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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Shifting Aid Modalities

A Brief Historical Recapitulation

OECD Development Centre

Conditionality has grown over the last three decades in a way probably unimaginable in the early years of development aid. Donors now have an enormous influence on policy decision making and execution in areas as disparate as democracy, judicial reform, corporate governance, health, education and environmental policy (Chang, 2005). As Robert Chambers (2005, p. 39) has noted,

“Now, to a degree that during the 1960s would have been vilified as gross neo-colonialism, in many small and low-income countries – especially in sub-Saharan Africa – lenders and donors not only fund much government expenditure (over 50 per cent in Uganda, for example), but also call many of the policy shots.”

A little historical perspective on the way in which conditionality has evolved is thus important to put these shifts in context, for it ties intimately with the way in which aid disbursement has changed. At the risk of excessive simplification, one can distinguish broadly between five different periods in donor-recipient relations:

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