through which budget transparency in developing countries can be enhanced. According to the 2008 Open Budget Index (OBI) Report, however, aid dependency and budget transparency appear to be inversely correlated. This article looks at the role of donor agencies in promoting or preventing budget transparency in aid-dependent countries. It looks at significant correlations across the whole sample of 84 countries covered in the 2008 OBI, and analyzes more specific data for a sub- sample of 16 aid-dependent countries, before selecting six countries for which more detailed findings are then presented. All of these countries have implemented reforms aimed at enhancing budget transparency, with substantial donor support. These, however, often had only limited success, partly because they were not well adapted to the local context, and partly because donors put limited emphasis on improving public access to budget information. Donor efforts were also often offset by other characteristics of donor interventions, namely their fragmentation, lack of transparency, and limited use of programme aid modalities such as budget support and pooled sector funding. Copyright © 2012 John Wiley & Sons, Ltd. key words—budget transparency; foreign aid; aid-dependent countries; Open Budget Index; donor engagement; governance INTRODUCTION Budget transparency, in the form of public access to detailed and timely budget information, has become a new buzzword in international development circles. The Paris Declaration on Aid Effectiveness, signed by more than a hundred aid donor and recipient countries, and multilateral development organisations, states that ‘corruption and lack of transparency [...] impede effective resource mobilization and allocation, and divert resources away from activities that are vital for poverty reduction and sustainable economic development’ (OECD, 2005:2). Improved budget transparency is also seen as key for enhancing domestic accountability and fostering a culture of mutual trust between recipient governments and donor agencies. This has been recognised in the Accra Agenda for Action, adopted in 2008 as a follow-up to the Paris Declaration, in which a number of additional commitments are included on providing comprehensive and timely information on aid flows to recipient governments, regardless of whether such flows are channelled through country budget systems or not. Over the past decade, donors have played an active role in the development of numerous efforts to strengthen budget- ary management and the processes through which budget transparency can be enhanced. Increasing donor engagement with various elements of budgeting processes, however, has also been associated with the creation of a perverse set of incentives, which have often undermined the quality of budgetary management and its level of transparency. As a matter of fact, according to the 2008 Open Budget Index (OBI) Report, 1 aid dependency and budget trans- parency are inversely correlated. More specifically, ‘countries that perform poorly on the OBI also tend to depend *Correspondence to: P. de Renzio, Senior Research Fellow, International Budget Partnership, Visiting Researcher, Fundação Getúlio Vargas, Rio de Janeiro, Brazil. E-mail: derenzio@cbpp.org 1 The OBI is produced on a biannual basis by the International Budget Partnership, and is based on a detailed survey questionnaire carried out by country-based independent researchers, looking at the budget information that is contained in eight key budget documents, and the extent to which such documents are made publicly available. For more details, see IBP (2009). public administration and development Public Admin. Dev. 32, 167–180 (2012) Published online 24 January 2012 in Wiley Online Library (wileyonlinelibrary.com) DOI: 10.1002/pad.1603 Copyright © 2012 John Wiley & Sons, Ltd.