In contrast to general budget support (where funding was essential to the results achieved), in SRPCs, technical assistance, policy dialogue and performance measurement were the main drivers of effectiveness, with funding taking a second, even if strategic, place.

Of the six countries evaluated, Cambodia, El Salvador, Morocco, and South Africa were lower middle-income countries (LMICs), whereas Paraguay and Peru were upper middle-income countries (UMICs). Budget support represented the main, and often the only, aid delivery method for the EU in these countries and the volume of funding remained minor relative to total public funding. As opposed to general budget support, where funds could represent 15% or more of public expenditure, depending on the year considered, the countries considered here were not aid-dependent and SRPCs represented, at most, 0.6% of annual public expenditure. 

However, this is not necessarily a general characteristic of SRPCs, but rather a particularity of those in this small sample of LMICs and UMICs. For example, the eight countries considered in the previous section on general budget support also benefited from sector budget support, which was found to be as essential as policy dialogue and technical assistance in contributing to observed results. 

In the six cases of sector budget support evaluated, actual disbursements were close to planned disbursements, and SRPCS were more predictable than any other aid modality, both in amounts and in delivery timing. Some in-year unpredictability of timing occurred but it was well-managed by the authorities, leaving government budget and Treasury plans unaffected. 

The technical assistance provided in the context of SRPCs was crucial to improving sector conditions for effective policy implementation in complementarity with budget support funding. Technical assistance nourished strategic dialogue on policy design and technical discussions on specific policy areas. It provided tools or outputs crucial for reforms to be pushed forward. It strengthened the capacities of the institutions responsible for policy implementation and provided preparatory inputs for the monitoring of disbursement conditions. 

When the needs expressed by the recipient countries and the technical assistance provided by the EU were in harmony, and coordination between development partners was good, the support provided tended to be more effective (Box 3.7).

The role of policy dialogue is key in budget support, both in reaching agreement on the reforms to be supported and in monitoring progress in policy implementation. In the six countries, the depth and scope of the dialogue and its effects on policy decisions varied from strategic policy advice to technical and operational discussions. In Morocco, within the wider policy dialogue framework taking place under the EU–Morocco Association Agreement signed in 2000, policy dialogue focused on the operational requirements for implementing a set of reforms to liberalize the economy, promote trade integration and modernize the regulatory framework. In Paraguay, policy dialogue and performance indicators influenced the design and implementation of policies in education, social protection, and public finance management. In El Salvador and Peru, discussions were focused more on the technical issues that arose within the sectors supported.

Unlike general budget support, the delivery of SRPCs did not involve joint management structures with other providers of budget support. This was partly because the majority of SRPCs evaluated were designed to provide support for a specific reform within a sector or a subsector, rather than to support a sector-wide approach. When an SRPC supported a whole sector (for example, education in Cambodia, El Salvador, Morocco, and Paraguay), policy dialogue would take place within existing multi-donor sector policy dialogue structures. Where established dialogue mechanisms already existed, the dialogue was more strategic and more effective. For example, the dialogue with development partners in the education sector in Cambodia led to a strategic decision by the government to increase budget transfers to schools for their operating budgets. 

Where SRPCs were provided as stand-alone operations, targeting very specific programs, sub-sectors or regions, the conditions for joint development partner dialogue were more limited. The EU was often the only development partner providing budget support in these areas (or, as in South Africa, the only development partner providing budget support at all). Development partners providing loans (e.g., multilateral lenders providing policy-based lending) were often leading a separate dialogue from those providing grants (e.g., the EU and bilateral development partners); this was more marked in LMICs and UMICs than in LICs. In the case of the SRPCs evaluated, dialogue was limited to the scope of the sub-sector or program supported, harmonization was less advanced, and there was less inclination to align disbursement triggers and positions on policy dialogue issues (El Salvador, Paraguay, and Peru). 

In all cases, the use of variable tranches and of performance indicators provided an opportunity for discussing sector or subsector issues and finding solutions to identified problems. In some cases (e.g., Morocco) EU budget support was instrumental in setting up monitoring frameworks with actions and targets to be achieved. Dialogue on performance indicators sometimes led to strategic policy discussions and the monitoring of wider sector objectives. More often, the scope remained tightly linked to the variable tranche indicators, with the strategic dimension of policy design and implementation staying firmly with the government. Where the choices of performance indicators spanned several different areas of a sector policy or different sector policies, budget support overcame the internal fragmentation of management structures within and between beneficiary ministries by nurturing intra- and inter-institutional dialogue and coordination. The strengthening of the inter-institutional dialogue within government was a benefit of EU budget support, as noted in both Morocco and Paraguay.