By Owen Barder, the Addis Ababa-based director of aidinfo.org, an initiative to accelerate poverty reduction by making aid more transparent. Aidinfo is part of Development Initiatives, a UK-based development consultancy.
Bill Easterly and Laura Freschi at Aid Watch lay in to British Government aid for giving financial support directly to governments:
In 2007, the UK gave 20 percent of their total bilateral ODA in the form of budget support to 13 countries: Tanzania, Ethiopia, Pakistan, Ghana, Uganda, Mozambique, Vietnam, Malawi, Zambia, India, Sierra Leone, Nepal, and Nicaragua. Of this list, only Ghana and India were classified as “free” by the annual Freedom House ratings on democracy (according to either the 2007 or 2008 rating). For the 11 other countries that did get British budget support, how much is there “country ownership” when the government is not democratically accountable to the “country”? … There is nothing that says you have to give aid meant for the poorest peoples directly to their governments, if the latter are tyrannical and corrupt. With the examples above, which side are UK aid officials on, on the side of poor people or on the side of the governments that oppress them?
With all due respect to Aid Watch, I don’t think they have got this right. For example, they say:
Ethiopia’s autocratic government, which is inexplicably the largest recipient of UK budget support in Africa, won 99% of the vote in the last “election”.
Nice point, except:
a. according to the official results of the 2005 election, the ruling party won 59.8% of the votes; the Coalition for Unity and Democracy got 19.9% and the United Ethiopian Democratic Forces got 9.5%. I have no idea if those accurately reflect how people voted, but it is nonsense to say that the government received 99% of the vote;
b. the UK does not give budget support to the Federal Government of Ethiopia. Through the Protection of Basic Services scheme, which was introduced after worries about the election, the UK Government provides finance to local government (albeit through the existing financial transfer mechanism via central government). As well as funding health and education, the project includes significant components to increase transparency and accountability of federal and regional parliaments.
Aside from getting the facts wrong, Aid Watch seem to be criticising this form of aid by slinging mud rather than by way of a proper analysis of the advantages and disadvanges. We should be asking what benefits arise from giving aid through government, and what harm may come from it. Aid Watch acknowledge the possible benefits: lower transaction costs, more coherence in development policies, building capacity of government. There is another crucial possible benefit: putting money through government budgets is also a way to make the government more accountable to its own citizens, rather than to a bunch of foreign donors.
But Aid Watch don’t try to spell out what the harm might be if aid is given to governments with unpleasant records on human rights or corruption. I personally think there is a case to be made against giving money to many governments, for example if there is reason to believe that the money will not be spent on poverty reduction, or if it will sustain in power a government which might otherwise be booted out of office. But let’s set out these reasons coherently, and let’s try to assess their importance relative to the possible benefits. Aid Watch seems to suggest that guilt-by-association is enough to damn the whole enterprise.
As it happens, the governments mentioned in this piece (Ethiopia, Vietnam and Malawi) all make demonstrably good use of the money they have received. Here in Ethiopia the expansion of public services such as free education and publich health workers financed by Protection of Basic Services is transforming the quality of lives across the country; and Vietnam has made quite staggering progress in bringing down poverty. Personally I think there are important questions to be answered about the quality of democracy in both countries: but that doesn’t mean I want to kill some of the citizens of those countries, or deprive them of basic services, by giving less effective aid. The British Government’s approach of giving some aid in the form of budget support (too little, in my view) is motivated by evidence that in some circumstances this is an important way of building more effective, responsive and accountable institutions.
Developing countries don’t want to receive aid forever, any more than industrialised countries want to give it forever. Building effective and accountable public services is a way of financing the delivery of public services in the short run, while at the same time making it more likely that countries have an exit strategy from aid in the long run. That is not preferring governments to poor people: it is preferring poor people to giving aid in a way which maximises the publicity you get and covering your back but doing little to build accountable and sustainable public services. Giving aid as budget support should not be promoted ideologically: it should be used where the advantages (in terms of better service delivery and the long term benefit to accountability and institutions) outweigh the disadvantages (such as the risk of sustaining a bad government in power). Equally it should not be opposed ideologically. Budget support has not been shown to be at any greater risk of corruption or of fungibility than other forms of aid (these are the two main arguments that are offered against budget support). It should be assessed case-by-case. Where it can be used, it represents a very powerful mechanism for both the short term benefits of service delivery and the long term benefits of institutional development. Where it cannot be used, donors should be focusing on what they can do to help create an environment where it can be used in future.
