How much should different countries get and why?
Different developing countries receive very different amounts of aid. Even considering just low-income countries, amounts ranged in 2004 from around $90 per capita in Zambia and Senegal to less than $5 per capita in Nigeria and less than $1 per capita in India (World Bank, 2006). Are these differences justified, and if not, what would an improved allocation look like?
Much research has been undertaken already. Several studies have looked at whether donors’ allocations are based on recipient country ‘need’, as measured by per capita GDP or some non-income welfare indicator (Box 1). The main finding is that most donors’ allocations are only weakly based on recipient country needs. There is, however, a good deal of variation among donors, with multilaterals generally performing better than bilaterals, and some bilaterals (e.g. the UK, Netherlands) generally performing better than others (e.g. France or Japan).
Although useful, studies of this nature share a drawback: there are few obvious benchmarks by which to judge donors’ allocations. What proportion of aid, for instance, should go to the poorest countries? By how much should aid received fall
as a country’s per capita GDP rises? Recognising this, researchers have begun to think more systematically about what an optimal allocation of aid should look like. In particular, which variables should determine the amounts of aid that different countries receive, and what should be their relative contributions?
In these discussions, two sorts of disagreement have arisen. One is about principles: what are the fundamental principles according to which aid allocations should be determined? This involves deeper questions about the role of aid and notions of equity and fairness. The second is about evidence and implementation. Even if we agree on the fundamental principles,
we may not agree about what those principles imply in practice. This is because the evidence on the effects of aid is not always clear cut.
These issues have particular relevance in the context of recent debates around the Millennium Development Goals (MDGs). In particular, will the large scaling-up of aid volumes, called for and agreed during 2005, be combined with a sound approach to its allocation across countries? This issue was relatively neglected during the 2005 debate, but 2007 – the mid-point between the
setting of the MDGs and the key target date of 2015 – will heighten attention on the issue. This Briefing Paper discusses the issues further, and concludes with recommendations for donors.
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