In this paper, the authors state that the micro-macro paradox has been revived. Despite broadly positive evaluations at the micro and meso-levels, they note that recent literature has turned decidedly pessimistic with respect to the ability of foreign aid to foster economic growth. Policy implications, such as the complete cessation of aid to Africa, are being drawn on the basis of fragile evidence. This paper first assesses the aid-growth literature with a focus on recent contributions. The aid-growth literature is then framed, for the first time, in terms of the Rubin Causal Model, applied at the macroeconomic level. Its results show that aid has a positive and statistically significant causal effect on growth over the long run with point estimates at levels suggested by growth theory. It concludes that aid remains an important tool for enhancing the development prospects of poor nations.
Resource allocation and health financing
The central argument of this working paper is that, given the magnitude of the investment in infrastructure that is required, especially in Africa, the role of external funding (foreign aid) in the future should be distinctly different to what it is now. While external funding will be required to continue to fill the ‘savings gap’ in some small countries and land-locked countries, in most other countries it can play a very different role in facilitating the creation of institutional mechanisms that help mobilise more funding from other sources. These include domestic revenues (which already fund a large proportion of infrastructure), investments by China and the other BRIC countries, sovereign wealth funds and infrastructure funds. There are already examples of external funding playing such a leveraging role. What is needed is to take this to a new and higher level, the authors argue. The study provides an overview of evidence on infrastructure needs and also possible magnitudes of flows from different sources for investment in infrastructure.
Malawi is one of the most aid dependent countries in the world. When one considers the work that is done by international NGOs, however, or by them through local surrogates, it is argued that there is no aspect of life in Malawi that has escaped external funding. With July 6, 2014 a day 50 years to the day when Malawi became an independent state the author argues that it’s important to accentuate the discussion on aid in Malawi and its implications for Malawi. the author argues that a heavy reliance on external funding means that foreigners, not the citizens, are in charge of the country’s governance.
In response to the problem of aid fragmentation, joint country assistance strategies have emerged as a preferred method to coordinate and harmonise aid. This paper determines that, to date, donor teams and recipient governments have come together in at least twelve countries to prepare joint strategies. A number of lessons were learnt and conclusions drawn. Lack of communication between stakeholders was identified, especially regarding strategy processes. Poverty reduction strategy processes should ideally be separated from the joint country strategy process to reduce government workload. An inclusive, thorough and effectively managed process has a greater chance to create the trust, cooperative spirit and follow-through during the implementation phase than one that stresses the production of a quality report without adequate venting of differing views and interests. In countries where government lacks capacity or will, the donor community may wish to identify one agency as the presumptive leader among donors for aid coordination on the ground.
What is the relevance of the aid commitments embodied in the Paris Declaration on Aid Effectiveness (2005) and the Accra Agenda for Action (2008) to development actors in South-South co-operation? While research on South-South co-operation is increasing, this article notes that it appears to be largely focused on financial flows or on a limited number of emerging economies, but not on the experiences of practitioners of South-South (SS) co-operation themselves. The article offers two reasons why aid matters for SS partners. First, aid effectiveness is important for partner countries. The effectiveness commitments embodied in the Paris Declaration and the Accra Agenda for Action have failed to promote behavior change, for example, in increasing the use of country systems and in making aid more predictable. One possible solution is the internationally recognised Survey on Monitoring the Paris Declaration, which tracks the implementation of the Paris commitments. Second, development actors need to go beyond the conventional ‘donor-recipient’ relationship, especially as the development co-operation architecture is becoming more diversified and complex. The Accra Agenda for Action in 2008 opened the door to encourage an inclusive and effective development partnership with civil society, parliamentarians, private sector, providers of South-South co-operation, foundations and global programmes. More actors are taking ownership of the aid effectiveness agenda by shaping it with their own views and experiences. One such example is the Dili Declaration (April 2010), in which a group of fragile states, including the Democratic Republic of Congo, have adapted aid effectiveness principles to their situations of national conflict and fragility.
