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Delegation of the European Union to Algeria
Economic section
“Introducing Sector Budget Support on Sanitation
in Algeria”
Key challenges
ENPI REGIONAL WATER SEMINAR :
AMMAN 21-24 MARCH
Context in Algeria
1. Relative macroeconomic stability, huge reserve funds,
repayment of external debt
2. Economy based on hydrocarbons
3. Very dependant of external shocks
4. Closed economy (large state sector, including financial
sector), limited impact of the financial crisis, move towards
protectionist policies (Complementary financial law 20092010)
5. Algeria has massive investment plan: USD 286 bn for the
next 5 year Plan
6. Public expenditures as the main source of growth with
marginal role for the private sector
7. Focus on investment, no incentive for reform
Unusual context to promote budgetary support
Problems with EU cooperation
1. Algeria not part of EC Neighbourhood Policy, but using
Neighbourhood instrument
2. Key policy context is the Association Agreement (signed in
2005), very controversial, institutional set-up exists (subcommittees)
3. Development cooperation with EU covering all sectors,
smaller amount than with Morocco and Tunisia (about 54 mio
per year), instruments limited to technical assistance (twinning
started in 2009)
4. Limited absorption capacity leading to recoveries of old
programmes, important cuts decided in the 2008 and 2009
programming (about 50 mio euro)
5. Political stability: no real revolution expected until date?
Challenges to implement the first SBS
• Sector budget support in a wealthy country
= limited financial leverage on Algeria (20 mio for 286 bn)
= critcism of some Member States
• Commission is the only donor pushing for budget support,
others not present or without experience
• Complexity of involving different ministries (Foreign Affairs,
Finance, Water)
• Ministry of Foreign Affairs is favorable but for the wrong
reasons
• Lack of understanding by Water ministry of the full contents
and implications of sector budget support
Not an easy start….
Why a SBS in Algeria ?
• Limited absorption capacity for TA and important decommitment
• Problem of coordination: need for a common platform between line
ministries (MRE, National Office on Sanitation, MoF, MAE, etc)
• Why Algeria is the lone partner not benefitting from this financial
modality (Marocco, Tunisia, Egypt, etc.)?
• Improve ownership and deliver aid through national system (Aid
effectiveness)
• Upgrade policy dialogue at a higher decision level
• Eligible criteria are met in this particular sector…
• …but is not systematic/dogmatic (Cf Transport II: sector not mature
for SBS)
Money is not the problem …but the strategic vision and quality
of spending
Challenges in the WS sector
• Weak links between the ministries (Water and Finance)
• No economic (cost/benefit analysis) approach in the
sector
• Difficulties to evaluate and perform state programme on
costly investment
• Sustainability of budget resources to cover the sanitation
office (ONA)
• Weak management of Human Resources and level of
training for the executive and middle management on
sanitation
• Limited management and planning tools to organize the
sector
• No participation of users, or consumers
Why a SBS on water and sanitation?
• A key priority in the 5 years state plan
• Continuity in the EC programming (EAU I = 20 mln Euros)
• Relatively good institutional capacity in the Ministry and in the
National Sanitation Office
• Solid legal framework (Water law 2005)
• Sector strategy exists although scattered, incomplete and not
well formalised (Plan National de l’Eau, Schema Directeur de
l’Eau)
• Very few donors in the sector
• Focus on investment but not on services and management
• Ministry of water resources pilot for sector MTEF
Priorities of the SBS EAU II
• Strenghten a strategic integrated approach on
sanitation in the water sector
• Focus on management and services (regulatory
function) instead of investment
• Develop management skills and training
• Implement mid term budget planning based on
performance and transparency
• Improve quality of water and impact on public
health
Hybrid SBS with TA (€30 mln)
Budget sector support: €20 millions
 Validation of the national strategy and budget planning
 With indicators focused on qualitative changes in the
sanitation sector
 Improved sanitation investments, including maintenance
 Key public finance management issues in the water sector
(cost recovery for the Sanitation Office, performance audit,
MTEF, etc.)
Technical assistance: €10 millions
 Preparation of a strategic Sanitation Plan
 Technical training center for sanitation (national training
center)
 Specialised equipment for laboratories (Quality of water)
Temporary results
• Better ownership and involvment through the national system.
• Establishing a common platform for a policy dialogue between
the line ministries
• A better understanding of the financing modality (SBS)
• Strategic discussion from operational to policy level (Cabinet)
• Understanding the rationale behind a logical framework
• Positive side effects on PFM with:
-Succesful PEFA with participative approach and acceptation by the
MoF of the weaknesses.
-A new EC programme (€ 5 mln) on a strategic reform of budget
system (minister level), crucial because public expenditure is the main
source of growth in Algeria
…..those results before disbursing the first tranche!
Lessons learnt
• SBS plays the role of catalyst
• Stimulates policy dialogue: EC/Algerian partner
and between line ministries
• Opens new opportunities on PFM reform
• Better ownership and effectiveness using
national system (State budget)
• Not to be dogmatic but sector specific
• Money is not the issue… but the strategic vision,
level of dialogue and quality of spending