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Policy Ownership and Aid Conditionality in the Light of the Financial Crisis

A Critical Review

image of Policy Ownership and Aid Conditionality in the Light of the Financial Crisis

The current economic situation has obliged the international donor community to reexamine its stance on the conditionality of development assistance. This study evaluates which controversies persist with respect to aid conditionality, how successful donors have been in stemming the rising tide of aid conditionality of the 1980s and 1990s, and whether the donor community practices what it preaches regarding the allocation of aid based on governance and development criteria. Above all, the report considers how the financial crisis has rendered it increasingly difficult to maintain traditional conditionality frameworks. Strategies for reducing the number of aid conditionalities and for enhancing recipient ownership of aid policies are proposed in light of the unsustainability of existing frameworks.

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Conclusions and Policy Recommendations

OECD Development Centre

There is a strong sense in which the whole debate on ownership and conditionality is counterproductive and detracts attention from some serious problems which donors need to deal with urgently. The international aid architecture has grown spontaneously, and, unfortunately, suffers from major dysfunctions. Reisen (2008) describes it as a “non-system”. The persistent problems which plague development assistance are well summarised in Kharas (2009). Despite the professed objective of reducing it (paragraphs 6 and 33 of the Paris Declaration), aid fragmentation is still increasing (World Bank, 2008; OECD, 2008a). There is little evidence that the administrative burden for recipient governments associated with aid delivery has decreased. Co-ordination is poor and technical assistance has grown excessively, at the expense of investment in productive and social sectors. Meanwhile, the share of country programmable aid (that is, the amount of funds available for development projects and programmes in the recipient countries) in total aid flows is still too low. These structural problems with aid delivery need urgent attention.

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