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Foreign Aid for DevelopmentIssues, Challenges, and the New Agenda$
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George Mavrotas

Print publication date: 2010

Print ISBN-13: 9780199580934

Published to Oxford Scholarship Online: May 2010

DOI: 10.1093/acprof:oso/9780199580934.001.0001

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Reconstructing the Aid Effectiveness Debate

Reconstructing the Aid Effectiveness Debate

Chapter:
(p.63) 4 Reconstructing the Aid Effectiveness Debate
Source:
Foreign Aid for Development
Author(s):

Machiko Nissanke (Contributor Webpage)

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780199580934.003.0004

This chapter criticizes the current International Development Association (IDA) aid allocation and debt sustainability framework on the grounds of their over-reliance on the country policy and institutional assessment (CPIA) as the guiding criterion. It argues that CPIA-centred allocation of aid fails to introduce an incentives structure supportive of a genuine donor-recipient partnership, conducive to development. Further, it claims that the CPIA-dependent debt thresholds—central to the new debt sustainability framework—effectively submit sustainability concerns to the policy performance prerogatives of the aid allocation system. Resting on a thin empirical basis, such approach fails to take due account of low-income countries' vulnerability to exogenous shocks, as a key determinant of debt distress. As an alternative to the current CPIA-based scheme, the paper outlines the key features of a state-contingent mechanism, guiding both aid allocation and debt sustainability analysis.

Keywords:   foreign aid, economic development, aid allocation, debt sustainability

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