If Aid Watch want to be taken seriously as an aid watchdog, then (a) they’d better get their facts straight and (b) they need to do some proper analysis of the costs and benefits of different choices for aid delivery in different contexts, rather than simply asserting that it is wrong to give aid to and through governments of which they disapprove. Incidentally, last year Easterly and Pfutze (”Where Does the Money Go? Best and Worst Practices in Foreign Aid.”) ranked the UK as the best bilateral donor. That doesn’t mean that the UK is perfect, by any means, and it doesn’t mean that they get every judgement right; but it does suggest that UK aid officials might not deserve the allegation in this blog entry that they prefer poor governments to poor people.
Declaration of interest: I used to work for the UK Department of International Development.
9 Comments
“Developing countries don’t want to receive aid forever” Is this true? Many of the countries receiving significant aid have been doing so for more than a generation.
I do accept that poor people don’t wish to be poor forever – that does make sense. Even being poor for 20 years must be damned annoying, but I suppose it at least means that you’ve had the 20 years, unlike those who received no aid.
Can aid watchdogs really add value by noting which countries receive aid, from where and how much? It’s not something that is ever likely to affect the way I vote, who I give money to, who I work for, or what work I do. But perhaps that just means I’m not the target audience for any of this – which for now I’ll consider a “good thing”.
Mr. Owen Barder: according to the official results of the 2005 election, the ruling party won 59.8% of the votes; the Coalition for Unity and Democracy got 19.9%.
Moussa: This figure maybe wrong, but I see it as not the key point of the argument. Election only does not define democracy. The freedom house ratings is also there to help have a sense. By the way, even dictators now understand that they should award themselves much less than 99% in order to appear credible in eyes of their aid western partners. (Gambia is a clear dictatorship, but the prez awarded himself only in the 60s% in 2006. And this is a man who stated clearly that as long as he is alive, no one else has chance to rule the country. In Togo, the last times Eyadema (Indisputable dictator) rigged the ballots, he awarded himself less than 52.13%, in 1998 and 57.78 in 2003 after he changed the constitution to stand a third time). So, let stick to the points about the reel impact of aid. The point that Ethiopia is not a democracy remains to me.
Mr. Owen Barder: The British Government’s approach of giving some aid in the form of budget support (too little, in my view) is motivated by evidence that in some circumstances this is an important way of building more effective, responsive and accountable institutions.
Moussa: But dictators don’t want accountable institutions. If you ever get close to doing that, they will kick you out of the country and find new partners to foul.
Mr. Owen Barder: There is another crucial possible benefit: putting money through government budgets is also a way to make the government more accountable to its own citizens, rather than to a bunch of foreign donors.
Moussa: That didn’t seem to have worked well with Mobutu for decades, or did it? (wants more examples?) Not anywhere in Africa that I know.
Mr. Owen Barder: Incidentally, last year Easterly and Pfutze (”Where Does the Money Go? Best and Worst Practices in Foreign Aid.”) ranked the UK as the best bilateral donor. That doesn’t mean that the UK is perfect, by any means, and it doesn’t mean that they get every judgement right; but it does suggest that UK aid officials might not deserve the allegation in this blog entry that they prefer poor governments to poor people.
Moussa: To me, it means that when it comes to aid, even the best isn’t that good and hasn’t been that good.
Mr Barder, I need a little more argumentation to understand your statement that putting money through government budgets is also a way to make the government more accountable to its own citizens, rather than to a bunch of foreign donors. I think quite the contrary. Governments spend a lot more time listening to their foreign donors when that money is given to them directly than to their own people who have little say where their taxes go. I would cite this as a key disadvantage of direct government support. Please also see Andrew Mwenda’s presentations on this issue.
Owen,
On the facts…
1. In Ethiopia, the ruling party did indeed win 99% of vote in the last elections – the nation-wide local elections held in April 2008.
2. Everyone knows local government is federal government in Ethiopia! PBS is ‘probationary budget support!’
Any discussion of aid has to begin with the basic premise that aid, virtually any type of aid, makes government less accountable to the public and more accountable to donors. Donors have the moral duty to ensure that their interests do not conflict with the public.
Theory or ‘ideology’ versus evidence is a red herring. You know very well that in this domain, the evidence is scant and interpretation dubious. Sure these countries’ HDI’s have improved, but there is no way to credibly demonstrate that this is a result of direct budget support! Though evidence should be considered, we should remember that it is circumstantial, and that this is to a large extent a question of morality and theory.
Ditto Jeff Barnes above.
The bottom line is that donors usurp the public, so they assume some moral responsibility for the actions of the governments they support. So it is the donors’ moral duty to constantly demonstrate, and demonstrate clearly, that their policies are optimal given circumstances. But they don’t do this.
