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Strengthening modelling capacity for development policy analysis

UN DESA has during the past ten years, through several projects, transferred economy-wide and energy modeling tools and the required capacity to use them for policy analysis to 22 countries in Latin America, the Middle East and North Africa, Asia and Africa. These projects have influenced the way governments are thinking about the feasibility of different policies using evidence from rigorous modelling analyses that integrate the economic and social dimensions of development and energy planning.

The use of these models by government experts has helped to sharpen the thinking on development policies and encouraged policy dialogue. There is now more awareness in the beneficiary countries about the need to assess any development policy in light of the real macroeconomic and financing feasibility of implementing it. Economy-wide models are informing the design as well as implementation of national development plans, including in energy planning, as they help detect the trade-offs and synergies of policies flowing through all sectors of a socio-economic system.

Modelling to help work towards meeting international development goals

Overall, the projects have influenced how governments are thinking about their policies and plans in a number of areas. One of these areas relates to how the main line ministries assessed integrated policy options and financing mechanisms to meet the Millennium Development Goals (MDGs). The projects also provided important policy insights on pathways to achieve sustainable energy generation. Government experts from various institutions have become more qualified to identify feasible financing strategies to meet the goals where they were lagging behind. This has helped Ministries of Finance think more carefully about spending more in social sectors without compromising fiscal and public debt sustainability. In Uganda, for example, it was found that instead of investing in social sectors, the MDGs could be more quickly achieved if the country invested more in public infrastructure. This finding was not so obvious before the projects were implemented. The analyses developed informed poverty and MDG strategies. In Uganda, the Poverty Status Report 2014 and the MDG Report for 2013 were informed by economy-wide model-based analyses.

Models to inform national development plans

Transferred models have also been instrumental in informing the drafting and implementation of national development plans and strategies. In 2015, trainees of one of the projects, accompanied by the technical support from DESA staff, elaborated a number of scenarios used in the drafting of the macroeconomic chapter of the Second National Development Plan in Uganda. In Bolivia, an economy-wide modelling framework helped advise the government that, in order to meet the commitments of Agenda Patriótica 2025, the country’s development vision, the economy would need to grow much more than in the past years (by around 7%) to avoid excessive reliance on public spending and overstretching the budget. These findings were possible because the economy-wide model helped address the challenges within an integrated socio-economic framework where the needs from all sectors were considered in unison—rather than following a silo approach. High-level policy makers understood the importance of continuing using the modelling tool during implementation of development plans in Bolivia. As a result, enhanced technical capacities in the use of energy models were crucial in formulating the Intended Nationally Determined Contribution (INDC) presented by Bolivia at the United Nations Conference on Climate Change (COP 21) in Paris in December 2015.

Modelling capacities to anticipate economic shocks

The modelling capacities have enabled government experts to be better prepared to anticipate different economic shocks, and understand how such shocks may impact on the efforts to meet development goals and implement development plans and strategies. In Bolivia, policy notes on these issues are regularly generated by the Economic and Social Policy Analysis Unit (UDAPE) of the Ministry of Planning of Development (MPD) in order to inform cabinet discussions. As of October 2016, an UDAPE team is fully engaged in using the models adopted through capacity development projects to understand the socio-economic impact of fluctuations in the price of gas, a commodity which the economy critically relies upon.

Dataset construction

In order to apply economy-wide models in each beneficiary country, the projects have included the construction of datasets that are mostly based on official national accounts and household surveys. Problems in the official data have been detected during the process of constructing the datasets for the models. Detecting problems in data has been critical to provide useful feedback to statistical offices, which is an important byproduct of the projects. Moreover, the building of datasets for models has also prompted policy discussions.

Institutionalization of practices and country ownership of modelling tools

Countries have continued to use modelling tools following UN DESA’s capacity development projects. Bolivia is using a modelling tool to analyze issues of implementation of their Economic and Social Plan. In Uganda, the modelling tool that was used to inform the first national development plan, was extended and used for the second development plan. The close involvement of target countries including through finance and in-kind contributions to the projects have been important to create a sense of ownership and for the institutionalization of practices.

Policy coordination

An important contribution of the capacity development projects on modelling tools has been the technical interactions among government officials from various ministries and government institutions. UN DESA has placed special emphasis on inviting participation of government officials from various institutions in order to build capacity in understanding the inter-linkages across various dimensions of development. Policy simulations from a typical economy-wide model, for example, have policy implications that are relevant to ministries of finance, planning, central banks and other sectoral ministries. Economy wide modelling including an energy sector, requires participation from the institutions in charge of energy production, in addition to the institutions mentioned above. In most countries where UN DESA has implemented capacity development projects on modelling tools, there are strong basis and technical expertise for improved policy coordination and inter-ministerial policy dialogues.

Read more about UN DESA’s Modelling Tools for Sustainable Development.