Development effectiveness at the country level

Abstract

"While we know a lot about how countries become prosperous, we have only begun to understand how aid contributes to economic growth and poverty reduction. The development record is mixed and no robust association between the volume of aid and development performance has been unearthed. Cross country regressions do not throw much light on the reality of aid. The novel mix of qualitative and quantitative methods fashioned by independent evaluators is more informative regarding aid effectiveness both at project level and at country level. A new brand of country assistance evaluations demonstrates that success at project level matters even if it does not always translate into success at country level - the 'micro-macro paradox'. Well managed aid works when it uses instruments that are tailored to specific country contexts. Budget support mechanisms and program aid instruments have a role to play in some circumstances. Projects are the aid vehicles of choice in others. The popular notion that development effectiveness can be ensured through the targeting of aid towards countries that are classified as good performers by idealized sets of indicators has been discredited. Conversely, recent policy research findings suggest that, despite the risks involved, aid does the most good when it privileges the weakest and poorest economies and those most vulnerable to shock. To achieve development effectiveness at country level, coherence of interventions is critical as is judicious sequencing. Development operations should be (i) selected to fit within coherent country assistance strategies, (ii) aligned with the priorities of the country and (iii) coordinated with other policies and the actions of partners. This is because the quality of aid matters as much as its quantity since it is a transmission belt for ideas, a device to train development leaders, an instrument to build state capacity and a platform for policy experimentation and dissemination. The final proposition offered by this paper is that professionally administered aid works but that it would work even better in concert with reforms of rich countries' policies. The new development agenda should extend beyond aid. It should aim at levelling the playing field of the global market and at peace building in the zones of turmoil of the developing world." (author's abstract)