issues in aid effectiveness

8/2/2019 Issues in Aid Effectiveness

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1(Kharas, 2008); (Fielding and Mavrotas, 2008)

Economists underlined that even when disbursed aid is problematic because frequently unpredictable: in a recent

paper Celasun and Walliser (2008) show that between 1990 and 2005, there is a significant absolute difference

between aid promised and aid given, equal to 3.4 per cent of each sub-Saharan African nations GDP (in the case of

countries like Sierra Leone the swings have been equivalent to 9 per cent of GDP).

ISSUES IN FOREIGN ASSISTNACE

INTRODUCTION

Donor countries have pledged not only to scale up aid commitments in order to reach the

development targets defined by the Millennium Development Goals, but also to monitor aid

effectiveness through the harmonisation of donors policies.

FRAGMENTATION

WHAT Fragmentation is? When Foreign Aid is disintegrated among many small donors in a

country issue of fragmentation arises. There is indeed a growing concern that aid efficiency is

undermined by FRAGMENTATION and a general lack of co-ordination among the donors

community. Harmonisation, along with scaling up and PREDICTABILITY, is seen as a prerequisite

for aid to deliver its promises. The Paris declaration makes harmonisation and cooperation one

of its main commitments by stipulating that donor actions must be more harmonised,

transparent and collectively effective. By signing the declaration, donors commit to implement

common arrangements and recognize that excessive fragmentation of aid at global, country or

sector level impairs aid effectiveness.

There is more to fragmentation than a simple increase in the number of actors. A large number

of these partnerships actually carry little money. Developing countries often bear the

administrative costs of aid with few benefits attached. The rapid growth in the fragmentation of

aid donors is seen to be a burden for recipient countries. Although, too much fragmentation is

not the issue; but too little competition among the donors is main concern.


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For making well the predominant fragmented scenario; emphasis should be on the theory that

likeminded donors, both bilateral and multilateral can work on sector-wide approaches. This

approach has a good precedence in Vietnam

PROLIFERATION

A proliferation of donors and projects has made the governance of aid more problematic in the

recipient countries.

VOLATILITY (UNPREDICTABILITY)

Foreign assistance is usually considered to be too volatile and has important consequences for

recipients in terms of macro-economic cost, the magnitude of the phenomenon being

dependent on both aid and recipients institutional characteristics.

Aid volatility is usually considered to be too high, and is known to be higher than for domestic

revenues.1

1. A direct consequence of volatility is that recipient governments find it difficult to planahead.

2. Situation is even more complicated when aid is not only volatile but also unpredictable.3. In particular aid VOLATILITY prevents consumption smoothing and may trap recipients in

poverty if they cannot finance projects that require sustained income flows;

consequently,

4. It may complicate the macro-economic management of recipient countries.LACK OF PREDICTABILITY


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According to preliminary data, a recent Survey on the Implementation of the Paris Declaration

(OECD-DAC, 2008a) showed that in any average country only 45 percent of aid arrives on time,

as scheduled by donors. This lack of predictability means that government authorities in

developing countries will have difficulty planning or responding to citizens' needs if funding

does not arrive when new hospitals and classrooms were promised (see "Managing Aid

Surprises" on p. 34).

issues in aid effectiveness

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