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?

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