Donor Nations Say Poor Budget Management In Recipient Countries Is Holding Up Assistance.
Africas poor nations now see the shimmering prospect of a substantial increase in foreign aid. The question, however, is not just how much extra money the richest donors meeting at the G8 summit on July 6-8 are ready to deliver, but how well African countries can use it, writes the World Bank press review Tuesday.
The Commission for Africa, the panel set up by Britain, the summit host, concludes in its report that “over the next three to five years aid levels could be doubled and used productively”.
But funds already available often remain under-utilized. Even in a country such as Senegal, with a relatively good record of budget management, leading donors such as the World Bank and the European Commission say large parts of their assistance portfolios are unused.
They blame this on a shortage of administrative capacity in government, and on slow bureaucratic processes that provide openings for corruption.
Some experts argue that there is a limit to the amount of aid in proportion to the size of a recipient countrys economy that can be absorbed. Richard Manning, Chairman of the Development Assistance Committee (DAC) at the Paris-based Organization for Economic Co-operation and Development, says studies suggest aid is productive up to a certain level and then shows diminishing returns.
But he points out that donors would be starting from a relatively low base. Despite recent increases, aid to the developing world as a share of recipients gross national income, at about one percent, is well below what it was in the early 1990s. Per capita aid to Africa is also lower in real terms.
Steve Radelet, Senior Fellow at the Center for Global Development in Washington, says non-delivery of aid is partly the fault of donors as well as recipients. To avoid administrative bottlenecks, more aid needs to go outside direct government channels and be distributed through non-government organizations and private-sector entities, he says, citing as a model the approach adopted by the Global Fund to Fight AIDS, Tuberculosis and Malaria.
The capacities of finance ministry bureaucracies are overstretched by the demands of meeting donor requirements, and sometimes undermined by donor programs as staff are drained away to run aid projects. Radelet sees a clear tension between the desire to give recipient countries greater “ownership” of programs and the capacity and institutional constraints in those countries.
Aid needs to be combined with a strengthening of government systems, he says. At the same time, donors need to be more open about their activities, and about the share of aid going to consultants and other professionals close to donor governments.
Trevor Manuel, South Africas Finance Minister, suggested earlier this month that rich countries, following the example of the UK-backed Extractive Industries Transparency Initiative, should sign up to a “donor aid transparency initiative”.
To improve absorption of aid, development agencies and governments – especially European donors such as the UK, the Netherlands, Sweden and Denmark – have been switching to broad support of sectoral and national budgets.
In a related editorial, Financial Times columnist John Kay writes that the good news about extreme poverty is
– that more people have been lifted out of it in the past 10 years than in any decade in world history;
– that this is mainly the result of rapid economic growth in China and India, which is in turn principally due to internal reform not external action;
– that the real contributions of rich countries have mainly been through trade and investment, not aid; and
– that world leaders have played only a minor though constructive role in that process.
The lesson is, Kay argues, that world poverty will be ended by the actions of poor people themselves.
– We in rich countries can make a modest contribution but if the United Nations millennium development goals to eradicate poverty are met, which is unlikely, it will be the achievement of the poor, not the rich, and the achievement of individuals, not politicians, Kay concludes.
Kilde: www.worldbank.org
