Accelerating aid disbursement in a financial crisis

Interesting idea from Homi Kharas at the Brookings Institution

That is why the G20 should consider declaring a development emergency for 2009. They should urge aid agencies to take every step possible to accelerate the disbursement of already approved funds. They should support staff and managers for taking risks to speed up the flow of money. Their representatives on the boards of these agencies should monitor progress. Poor countries need the money, and they need it now. Rich countries have already paid for this. Now they just need to demand speedier results.

I can see how that would help in the short run (though presumably the financial crisis may be leading many aid agencies to do the exact opposite – shifting expenditure “to the right” is one way that donor countries may be coping with fiscal effects of the crisis.

But I can’t see how that would help in the long run. What we need is an automatic fiscal stabiliser that increases aid to poor countries in a crisis. One way to do this would be set up entitlement programmes – safety nets below which nobody can fall – and accept that the cost of these programmes will automatically go up when the economy turns down.

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