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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Policy-Based Conditionality and the Economic Crisis – A Final Nail in the Coffin?

OECD Development Centre

Part of the debate here might in any case be surpassed by events. As noted in the introduction to this study, prior to the crisis de facto power to impose conditionality via the IFIs, the custodians of the current international system of conditionality, had very much waned. The IMF in particular had seen its role very much diminished, by a combination of high commodity prices and extremely low market interest rates, giving many developing countries a degree of financial autonomy that they had not enjoyed in generations. The World Bank too had been embroiled by internal governance problems and saw the demand for its finance curtailed.

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