Over at The Atlantic Community there is a discussion this week on how aid can be improved.
First up is Lawrence Haddad, with Six Ways to Improve Aid Effectiveness. In summary, his six are:
- fix the broken feedback loop.
- communicate the successes and risks of aid in a less ‘public relations’ way.
- publish results of donor efforts to meet their commitments
- limit the number of donor transactions that recipients are expected to engage with.
- focus more on influencing other parts of donor governments.
- plan for aid exits, even if they won’t happen for 10-15 years.
I largely agree with these. Within the aid system, I’d give top priority to fixing the broken feedback loop; and for development policy more broadly I’d focus on better influencing the other parts of donor governments.
The part about planning for aid exits is least convincing. On the contrary, I think aid suffers from the pretense that it is temporary, with everyone having to claim that aid projects will catalyse permanent change. Every programme has to be designed to look as if it will only require aid for a short time, after which it will be self financing. This makes donors too reluctant to invest in excellent programmes which are likely to need sustained funding over many years.
And I’d add predictability – surely one of the most important improvements in aid that donors could easily make. aid is made hugely less effective by lack of predictability. Homi Kharas has estimated that the cost of aid volatility is between 15 and 20 percent of the total value of aid, or about $16 billion a year. From the average recipient’s perspective, the deadweight loss is about 1.9 percent of GDP. Ironically, many of the drivers of lack of predictability (such as donor conditions) are intended to ensure that aid is effective, and have the unintended consequence of making it less so. This is the most requested improvement from developing countries, and it is something that donors could do relatively easily.
My own piece is up tomorrow. You won’t be surprised to learn that I think greater transparency is at the heart of improving the aid system, as a way of driving the other changes that Lawrence and others identify.