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What is aid effectiveness?

Definition

In order to achieve the MDGs it is agreed that we need to secure "more and better aid". Aid Effectiveness refers to the second part of the equation.

Emerging consensus on aid effectiveness (for example in the Organisation for Economic Co-operation and Development's (OECD's)Development Assistance Committee (DAC) points to the importance of aid that is country-owned, aligned and harmonised, focused on the poorest, predictable and untied, delivered through effective institutions, and that focuses on results not inputs. Donors should also use minimal conditions, strengthen accountability and participation, and ensure their own policies are joined up behind the country's poverty strategy.

Why is it important?

• There are pressures to demonstrate that aid is working as DFID and others seek higher volumes of aid. DFID is accountable to UK taxpayers and must be responsive to these pressures. Developing country governments are accountable to their own citizens for effective use of aid resources.
• TheMake Poverty History coalition is calling for "More and Better Aid", bringing aid effectiveness up the agenda for politicians and others. As well as improving the delivery of our own aid in order to get back on track for the Millennium Development Goals (MDGs) we need to encourage others to do the same. 
• DFID signed up to a new series of commitments concerning harmonisation, alignment and ownership at the High Level Forum on Aid Effectiveness in Paris (March 2005). Now the pressure is on to perform against a set of concrete indicators. A separate set of principles have been agreed in the Development Cooperation Directorate (DAC) for fragile states.

Facts and figures

• There are pressures to demonstrate that aid is working as DFID and others seek higher volumes of aid. DFID is accountable to UK taxpayers and must be responsive to these pressures. Developing country governments are accountable to their own citizens for effective use of aid resources.
• The Make Poverty History coalition is calling for "More and Better Aid", bringing aid effectiveness up the agenda for politicians and others. As well as improving the delivery of our own aid in order to get back on track for the MDGs we need to encourage others to do the same.
• DFID signed up to a new series of commitments concerning harmonisation, alignment and ownership at the High Level Forum on Aid Effectiveness in Paris (March 2005). Now the pressure is on to perform against a set of concrete indicators. A separate set of Principles have been agreed in the DAC for Fragile States.

DFID/UK position

• DFID has produced new policies on the use of Poverty Reduction Budget Support (PRBS) and conditionality, now being implemented at country level (see core briefs on these).
• This year DFID will work on improving its use of technical cooperation, and its policy coherence with other departments. DFID encourages other donors to:

• untie aid and allocate to the poorest countries
• harmonise donor activities (e.g. joint programmes, multi-donor offices) or work through multilaterals where effective
• use budget support to support good performers with national poverty reduction plans, where the circumstances are appropriate.
• reduce use of conditionality.

• DFID is committed to working more effectively in fragile states, in its bilateral programmes, with multilateral partners, and across Whitehall.
• DFID also seeks to secure international consensus on the role of aid in middle income countries (MICs), build a supportive international policy environment (for example on trade and investment), and support the development of institutional capacity.

International perspectives

• DAC donors generally agree that that aid should be country-owned, harmonised, aligned behind a national plan, mutually accountable, results-based and supported by joined-up policies. Not all DAC donors are willing to untie their aid.
• Opinions differ over aid instruments. The US and Japan stress that budget support should not be regarded as better than projects.

Developing country perspectives

• The aid effectiveness debate is dominated by donors.
• When aid effectiveness is raised by partner governments, they tend to focus on harmonisation. The New Partnership for Africa's Development have asked donors to change the way they deliver aid, calling for mutual accountability and better policy coherence.

Criticisms

• Aid is not as effective as it could be. Donors are not living up to their commitments.
• Some donors still maintain old-style relationships with developing countries, with imposed policies rather than open dialogue.
• Aid is not harmonised: developing country governments struggle under the burden of donor activity. Last year donors started 35,000 activities globally. In Tanzania alone there were 1,371 new projects between 2000 and 2002.

Case study

In Mozambique: the government coordinated 14 donors around its poverty reduction plan. Since 1996, poverty has fallen from 70% to 55% and the number of children in school has doubled.

Last updated: 13 February 2006

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