Can More and Faster Aid Mean Better Aid?

At a CGD event (presentation slides available) earlier today, Koos Richelle, Director General of the European Commission’s EuropeAid, laid out the priorities of his organization, the fifth largest source of development assistance, with refreshing candor and humor. Saying that the aid business has been “good for the soul” of the donor but not necessarily particularly beneficial to the recipient, he said it’s time to stop believing “fairytales from donorland.” With greater aid volumes committed by European countries, the challenge is to ensure that the money makes a difference in the real world. Toward that end, Richelle made a vigorous case for a change in behavior by both multilateral and bilateral donors: Less fragmentation across lots of small projects, more attention to measuring impact and less to toting up inputs, greater willingness to terminate funding when results are poor, and more. He called, in fact, for the wholehearted implementation of a set of changes in policies and practices that have been part of the official aid rhetoric - loudest in Europe - for several years (see, for example, a raft of documentation at http://www.un.org/esa/ffd/).The topic that sparked the liveliest questions from the audience was budget support - a way of moving the money that is more popular among the development community in Europe than in the US and Japan, and is often promoted as a way to ensure that development is “country-driven.” One questioner asked whether budget support might undermine responsiveness to national priorities and democracy if it permits donors to influence the whole of a recipient country’s budget. (It would be interesting to hear what recipients of budget support think about that!) Another wondered whether the opportunities for corruption would be increased if funds were provided through budget support. (The OECD’s evaluation released in May says no to that.) Arguing that strong conditions should be placed on both initiating and continuing any external support, another questioner asked whether responding to “country priorities” is a good idea after all, if those priorities correspond poorly to improvement in economic conditions and social welfare. (Again, the evaluation clearly came to the unsurprising conclusion that it’s better to give support to governments that have good intentions.)Noting that EC requires that any budget support be conditioned on the basics of good behavior by recipient governments, Richelle closed by reiterating that there’s a lot of political pressure to move more money, faster. For that purpose, budget support is far superior to traditional projects, which take upwards of 18 months to design and are often cumbersome to implement. Thus is revealed a central conundrum of development aid: how to line up the incentives for more and faster aid with those for better aid. Is budget support the answer?