Nicaragua is one of the countries that volunteered at the HLF Conference in Rome to serve as a pilot for implementation of the various components of the harmonization agenda. The areas of focus in the Nicaragua pilot include, in particular, operational policies, procedures and practices. The country is also serving as a pilot country for the Education for All-Fast Track Initiative (EFA-FTI) as well as for the European Union (EU). Currently, Nicaragua is the first of four pilot countries in OECD/DAC’s Joint Country Learning Assessment (JCLA).

The country, the largest in Central America in terms of land mass, is characterized by a very high per capita ODA. Two-thirds of public investment is donor financed. Nicaragua reached its ‘completion point’ under the Heavily Indebted Poor Countries (HIPC) initiative and as a result, has reduced its external debt by almost 75 percent.

The Government’s Strengthened Growth and Poverty Reduction Strategy (SGPRS), its PRSP, was prepared over a period of two years and presented in 2001. The preparation of this PRSP involved broad-based participation from many sectors of society and support from the international community. Its overarching objective is to reduce the number of people living in extreme poverty from 19.4 percent of the population in 1993 to 9.3 percent in 2015.

The strategy of the Government of Nicaragua (GoN) rests on the following four pillars:

• Broad-based economic growth with an emphasis on productive employment generation and rural development
• Greater and better investment in the human capital of the poor
• Better protection for vulnerable populations
• The strengthening of institutions and good governance

These pillars are intertwined with three cross-cutting themes: (a) a reduction in environmental degradation and ecological vulnerability, (b) an increase in social equity, and (c) further decentralization.

The new administration (that took office in 2002) has expressed its support for this strategy that serves as a platform for donor policy coordination.

The second annual progress report of the SGPRS was issued in November 2003. To strengthen the first pillar of the strategy, GoN has prepared a draft National Development Plan (NDP) that was presented to the international community at the CG in Oct. 2003. PRSP II (ERCERP2) will build the framework for increased donor alignment.

In 2002, GoN started a country-led process to set strategies and annual plans through sector round tables. The round tables were institutionalized in June 2002 through the first forum on “Coordinating International Development Cooperation” followed in June 2003 by the forum on “A Sector-Wide Approach to Coordinating International Coordination”. This process led to the establishment in September 2003 of a Code of Conduct between Nicaragua and its partners (including the commitment to SWAps).

In February 2003, through Presidential Decree 71-2003, the President of Nicaragua requested the official creation of the Sectoral Coordination Tables (sometimes referred to as sector coordination boards or sector round-table coordination groups). These are the main mechanism for coordinating cooperation.

The third forum on Coordinating Cooperation was scheduled for August 2004 at which an assessment of the functioning of the coordinating tables (global and sectoral) was to be made.

SWAps are planned in the education and health sectors, and substantial effort is being made to promote coordination in these sectors.

WB is willing to support establishment of possible pooling arrangements for some or all primary education resources.

Bilateral donors are negotiating with the WB a basket fund for the Public Sector Technical Assistance Credit (PSTAC).

There is a donor coordination group for budget support that meets regularly and invites other donors as observers. This group is led locally by the Dutch and has been working (since the first quarter of 2004) on finalizing a Joint Financing Agreement (JFA). This agreement sets out the joint terms and procedures for harmonized budget support.

The implementation of the PRSP will be supported from 2004 onwards by a Poverty Reduction Support Credit (PRSC) financed by KfW and WB. A complementary capacity enhancement program is financed by several donors. Donors with existing and planned budgetary support expect to use the PRSC policy matrix as a basis for their operations.

The EC and the Netherlands are already using the country systems and procedures through budget support programs.

The Inter-American Development Bank (IADB) has prepared CFAA and CPAR jointly with the World Bank. The IADB and WB also share information and audit tools on financial management.

Poverty and Social Impact Assessments (PSIAs) were undertaken on tax reform and basic education. The two areas of reform with important economic, social, and political impact were the Law of Fiscal Equity and the EFA-FTI. WB provided technical and financial support for the PSIA work on basic education.

PSIAs are being prepared on the public investment program as well as on decentralization. The latter is being cofinanced by GTZ and the WB. KfW is considering financing a PSIA in the water and sewerage sector.

The Global Donor Platform for Rural Development (GDPRD) is working to harmonize donor activities in rural development. It has selected Nicaragua (also Burkina Faso, Cambodia, and Tanzania) for a preliminary fact finding study on donor collaboration. The draft Assessment Study on Harmonization and Alignment (H&A) in Rural Development (March 2005) with reports for each pilot country, was presented for discussion at the World Bank on March 30, 2005. The next step is to involve the partner/client institutions to assess their views on cooperation and to prepare a joint road map for improved H&A in Rural Development.

An Agenda of Actions for the Coordination, Harmonization and Alignment Processes of International Cooperation (May 2004 – March 2005) is available and was presented at the Fifth Meeting of the DAC Task Team on Harmonization and Alignment (TTHA), July 6 - 7, 2004. A new action plan is to be drafted.

In 2003, the Multilateral Organizations Performance Assessment Network (MOPAN) conducted a pilot performance assessment of select multilateral organizations (AfDB, AsDB, IADB, UNICEF, WB and WHO) who were involved in the health sector in eight countries (including Nicaragua). The assessment primarily looked at the organizations’ support for national policies and institutions and their participation in aid coordination activities and other partnerships. The report from this pilot exercise has been completed.

OECD/DAC Working Party has developed indicators (in a survey instrument) to monitor progress on harmonization and alignment. A draft report has been prepared.

Joint DFID/SIDA Evaluation of Budget Support is in progress for 9 countries (including Nicaragua). The literature review has been completed. Final report in the form of a SIDA working paper is expected by December 2005.

In May 2004, the Development Assistance Committee of the OECD (OECD/DAC) launched a Joint Country Learning Assessment (JCLA) in Nicaragua, the first of four pilot countries. The aim is to learn and assess the processes that the Nicaraguan government and the development partners have used for harmonization at the country level. The process was initiated at the request of the GoN with the EU and UNDP as volunteers to lead (specifically, EU at the level of the DAC Task Team and UNDP mainly at the partner country level). A local support group with representatives from GoN, EC, UNDP, Netherlands and Japan was established to undertake this task. The main donors supporting the JCLA are EC, Japan, the Netherlands, Norway and UNDP.

The concluding phase of the JCLA included a High Level Mission to Managua (October 4-5, 2004) attended by senior representatives from DAC, EC, UNDP, Netherlands, Japan, IADB, and the WB.

Preparation meeting of the fourteen partner countries of the TTHA was scheduled for October 6 - 7, 2004 in Managua.

GoN was represented at the IADB-sponsored Latin America and Caribbean Regional Workshop on Harmonization and Alignment for Development Effectiveness and Managing for Results which was hosted by the Government of Honduras in Tegucigalpa on November 8-10, 2004. The workshop prepared participants for the Second High-Level Forum (HLF-2) on Harmonization and Alignment in Paris, Feb. 28-March 2, 2005. A case study on Nicaragua (supported by IADB) was prepared for the workshops.

The final version of the Paris Declaration, customized for Nicaragua, is available. It includes the Paris indicators, the national level indicators, and a companion note to this action plan.