This occasional paper focuses on China’s and the EU’s aid policies towards Africa by examining their different approaches to aid and the internal logic behind these differences in order to facilitate mutual understanding. It points out that, due to their different development stages, different development models and different aid co-operation experiences in Africa, China and the EU have developed different aid principles, priorities and modalities with different logics. China advocates more ‘co-operation’ than ‘aid’ itself, so the country’s main principles guiding the way in which it manages aid are no political conditions attached to aid provisions, two-way co-operation and a win-win formula. The EU considers aid as a one-way instrument to promote Africa’s good governance and sustainable development, so the key principles that it applies are conditionality, one-way benevolence and co-responsibility. However, the paper highlights that these different logics behind the EU’s and China’s policy approaches are not necessarily contradictory. It proposes that both sides should shift perspective, putting aside the perception of ‘competing models’, to study the points of overlap and thus open a new window for co-operation. Considering the wide perception gap that exists between the two sides, the author recommends that a practical and pragmatic way to advance co-operation may be through focusing initially on second track approaches.
European civil society organisations have expressed dismay at new Organisation for Economic Co-operation and Development data revealing the cuts made to almost all European countries’ aid programmes in 2011. Twelve European countries slashed their aid budgets in 2011 – with the biggest cuts seen in Greece (-39.3%), Spain (-32.7%), and Austria (-14.3%) – and only three European countries increased their aid spending: Italy (33%), Sweden (10.5%) and Germany (5.9%). Publish What You Fund urges the development community to focus on maximising the impact of aid by ensuring external funders provide more accessible, timely, and comparable information about the aid they give. All European funders should implement the commitments they made in the EU Transparency Guarantee by publishing their aid information to the International Aid Transparency Initiative (IATI), so that other European countries and funders around the world can co-ordinate their aid spending more effectively. It is also crucial that information on European Union (EU) aid is made available through the common standard so that recipient countries can see what is coming to them and plan their own spending in relation to this.
After grappling for years with difficult issues – including coordination of aid activities, recipient country ownership and predictability – it appears that external funders, recipients and civil society alike have realised that very little of the aid effectiveness agenda can be achieved without greater and systematic transparency. And while aid has become more transparent, progress is slow and uneven, according to the new edition of the Aid Transparency Index. The report finds that transparency can be improved, without great difficulty, when political commitment is translated into effective implementation. Aid information must be shared openly in a timely, comprehensive, comparable and accessible way. The report discusses the role of the International Aid Transparency Initiative (IATI), which offers a common standard for publishing aid information that satisfies all of these elements. So far 33 external funders have signed IATI and thereby committed to publishing to its common standard. These funders account for over 75% of official development finance.
This article argues that, as a result of the current financial crisis, there has been a resurgence of commitment to transparency in overseas development aid (ODA) in all areas and greater focus on the effectiveness of spending. It notes that progress on ODA transparency can occur swiftly and the impacts can be significant. Eighteen donors are reported to have signed up to the International Aid Transparency Initiative (IATI), including major multilateral and bilateral donors like the World Bank and the United Kingdom’s Department for International Development (DFID). The process of defining the standards is ongoing, calling for common standards of transparency, including publication of what is funded. One of the consequences of lack of transparency on ODA resources is the issue of donor ‘orphans’ or ‘darlings’ - where aid flows disproportionately to a particular region, sector, issue or ministry. Greater levels of information and transparency is needed on ODA benefits to civil society, including non-governmental organisations, parliamentarians and direct beneficiaries. This is a prerequisite for not only holding donors and service providers accountable over commitments they have made, but also for citizens to hold their governments to account over discrepancies between ODA received and spent on behalf of beneficiaries.
Is public expenditure in developing countries inefficient and biased against the poor? How could better aid delivery enhance the likelihood of achieving Millenium Development Goals (MDGs)? What changes are required in current patterns of public expenditure and monitoring and in donor-recipient relations?