How can foreign aid donors help, not hinder, transparent budgeting?

This post was prepared by Porter McConnell of OxfamAmerica.

Development aid, used in smart ways, can save lives and help people get themselves out of poverty.  But sixty years of foreign aid have shown that donors cannot fix the problems of poor people by themselves.  Poor people themselves are demanding accountability and performance from their governments, and our aid is most effective when it invests in strengthening this relationship.

Oxfam recently released a paper calling for specific reforms that emphasize recipient ownership—making US foreign aid support the efforts of governments and citizens to lead their own development.  In particular, reforms should follow these three principles:

Information:  Let countries know what donors are doing

•             Be transparent, publishing what the US gives overall every year in a form that recipient governments can use and their citizens (and US taxpayers) can access and understand.

•             Be predictable, providing countries with regular and timely information on three-to-five-year forward expenditure and implementation plans with at least indicative resource allocations.

Capacity:  Help countries lead

•             Better align technical assistance with what governments and citizens need, including by untying aid.

•             Support local efforts to improve domestic accountability, including by using public financial management systems when appropriate and supporting efforts by citizen groups, parliaments, and auditing agencies.

Control:  Let countries lead

•             Limit earmarks and Presidential initiatives that are inconsistent with country priorities.

•             Give recipient governments and citizens incentives to manage their own development effectively and hold each other accountable, including direct budget support in appropriate contexts.

As the report is careful to point out, every country is different, and donors should view the above as a continuum.  Where governments are corrupt or non-responsive, donors can provide information and work primarily with civil society groups.  However, where governments have a record of transparency and providing services to their citizens, donors can and should let countries control the development agenda.

To subscribe to Oxfam’s Aid Reform updates, click here.

Read a related IBP paper: Improving Budget Transparency and Accountability in Aid Dependent Countries: How Can Donors Help?

 

What next for Aid? Double or nothing or new conditionalities?

The International Aid debate has been raging between people like Jeffrey Sachs, William Easterly and more recently Dambisa Moyo, who take extreme positions for phasing out Aid or massively increasing Aid. As Kaufmannn summarises in a recent blog:

“Aid is dead:  it is worse than merely useless, since it abets and perpetuates mis-governance and dependency by Africa.  No, to the contrary, massive additional infusions of aid are crucial for all of Africa.  This massive transfer of aid to governments in Africa is particularly urgent right now, in the midst of the financial crisis, which is bound to inflict permanent damage everywhere in the continent.”

The day to day business of poor governments and donors is more complex and less clear cut than these extremes. In practice there is little opposition or choice between governance reforms and increases in Aid. Pursuing either of the extremes on offer will undoubtably end in fiscal collapse or massive wastage. Neither the suspension of Aid nor the indiscriminate multiplication of Aid will lead to the development nirvana that their prophets promise. If the 20th century taught us anything, it must be that such ‘final’ solutions invariably end in tragedy.

The reality of government and development work is much more incremental and less sensationalist than this. As Kaufmann explains in the same blog:

“It is far less appealing for a media story to have to report that aid can work effectively and can help, but only under certain conditions — in particular where there is a serious commitment to improved governance by recipient country government and by donors.  And not otherwise…”

As Kaufmann acknowledges in his blog, the problem that donors and governments come up against much more regularly is how to encourage such governance reforms without using aid conditionalities. While the wide support for budget support has already limited the scope for the use of conditionalities,  it is also common knowledge that conditionalities are not an effective instrument for influencing recipient governments. Recipient governments seem to find no difficulty in deferring, misreporting or negotiating past such conditionalities. The proliferation and growth of new donors has made it even easier for poor governments to dilute the power of conditionalities.

What can create the domestic political will needed for the governance reforms that make Aid effective? Greater aid coordination? More emphasis on domestic accountability? What do you think?

 

Getting Collier’s Bottom Billion to the Top

The latest issue of the Institute of Development Studies’ publication, In Focus, explores the strengths and weaknesses of the policies advocated in Paul Collier’s book ‘The Bottom Billion’.

 The 13 four-page policy briefs discuss the key issues raised by Collier, including aid, trade, military intervention and international conventions. Read them here.The briefs were written by a group of development experts, with financial support from DFID.

They welcome how Collier has advanced the debate, but also highlight his reliance on cross-country regressions, and significant omissions, including climate change and poverty in China and India.

Mick Moore (IDS) argues, for example, that Collier doesn’t explain why governance in poor
countries is likely to be corroded and corrupted through interactions with the international system. Or why these countries need protection through international laws and charters  when rich countries developed successfully in a much less regulated international  environment.

 James Fairhead (University of Sussex) argues that Collier neglects the negative interaction between natural resources and national debt in poor countries, and the role of local politics.

If you haven’t read the book, have a look at the IBP’s summary & review here. Or have a look at Collier’s homepage.

If you aren’t up to more reading, watch two Collier clips on Youtube by clicking here and here.

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