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Begin New Search Topic Foreign Aid Content Type Working Paper Publishing Institution Center for Global Development

1. Are Development Finance Institutions Good Value for Money?

Author:
Paddy Carter
Publication Date:
10-2021
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Finance institutions take money from foreign aid budgets to invest in private enterprises. How much should they be given? We can make some progress on that question by looking at the return on investment in the form of higher real incomes for workers and customers, and comparing that to a cash transfer benchmark. There is considerable uncertainty, but what evidence we have suggests returns on investment are in a range that compares well to that benchmark. There is also a diversification argument that because we don’t know which of the things that aid can finance will ultimately prove most important for poverty eradication, aid allocation should hedge its bets. A low single digit percentage of aid allocated to increase the quantity and quality of private investment in low- and middle-income countries seems reasonable.
Topic:
Development, Foreign Aid, Finance, Investment, and Institutions
Political Geography:
Global Focus

2. Some Unpleasant ODA Arithmetic

Author:
Ranil Dissanayake and Atousa Tahmasebi
Publication Date:
10-2021
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Official development assistance is supposed to be designed to prioritise the economic development and welfare of developing countries. The OECD’s Development Assistance Committee is a club of wealthy donor countries which collaborate to set rules and norms to this effect. However, digging into the official data submitted by donors to the OECD reveals some unpleasant truths. We use data on every funding line reported by donors to the OECD between 2006 and 2019 to investigate the pattern and distribution of commitments and disbursements of ODA to developing countries, and discover that ODA is targeted poorly within the group of eligible developing countries; that this group of eligible countries is gradually expanding to include more relatively wealthy places; that aggregate ODA flows are organized and structured sub-optimally; and that ODA responds more to arbitrary income classifications than it should. We suggest informational and incentive reforms in response. These findings also suggest limits to what realistic reform of ODA can achieve, and, consequently, the importance of non-aid development policy for outcomes in developing countries.
Topic:
Development, International Cooperation, Foreign Aid, and Welfare
Political Geography:
Global Focus

3. A Short-Sighted Vision for Global Britain

Author:
Owen Barder, Hannah Timmis, and Arthur Baker
Publication Date:
03-2019
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
here has been a resurgence in calls to reconsider the cross-party consensus in the UK on foreign aid and development. The main political parties are all committed to spending 0.7 percent of gross national income on aid, to using the internationally agreed definition of aid, and to maintaining a separate government department to administer the majority of this aid, led by a Cabinet Minister. In their recent report, Global Britain: A Twenty-first Century Vision, Bob Seely MP and James Rogers lay challenge to these long-established pillars of UK development policy. In this note, we consider some of the questions they raise and suggest alternative answers.
Topic:
Development, Government, Foreign Aid, and Bureaucracy
Political Geography:
Britain and Europe

4. The Dos and Don’ts of USG Humanitarian Reorganization

Author:
Jeremy Konyndyk
Publication Date:
04-2019
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
The FY 2020 budget request released by the White House last month contained a sweeping proposal to rationalize and streamline US government humanitarian assistance programs overseas. The proposal would merge the three humanitarian budget accounts (International Disaster Assistance, Migration and Refugee Assistance, and Food For Peace Title II); strip programming responsibilities from the State Department’s refugee bureau and consolidate them entirely in a new humanitarian bureau at USAID; and establish a vaguely described “dual hat” senior leader role to oversee humanitarian activities at both USAID and the State Department. The proposed changes would be the most significant overhaul of USG humanitarian structures in decades. The proposal in its current form is unlikely to get much traction in Congress, where it is seen on both sides of the aisle as dramatically weakening US leadership on refugees. In light of other moves by the administration—like slashing refugee resettlement numbers and treating asylum seekers roughly—that is a legitimate and vital concern. There is ample reason to approach the proposal with caution, particularly the idea of stripping away the refugee bureau’s resources.
Topic:
Foreign Aid, Budget, Refugees, and Humanitarian Crisis
Political Geography:
United States and North America

5. What Is “Country Ownership”? A Formal Exploration of the Aid Relationship

Author:
William Savedoff
Publication Date:
10-2019
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
The aid literature and high-level accords like the Paris Declaration argue that “country ownership” is critical to the effectiveness of aid. In response, donors and recipients renamed themselves “development partners,” obscuring the tendency for country ownership benefits (i.e. more successful and sustainable programs) to come at the expense of satisfying the funding countries’ priorities. This paper illustrates the tradeoff between country ownership and funders’ priorities with a formal model in which aid is governed by a contract to produce a jointly desired outcome. The model generalizes the Principal-Agent approaches for studying aid which treat countries as having multiple objectives. The new model illustrates how a recipient country’s rational resource allocation choices vary with different aid contracts, whether based on lump sum payments, input-based payments, conditional payments, matching grants or outcome payments. It reveals two critical aspects of the country ownership debate. First, even when funders and recipients agree on project goals, funders can only achieve their priorities through distorting domestic allocative choices. Second, funders are likely to fully embrace country ownership only in cases where they believe alternative uses of domestic funds have integrity (as defined by the funder). The model also shows that when funders put higher priority on achieving their goals than accommodating recipient allocation preferences, they should prefer conditional payments, matching grants, or outcome payments. Among these, the donor’s preferences would depend on the relative observability of expenditures to outcomes. If instead funders embrace country ownership and seek to maximize the country’s welfare, lump sum grants are better. In terms of Paris Declaration goals of sustainability, the aid contracts which are least aligned with recipient country priorities will not be sustained after aid ends unless domestic preferences are altered by a process of hysteresis.
Topic:
Development, Diplomacy, International Cooperation, and Foreign Aid
Political Geography:
Global Focus

