What about aid quality?

Monday, July 04, 2005 1:46 PM by Paolo de Renzio

In the run-up to the G8 summit, everybody's attention is focused on how much the G8 leaders will commit in additional aid to help tackle African poverty. Will George Bush be convinced that additional resources are needed? Can Germany and Italy deliver on their promises for extra development assistance?

The reports published earlier this year by the UN MIllennium Project and the Commission for Africa have rightly highlighted the additional resources that are needed to assist African countries in their struggle to achieve the MDGs. But the focus has been mostly on the quantity of such resources, and not enough on the quality. As it becomes clear that the objective of doubling aid resources is still quite far from being reached, the debate should move fast towards discussing the issue of aid quality, so that aid effectiveness can be drastically increased in the years to come.

Aid quality, however, is a very elusive concept, much more difficult to explain and campaign for than simply say 'more aid'. The Make Poverty History campaign has rightly called for 'more and better aid'. But what does that mean? A recent report published by Action Aid analysed the content of aid resources provided by OECD countries, and discounted the parts that in their view did not directly contribute to poverty reduction. These include, among others, aid directed to middle-income countries, debt relief, a portion of technical assistance funding, aid tied to goods and services from the donor country, and un-coordinated aid. According to Action Aid, the present quality of aid is so low that only less than a third of it can be counted as 'real aid'. While some of Action Aid's assumptions can be questioned (see for example DFID's response to the report), the issues it raises are very important.

Some of these issues have been under discussion for some time at the OECD Development Assistance Committee (DAC), in particular when it comes to the impact that aid resources have on recipient countries' capacity to manage and spend them effectively. Fragmented assistance through numerous un-coordinated projects, high transactions costs imposed by the large number of missions, reports and other accountability requirements, and a general lack of reliance on local systems and priorities take a heavy toll on aid effectiveness at country level. The principles developed in the recently held High-Level Forum on Aid Effectiveness are starting to address some of these issues. Donors and recipients have committed to reaching a number of targets that are aimed at improving the quality of the aid provided, so that it can make a better contribution to the MDGs. Progress, however, is likely to be hampered by a number of factors. On one side, domestic accountability in donor countries may prevent the adoption of a more consistent and coordinated approach to aid delivery. On the other side, recipient governments may be weary of donors 'ganging up' on them, weakening their capacity to negotiate separate agreements where that is more convenient. More in general, the aid system is one where accountability mostly works in one direction. While donors always have the option to 'turn off the tap' if a recipient country does not deliver on its promises, recipient countries have no mechanism to hold donors accountable for delivering on their commitments. As a recently published ODI Opinion argues, aid quality and aid effectiveness require a system that forces donors to improve the ways in which aid is delivered, and that will only happen when more voice and more choice are given to recipient countries in terms of influencing the decisions around the aid that they receive.

As far as the G8 is concerned, the main message should be: 'Yes, more aid is needed, but of better quality'. Just doubling aid, without addressing some of the characteristics of the aid system that reduce the overall quality of the aid delivered, would mean losing a great opportunity to enhance the effectiveness of aid in reducing poverty.