The idea is simple. Donors and investors are likely to put in resources into countries if they perceive that they get value for their money. The public sector could make themselves attractive destinations for these inflows by putting in effective risk assurance mechanisms, leak-resistant procurement systems, steady project management systems, adequate monitoring and evaluation systems (M&E), verification and reporting systems and so on. These require collaboration through “value for money” compacts among partners from the public and private sector.
The Sustainable Development Agenda is premised on increased falows of development finance to least developed countries. This will, in the short term, include financial flows from vertical funds. Experience indicates that many countries may wish to consider increasing their capacity to manage the risks associated with vertical funding mechanisms, in two aspects: ensuring that the vertically funded programmes are appropriately integrated in and reinforcing national priorities and systems; and on the other hand that the fund providers get the value for money that they are seeking.
This entails strengthening integrated planning and budget approaches that can factor in vertically funded programs, and the strengthening of capacities for project design, management, procurement, M&E, verification and reporting. This will not only ensure value for money for the partner countries, but also donors and private investors will be reassured creating virtuous loops of win-win possibilities.
Development Connect’s experiences from similar approaches to capacity development in relation to other vertical funds indicate that a focused approach based on clear diagnostics and results-driven implementation can achieve significant progress over relatively short time horizons, recognizing that this is not a substitute for the long term capacity development of effective institutions that will need to look beyond the specific requirements associated with vertical funding mechanisms.