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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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Is Conditionality Increasing or Diminishing?

OECD Development Centre

The implications of this last big shift in donors’ conditionality policies are controversial, and will be examined in more depth later in Chapter 7 of this study. In principle, however, the donor community is now strongly committed to reducing conditionality and enhancing ownership. For instance, the Commission for Africa (2005, p. 314) proclaimed that “policy conditionality…is both an infringement on sovereignty and ineffective.” The same year the United Kingdom produced an important policy document boldly committing the government to eliminate it and to adopt a non-interventionist approach: “The United Kingdom will not make our aid conditional on specific policy decisions by partner governments or attempt to impose policy choices on them (including in sensitive economic areas such as privatisation or trade liberalisation)” (DFID, 2005, p. 10). At their July 2005 meeting at Gleneagles, the G-8 leaders confirmed the need for recipient countries to “decide, plan and sequence their economic policies to fit with their own economic strategies for which they should be accountable to their people”. Such declarations have been become increasingly frequent since the second half of the 1990s, when disillusions with the results of Structural Adjustment became more widespread. Some countries such as Canada abandoned conditionality altogether. Over the last ten years, then, calls for the reduction of conditionality and enhanced ownership have gained momentum. But how much has really been achieved?

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