Aid, Resource Rents and the Politics of the Budget Process

This paper analyzes the combined impact of political, institutional, and budget procedures on budget outcomes in aid- and resource-dependent countries. The paper builds on a new dataset of 47 low and lower-middle-income countries whose economies depend on aid or natural resource inflows between 1995 and 2006. The empirical section identifies some trends that qualify conventional beliefs about the importance of executive power on the budget process and helps identify some areas where more empirical and conceptual research is needed to understand the political factors underlying the budget process and producing budget outcomes.

The Impact of the Global Economic Crisis on the Budgets of Low-Income Countries

The global economic crisis created a huge budget revenue hole of US$ 65 billion of which aid has filled only one-third. As a result many Low Income Countries (LICs) are cutting Millennium Development Goals (MDGs)-related spending (especially on education and social protection), applying for expensive domestic loans, and increasing anti-poor sales taxes. The report explores what 56 LICs did in 2009 and plan to do in 2010 to fight the crisis, protect the poorest, and revive progress toward the MDGs. The report also urges: 1) the international community to make new aid commitments at the Millennium Summit in September 2010, 2) the International Monetary Fund to encourage LICs to spend more on achieving the MDGs, on combating climate change, and to report regularly on such spending, and 3) LIC governments to increase spending on social protection and education; increase in taxes on income, property, and foreign investors; and fight tax avoidance.

New Strategies, Old Loan Conditions: Do the New IMF and World Bank Loans Support Countries’ Poverty Reduction Strategies? The Case of Uganda

The study presented on the occasion of the spring 2002 meeting of the World Bank and the IMF, looks at the new structural adjustment loans to Uganda in light of the country’s Poverty Reduction Strategy Paper (PRSP). The authors suggest that crucial economic policy reform prescriptions contained in the loans may impair Uganda’s ability to realize the poverty reduction objectives. The study also questions whether the PRSP process allows an authentic and effective participation of civil society side-by-side with the government and IFIs (International Financial Institutions) in the articulation of the anti-poverty policies.

Practical Approaches to the Aid Effectiveness Agenda

Donor aid is a substantial source of funds for many countries that are struggling to meet the needs of their people and strengthen their economy. What happens when aid bypasses the recipient government’s budget process and is not aligned with the government’s priorities? And what can be done to improve alignment, support good budget processes and decisions, and increase transparency and accountability? The IBP and Publish What You Fund have released a new paper that explores the linkages between aid and budgets. The paper, written by the Overseas Development Institute, first documents similarities in how aid is treated in the national budgets of 14 aid-recipient countries, using two international budget coding systems as standards. Then it offers a generic system for classifying the amount and use of aid that best aligns with the administrative structures of the countries studied. Finally, the paper recommends strategies for increasing the transparency of aid information, particularly aid that is not spent through recipient country budget systems.