The Aid Effectiveness Triangle: Delivery, Conditions and Type of Aid on Offer

Can donors promote reform while not undermining ownership? Is conditionality, or the requirement that aid recipients undertake certain actions in return for the provision of that aid, inherently inconsistent with an ownership agenda? So asks Matt Dornan in an interesting blog post discussing ownership and aid effectiveness.

His post may focus on conditionality and ownership, but it links to another issue: that of how aid is delivered to countries, and how delivery mechanisms impact ownership. It all circles back to aid effectiveness and one big question: is the onus for aid effectiveness on the donor or the recipient? I would be willing to go all in and say the onus is on the donor. Why? Because the delivery mechanism, the conditions and the type of aid (see our post from last week) are the prerogative of the donor.

First, you have the conditions, as discussed by Dornan. Although these days conditions are ‘mutually agreed’ between donor and recipient country, it is still the donor driving the discussion and recipient government agreeing (willingly or unwillingly). It gets more complicated when you have some government agencies agreeing and others complaining about the conditions or ‘overreach’ or ‘interference’ by the donor. For example, Dornan discusses the example of Solomon Islands.

“Views did differ across government. Central government agencies responsible for negotiating policy priorities and budget support conditions viewed conditionality more positively than did line agencies. In fact, many actively used conditionality to promote their own reform agenda in line agencies that had previously resisted reform: something especially evident in the case of Public Financial Management reform. Limited buy-in from line agencies was considered a problem.”

Without trying to simplify the complexity of this issue, we could view this diversion of agreement on conditionality within the context of who the conditions benefit, why and how. Which leads us to a scenario where some in government may be willing to ‘own’ the programmes the conditions are tied to, while others are not. It’s messy and undermines the effective implementation of programmes when some actors are content and other not.

Second, you have the delivery mechanism. There are two ways to deliver aid: on-budget (through the government financial management system) and off-budget (parallel programme implementation that by-passes government institutions). To be blunt, the only way for aid to be effective - to build capacity of government through individuals, institutions and systems - is when it is on-budget. And yet, many donors continue to prefer off-budget delivery mechanisms to avoid issues like corrupt government institutions or argue that government is too weak to implement the programme. However, one must ask how government institutions are expected to improve if they aren’t given the chance to practice? I argued a similar point in relation to assessing the impact of capacity building programmes on this site previously. Perhaps it is best summed up through the findings of Simone Dietrich’s study of 23 OECD donor countries.

“The domestic political economy of donors profoundly affects how they provide bilateral foreign aid”. Donor governments whose “political economies emphasise market-based delivery systems [e.g., the United States, United Kingdom and Australia] are more likely to pursue bypass tactics in poorly governed countries to circumvent aid capture by corrupt elites.”

“The bypass tactic may foster the effective delivery of aid. But such an aid delivery method may create a dual public sector to deliver public goods and divert financial and human resources from state institutions. And it can deprive the recipient parliament of the right to oversee the implementation of projects funded outside the state system.” On the other hand, “the multiplier effect of aid in the economy is greater if aid flows through the recipient budget and national systems” because it can facilitate government capacity for planning, budgeting and programme delivery, stimulate local economic development, and in some cases support democratisation.

On-budget aid is something the government owns and therefore is responsible for (and thus accountable to the donor to ensure appropriate spending). It doesn’t create parallel service delivery mechanisms and doesn’t create competing governance streams which lead to more time arguing and less time implementing and therefore to ineffective aid.

Finally, there is the type of aid: programmed or budget support. Which is more effective depends on the purpose of the aid and the context in which it is being delivered. But as we argued last week, purely programmed aid has a finite lifespan. Programme aid without budget support in countries that have budgetary shortfalls are as effective as someone learning to speak French and then travelling to Japan to practice it. Activities must be mutually reinforcing. Building capacity without providing the necessary financial resources to put what is learned into action is a wasted effort. Not to mention, if there is little chance of putting what is learned into action, how committed will government be to setting aside precious time to learn it?

This is a brief overview of what practitioners know to happen ‘on the ground’ when they deconstruct the roots of poor ‘aid effectiveness’ and ‘ownership’. More case studies of on the interactions and intersections of these three factors would be helpful particularly for policy makers in donor governments to understand how their ideas and decisions can in fact undermine the very policies they are trying to implement.