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Another Look at Foreign Aid

Gustav Ranis

No 133408, Center Discussion Papers from Yale University, Economic Growth Center

Abstract: The discussion of the effectiveness of foreign aid has reached a high pitch. This paper assesses the sorry past and present key arguments for a potentially more effective and sustainable method of aid delivery. A key ingredient is to shake off the vestiges of structural adjustment and move towards true recipient country ownership complete with “self-conditionality” with aid recipients formulating their own reform packages. This means donors become much more passive, act like a bank and respond to proposals which concentrate on a few critical areas over a three to five-year period. Policy-based program lending should respond to packages put together by the main domestic stakeholders with the help, if necessary, of independent third parties. There should be no compulsion to lend; indeed, an aid hiatus is an indication that the new system is effective. What is required is for donors to stop using aid as a short-term foreign policy tool and for recipients to accept the notion that aid provides the opportunity to reduce the inevitable adjustment pains caused by real reforms.

Keywords: Institutional and Behavioral Economics; International Development; Political Economy (search for similar items in EconPapers)
Pages: 25
Date: 2012-08
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Persistent link: https://EconPapers.repec.org/RePEc:ags:yaleeg:133408

DOI: 10.22004/ag.econ.133408

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