Better Results for Less Debt will operate through the following strategy. A developing country's government and prospective funders (including bi-laterals, multilaterals, foundations, and/or others) will agree together on a program of support, under which the government commits to set goals to be achieved at specified dates (e.g., improve anti-malaria programs and achieve a particular reduction in malaria deaths). One or more funders will then provide financing, on grant or loan terms. An additional funder (or consortium of funders) commits to providing an agreed amount of funding when, at some later date, the specified set of results has been achieved. By setting aside those funds at the outset and compounding the interest earned on them, the second funder(s) have to contribute substantially less than their support is ultimately worth at the time it is needed for disbursement.
This scheme works regardless of whether the first and second infusions are grants, loans, or a mix of the two. All parties gain something from this scheme. The country gets the money up front that is needed to do the work, and then has the assurance of more to follow if the work is properly completed. Its government gets other benefits as well, including possibly the prospect of paying off some debt--a popular move with voters. The initial funder(s) have greater prospects of seeing their support result in the desired outcomes, and the second funder(s) can tell their overseers that their money will be released only when the results it is intended to support have already been achieved.
The polio campaign demonstrated how developing countries and funders can work together to obtain significant results through a new approach that combined an initial infusion of financial support to help a country launch a new initiative (the polio immunization campaign) and a subsequent infusion to help keep it going and reduce its cost to the country. The initial support, in the polio case, was a loan by the World Bank. The subsequent support, which was grant funding from the Rotarians and the Gates Foundation, was used to pay off the loan, which is why this approach has been called the 'polio buydown' (for 'buying down the loan').
In addition, the 'results focus' being emphasized recently in global development efforts is intrinsically built into this approach. Incentives to achieve results are strengthened by the fact that the second infusion of funds is released only when an agreed schedule of results have been attained.
United Nations Foundation and the Brookings Institution contacted interested parties to exchange information, ideas, and potential for more in-depth engagement. These contacts were made, involving discussions with the World Bank, European donors, foundation donors, and others.
The main conclusions from these meetings are as follows. Developing countries and their international partners are increasingly adopting methods of financing health care and other activities linking the availability of funding to concrete, measurable results on the ground. The Global Alliance for Vaccines and Immunization (GAVI) has completed a second year of disbursing grants based on performance goals verified through externally audited health data. The Inter-American Development Bank approved three performance driven loans in Colombia, Honduras, and Nicaragua where disbursements are made against an independent audit of achievement of specific health outputs and outcomes. The World Bank is moving towards performance-based Country Assistance Strategies, beginning in Peru. Further, there is a great deal of discussion about the potential for budget support modalities to evolve towards performance-based budget support.
Challenges remain. First, there is difficulty in defining indicators and measuring performance quickly and accurately and much work must be done to raise the quality and comprehensiveness of national monitoring systems to track performance. The newly created Health Metrics Network based at the World Health Organization will be addressing this issue in the health sector, along with other civil society partners; however, other sectors represent a major challenge. Second, greater attention must be paid to the design of appropriate incentives (grants versus loans versus buy-downs, or other) in countries of differing wealth and with differing relationships established with the international community (HIPC, special bilateral ties, etc.). Third, there are challenges associated with the identification of partners to finance results achieved. At the present time, there is still a great deal of ownership of projects by the different international and bilateral assistance agencies and reluctance to simply transfer monies to governments based on results achieved. This is reflected in the small proportions of aid that currently go to budget support. Fourth, even where performance-based systems are in place, there is little transparency regarding the decision to release funds and most agencies are under pressure to disburse according to a pre-established schedule. In other cases, performance measures are overly subjective and qualitative, and thus subject to interpretation. Finally, there has been little evaluation of the efforts undertaken to date that would allow for lesson learning and improvement of the approach.
The next steps moving forward include: continued identification and facilitation of opportunities for performance-based aid (PBA) and an evaluation of efforts undertaken to date in order to generate recommendations for moving forward.