Are Donors Part of the Solution, or Part of the Problem? How Can Development Cooperation Help Reach the International Development Targets (IDTs)?

30 June 1999
Public event

Speakers

Mick Foster, Centre for Aid and Public Expenditure, ODI

David Bevan, Centre for the Study of African Economies, Oxford

Chair:

David Booth - ODI

Description

At this meeting, speakers put forward the view that aid makes a stronger contribution to poverty reduction when delivered flexibly on the basis of better forms of partnership with government.

1. Introducing the last meeting in the series on 'Halving Poverty by 2015: Have We Got What it Takes?', David Booth (ODI) picked out two themes from the series so far:

  • faster growth is necessary but not sufficient - the pattern of growth, the level of initial inequality and the quality of government policies, are crucial; and
  • for aid to make a positive contribution, donors need not just new priorities but re-organisation and re-tooling on a substantial scale.
The meeting could be expected to develop these themes. The speakers were distinguished exponents of the view that aid makes a stronger contribution to poverty reduction when delivered flexibly on the basis of better forms of partnership with government.

2. Mick Foster reviewed changes in approaches to development cooperation from the 1960s to the 1990s. The story ended with J. Wolfenson's diagnosis focusing on the 'absence of a framework to coordinate and bring together under Government guidance an agreed set of objectives and effective and accountable programmes'. The aid effectiveness literature had drawn attention to the importance of a conducive policy environment. There were growing doubts about the usefulness of conditionality as a means of influencing policy where basic Government commitment is lacking. And the project approach to aid was increasingly criticised as too partial in its impact, as unsustainable and as incapable of influencing the overall composition of spending. All this suggested that donor effort on the international development targets (IDTs) should be

  • concentrated in countries where there is commitment,
  • flexible (in the form of long-term support to Government expenditure plans) and
  • placed within a firm framework.

3. Elements of the framework that needs to be built were: a clear vision of the roles of the State and other actors, means of increasing consistency between resource allocation and objectives, and agreed common arrangements for transparency and accountability. Important steps in this direction had been taken as a result of the adoption of the SPA's Public Finance Management Guidance by several African countries, a key feature of which is the setting of a Medium Term Budget Framework forming the basis for an annual dialogue with external partners and civil society. Within sectors, a sector-wide approach, led by Government in partnership with donors and civil society, also held out promise, although there were a great many practical difficulties to be tackled.

4. Among the challenges identified were: the need for clear agreements and strong peer pressures to maintain the necessary discipline on the donor side; greater willingness to commit funds on a long-term basis, allowing time for Government 'ownership' to develop; reducing institutional complexities by simplifying procedures and concentrating on the big issues; investing in capacity building but not waiting for it to develop before improving services; and adopting a process, not a blueprint, approach to partnership.

5. All these were well illustrated by recent experiences in particular countries. One positive experience was the new approach to public expenditure management leading to greater focus on poverty reduction in Uganda. There were also good examples, from Uganda and elsewhere, of innovative uses of information to build up pressure for more pro-poor allocations and more transparent implementation. It was becoming clear that sector programmes work best when 'nested' in a good macro-process of resource allocation, and where there is stable management and plenty of delegation. Conditionality still had a role to play, but conditions should focus on processes of consultation and accountability, and any sanctions should focus on future commitments, not current programmes. The key thing was for donors to be responsible about keeping Government in the driving seat.

6. David Bevan had comments in three areas.

  • First, he had a partial disagreement on the thrust of the aid effectiveness literature. There was some danger of overstating and oversimplifying the importance of a good policy environment. The recent studies from the World Bank were based on questionable indexes of good policy, and a recent survey of aid-effectiveness research by Hansen and Tarp suggested that, contrary to Dollar et al., aid can have a positive effect even in the absence of conducive national policies. This should check the current band-wagon of arguments suggesting donors need to wait for recipient governments to establish a policy track record.

  • Second, he shared Mick Foster's doubts about conditionality as a means of bringing about good policies, and was less sure that it would work in a budget framework. There were no easy solutions. As Mick had said, in the past donors had made the situation worse by using mechanisms that bypassed the policy processes of weak governments. The question was how to put this into reverse, which involved chicken-and-egg problems.

  • Third, as Mick had said, the move by donors to budget funding in place of project funding and balance-of-payments support was opening up important new issues of macro-management. In the past, it had been sensible to leave questions like the size of the budget deficit to the IMF. But now, with deficits under control in many countries, broader consultations over the appropriate size of the total expenditure envelope were appropriate and in some cases these might lead to the allocation of more resources to poverty-reducing activities.

7. Discussion of the two contributions included the potential of the budget framework approach to provide a limited cushion between Fund-supported stabilisation and donor-supported sector plans There was also interest in the future of projects and the role conditionality within the new approach. Should projects just wither away? What was really different about the new conditionality?

8. One participant wanted to know what is to be done about the appallingly low levels of total per capita spending, after debt service, in the poorest countries; and, anyway, what were the procedures for allocating between competing focuses of poverty-reducing spending - e.g. health and agriculture? Mick Foster agreed the figures were low, but it was also important that much Government money was very badly spent, with poverty outcomes varying widely in relation to per capita expenditure.

9. Would the case for aid be weakened if it came to depend not just on easily demonstrable improvements in economic growth but on more subtle and slippery performance indicators? No - it was thought - because poverty impacts, if they were able to be shown, would be the strongest argument of all. At the same time, methods for assessing poverty outcomes were in their early stages and would need time to deliver.

10. Finally, was there really an emerging consensus on these matters, when some donors were still very attached to projects and the Washington institutions were not grappling with the issue in quite the same way? Were African governments themselves convinced? With regard to Africa, the speakers thought the consensus was certainly not complete, but that governments in Tanzania, Uganda, Ghana, Mozambique and perhaps Rwanda had bought into new partnership with some enthusiasm. The Bank's Comprehensive Development Framework, which was not so different in intention from the ideas reviewed in the meeting, was being tried out in Ghana.