6. UK Aid Quality Indicators

Author:
Caitlin McKee, Ian Mitchell, and Arthur Baker
Publication Date:
12-2018
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
This paper discusses the United Kingdom’s foreign aid quality based on an updated assessment of the Quality of Official Development Assistance (QuODA) published by the Center for Global Development. QuODA uses 24 quantitative indicators based on how aid is given, grouped into four themes: maximizing efficiency, fostering institutions, reducing the burden on recipient countries, and transparency and learning. These are based on principles which donor and recipient countries agreed to in a series of high-level meetings on aid effectiveness. We find UK aid quality has decreased from 2012 to 2016 and now ranks 15th out of the 27 countries assessed. The quality of its multilateral aid is relatively strong with significant contributions to EU institutions who score in the top half of multilateral agencies, and well-above the UK’s bilateral aid. We analyse the UK’s bilateral aid in detail, identifying areas of relative strength but also four recommendations for the UK Government to improve aid effectiveness
Topic:
Development, International Cooperation, Foreign Aid, and Multilateralism
Political Geography:
United Kingdom and Europe

7. Rethinking the Financial Design of the World Bank

Author:
Devesh Kapur and Arjun Raychaudhuri
Publication Date:
01-2014
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Since their inception, through 2012, the institutions comprising the World Bank group have been involved in lending nearly a trillion dollars. In this paper, we focus on the IBRD, which is the core of the World Bank. The IBRD has the potential to continue to grow and be an important player in official financial flows, supporting critical long-term development projects with large social returns, in sectors ranging from infrastructure, social sectors, or environment.
Topic:
Development, Economics, Environment, Foreign Aid, Infrastructure, and World Bank
Political Geography:
Europe

8. How Should Donors Respond to Resource Windfalls in Poor Countries?

Author:
Alan Gelb, Anton Dobronogov, and Fernando Brant Saldanha
Publication Date:
07-2014
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Natural resources are being discovered in more countries, both rich and poor. Many of the new and aspiring resource exporters are low-income countries that are still receiving substantial levels of foreign aid. Resource discoveries open up enormous opportunities, but also expose producing countries to huge trade and fiscal shocks from volatile commodity markets if their exports are highly concentrated. A large literature on the "resource curse" shows that these are damaging unless countries manage to cushion the effects through countercyclical policy. It also shows that the countries least likely to do so successfully are those with weaker institutions, and these are most likely to remain as clients of the aid system. This paper considers the question of how donors should respond to their clients' potential windfalls. It discusses several ways in which the focus and nature of foreign aid programs will need to change, including the level of financial assistance. The paper develops some ideas on how a donor like the International Development Association might structure its program of financial transfers to mitigate volatility. The paper outlines ways in which the International Development Association could use hedging instruments to vary disbursements while still working within a framework of country allocations that are not contingent on oil prices. Simulations suggest that the International Development Association could be structured to provide a larger degree of insurance if it is calibrated to hedge against large declines in resource prices. These suggestions are intended to complement other mechanisms, including self-insurance using Sovereign Wealth Funds (where possible) and the facilities of the International Monetary Fund.
Topic:
Economics, International Trade and Finance, Natural Resources, and Foreign Aid
Political Geography:
Uganda, Kenya, Tanzania, and Ghana

9. The Political Economy of Bad Data: Evidence from African Survey Administrative Statistics

Author:
Amanda Glassman and Justin Sandefur
Publication Date:
07-2014
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Across multiple African countries, discrepancies between administrative data and independent household surveys suggest official statistics systematically exaggerate development progress. We provide evidence for two distinct explanations of these discrepancies. First, governments misreport to foreign donors, as in the case of a results-based aid program rewarding reported vaccination rates. Second, national governments are themselves misled by frontline service providers, as in the case of primary education, where official enrollment numbers diverged from survey estimates after funding shifted from user fees to per pupil government grants. Both syndromes highlight the need for incentive compatibility between data systems and funding rules.
Topic:
Development, Foreign Aid, Foreign Direct Investment, Governance, and Developing World
Political Geography:
Africa

10. Can Results-Based Payments Reduce Corruption?

Author:
Charles Kenny and William Savedoff
Publication Date:
10-2013
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
A common objection to results-based programs is that they are somehow more vulnerable to corruption. This paper explains why results-based approaches to foreign aid may be less vulnerable to corruption than the traditional approaches which monitor and track the purchase and delivery of inputs and activities. The paper begins by classifying different corruption costs and specifically distinguishes the problem of diverted funds from the costs associated with failing to generate benefits. It then characterizes the key differences between traditional input-tracking programs and results-based approaches in terms of how they are supposed to work, the implicit risks that preoccupy designers, how they function in practice, and what this means both for the scale of corruption and the realization of benefits. It then considers the conditions under which one approach or another might be more appropriate. The paper concludes that input-tracking approaches are vulnerable to corruption because they have high failure costs and a weak track record for controlling diverted funds. By contrast, results-based approaches are less prone to failure costs and limit the capacity of dishonest agents to divert funds unless those agents first improve efficiency and outputs.
Topic:
Corruption, Development, Foreign Aid, and Governance