Harmonisation and Alignment (H&A) is high on the agenda in Nicaragua as EU Donors increasingly focus on issues related to aid coordination and the fulfilment of global commitments enshrined in the Millennium Development Goals, the Paris Declaration and the European Consensus on Development which all highlight the need for greater aid effectiveness in order to eradicate extreme poverty in developing countries and improve the overall impact of Official Development Assistance (ODA).

In Nicaragua, aid coordination is a highly complex and formidable task given the large number of donors (reportedly over 40) and the high volume of ODA per annum (approx 563 Million USD in 2007) not to mention the second lowest development indicators in the region and a changing political and economic landscape which present considerable challenges for the success potential of any H&A initiative. Nicaragua continues to be a priority country for most EU donors and is highly dependent upon on development cooperation which represents roughly 11% of GDP and 75% of its Public Investment Plan (PIP).

Together with the European Commission there are currently 11 EU Member States operating in Nicaragua; this combined force is the main net ODA contributor to Nicaragua and therefore any EU-led coordination initiative has the potential to impact substantially on the local aid environment. EU donors are working closely among themselves, with non-EU donors and with the Government of Nicaragua in order to define strategic priorities for H&A and specific, tangible and measurable actions which will lead to short, medium and long term improvements.

Progress in the period 2002-2007

In the period 2002-2007 Nicaragua has been highly active as an OECD/DAC and EU pilot country for H&A initiatives and has succeeded in implementing several measures including the following:

H&A Roadmap: Nicaraguan National Action Plan for H&A 2005-2007

The Nicaragua National Action Plan for H&A, adopted in November 2005 identifies objectives, specific actions, expected results, related indicators of achievement and deadlines for completion on a short, medium and long term level in relation to ownership, harmonisation and alignment, results-based management and mutual accountability.

The plan fully incorporates the 12 Paris Indicators and represents an important in-country process. A multi-stakeholder H&A monitoring group including EU members has been established in order to promote implementation of the Plan and to provide regular feedback on advances to date.

Enhanced Coordination: Sector roundtables in priority areas

The Nicaraguan Presidential Agreement of February 71-2003 called for the establishment of sector roundtables in order to enhance the coordination of external aid. These roundtables aim to improve communication and information exchange between Government and donors in the priority areas of Education, Governance, Health, Infrastructure, Production, and Social Protection. EU Donors are present in all these fora and are actively contributing towards the development of Sector Wide Approaches (SWAps) where appropriate; such SWAps contain multi-annual action plans and expenditure forecasts allowing government and donors to better plan activities and financial disbursements with a medium to long-term perspective. Several roundtables have succeeded in signing Codes of Conduct and Memoranda of Understanding in order to improve coordination and better support approved sector strategies and common funding arrangements.

Improved Dialogue Mechanisms: Global Donor/Government roundtable and Donor Quintet

High-level Global Donor/Government meetings are held each semester in order to discuss and exchange views on national priorities. The Government presents its perspective on progress to date and future orientations and similarly the donor community expresses its opinions and raises concerns on priority issues. In order to coordinate better the opinions of donors, in February 2006 the international donor community decided to elect a high-level Steering Group, the Quintet which facilitates discussions on national priorities and prepares common donors positions. This group meets quarterly with the Government’s Inter-Institutional Commission, and currently comprises the European Commission and Finland together with non-EU donors, Japan, Canada and IADB/WB.

Budget Support; joint arrangements

In 2005, the Government of Nicaragua and a consortium of nine donors including six EU donors (the European Commission, Germany, Finland, Sweden, the Netherlands and the United Kingdom) signed a Joint Financing Arrangement (JFA) in order to contribute with budget support towards the fulfilment of the Nicaraguan Poverty Reduction Strategy 2005-2009. Through the JFA, both the Government and the Donors have committed themselves to common procedures for policy dialogue, commitments and disbursements, auditing and reporting, monitoring and evaluation, and information exchange. The increased use of budget support is expected to improve co-ordination and harmonisation among donors involved, to encourage greater alignment, lower transaction costs, greater predictability of funding and higher efficiency in the allocation of public expenditure.

H&A Challenges for 2008

With the installation of the New Government for Reconciliation and National Unity in January 2007, there has been the obvious need to jointly review H&A activities in order to ensure that they adequately reflect the national priorities in the new Human National Development Plan for Nicaragua. Challenges for 2008 include:

Consolidating progress; reinforced dialogue and sound country ownership

EU donors, the government and relevant development partners have a duty to build on the progress made in the period 2002-2007. There is a need to reinforce and verify the suitability of existing dialogue mechanisms and to encourage frank and transparent dialogue at both technical and political levels. The incumbent Government has shown strong leadership and this needs to be accompanied by a coordinated response from donors.

Establishment of a new Nicaragua National Action Plan for Harmonisation, Alignment and Ownership 2008-2010

Both donors and government have underlined the need to establish a new Action plan for the period 2008-2010 which will place emphasis on the 3 main axes of harmonisation, alignment and country ownership. The previous plan 2005-2007 has been assessed and a Government/Donor workshop was organised in February 2008 to reflect on the achievements and to identify where progress was needed and where impediments to greater H&A still remain.

EU Code of Conduct; greater complementarity and division of labour

EU donors are rising to the challenge of implementing the EU Code of Conduct (CoC) adopted in May 07. As a preparatory step, an analysis of where each EU donor stands in relation to each of the Code’s Guiding Principles was undertaken in the period November 07 – February 08. Preliminary results indicate that already much progress has been made but that more innovative efforts are needed. Some EU donors are present in more than 3 priority areas, EU donors do not always have a clear and common vision of how to proceed in relation to the division of labour, many have unsynchronised programming, budgeting and disbursement cycles. A CoC Action Plan will be drawn up for the period 2008-2009 and the EU’s fulfilment of the Code will be carefully monitored.