Governance or Poverty Reduction? Assessing Budget Support in Nicaragua

Abstract
General Budget Support (GBS) is assumed to lead to more effective poverty reduction through non-earmarking of the money and through recipient country ownership. A second and more hidden objective of GBS, however, is to influence policies and governance of recipient countries. This paper develops an evaluation framework that takes the tensions between these two objectives into account. It then assesses the results of GBS in Nicaragua under two administrations. It concludes that for most donors, the aim of improving governance was more important than poverty reduction, in both government periods, thus reducing the effect of GBS on poverty reduction. In addition, donor influence on governance was limited.