Unfortunately, aid agencies are the least accountable government departments since the donor public isn’t very interested in what they do, save for their total budget, perhaps. And of course these government departments’ major incentive is to expand their budgets and give more and more aid. This is all very disempowering for the recipient public. Another reason the onus is on donors to work hard to prove their policies’ effectiveness.
Now, it isn’t as if I don’t understand the nuances on the ground. When it comes to Ethiopia, for example, donor find themselves in a quandary of sorts. Though the government is illegitimate, the pro-democracy movement is extremely weak. The government is not pocketing all the aid money – there is clear evidence that at least some of the money is being spent properly. So the idea is that we’re making people’s lives a little better, and hopefully people with a better quality of life will be able to empower themselves politically. On the other hand, we’re entrenching an illegitimate government, perhaps putting the country down a dysfunctional path in the long run. It’s the same old questions.
But we shouldn’t be giving the same old answers. Again, I think that donors and their employees should explicitly assume moral responsibility for the actions of the governments they support. I believe that for aid efficacy, this is just as important, perhaps more important, than the drive for accountability and transparency.
Kudos to Dessalegn Asfaw!
Why not extend the call for sober analysis to more blog posts here?
For some reason, a lot of the posts and comments make me think of Aristotle’s writings on the Sophists.
Nuanced and thoughtful probabilities are so much more interesting than hard-headed certainties.
Owen Barder says: “There is another crucial possible benefit: putting money through government budgets is also a way to make the government more accountable to its own citizens, rather than to a bunch of foreign donors.”
Please explain it. Give us but one small evidence that because the government has received direct Budget Support it is now more accountable to its own citizens?
What do you do when governments don’t even start to comprehend the meaning of accountability, not even as a hypocritical political statement?
where does it say how much money they make each year
I am dissappointed by Mr. Barder’s false denial of the government’s election record, by referring to the 2005 election when he full well must know the last elections, to which Ms. Freschi referred, were 2008, in which the opposition parties won but a handful of seats of a total of 4 million wereda and kebele council seats.
On PBS: Anyone in the Ethiopia aid machinery (and plenty outside it) know all to well that this aid loan–a second PBS loan in the hundreds of millions of dollars was just signed a few days ago–was and is budget support by a different name. The government controls local governments’ expenditures hardly less than it does federal monies, in Ethiopia’s system of “centralised decentralisation”–and in any case PBS gets channelled to local governments via the federal ministry of finance. Senior World Bank officials responsible for oversight of credits in the region, whom I spoke to when PBS emerged on the scene 2006, made very clear that the loan’s structure is mostly cosmetic in making the loan appear as investment lending as opposed to budget support. In fact, even government supporters in the think tank under the Ethiopian prime minister’s office, while strongly appreciating PBS money, equally said it practically amounted to straight-up budget support.
The merits and demerits of giving budget support to autocratic regimes are one thing–but let us call a spade a spade and start the debate from there.
As a former, very senior, DFID official it is unsurprising that Owen Barder defends general budget support. Before he was forced to leave DFID because he expressed enthuisastic support for Tony Blair, he wrote frequently about the brilliance of the idea on his blog.
I have no idea whether budget support works. But as Per Kurowski points out, neither has – not can – donors. The logic of budget support is, as one would expect, impeccable in theory. It makes absolute sense. It makes no sense in practice, when donor funding is being stolen and misused on an industrial scale.
I am deeply concerned about where money is going. It’s very easy, very easy indeed, for recipient governments to fake evidence. We’ve all seen it being done.
Those who advocate budget support are, in my view, in a state of deep cognitive dissonance here. The question is, why? I think the answer is straightforward. Donor governments have responded to pressure from celebrities and campaigns like ‘Make Poverty History’ by promising more funding for Africa.
Budget support was, in my view, invented (DFID hailed the idea as a fantastic ‘innovation’ when they introduced it) as a way of making it as easy as possible to shift funds out of the donor countries’ finance department’ bank accounts into those of the beneficiaries. Spending money on a project by project basis, with all the overhead that entailed was simply too slow. Luckily it was possible to throw together some arguments to justify the policy, although as has been pointed out above the idea that it increases accountability is truly laughable.
My belief is that much of the money that isn’t simply stolen from central bank coffers is used very badly indeed. In one country I visit frequently, and which is a major beneficiary of budget support, it seems that all the central ministries are having vast new office buildings constructed in the centre of what is already an over-congested city.
Virtually all the senior staff of these organisations spend a good 30/50% of their staff on overseas ’study tours’ as it’s an excellent way of supplementing their tiny salaries. Nothing come out of these tours. They can cost tens of thousands of dollars per person, because the officials pay themselves UN level subsistence rates and then live in very basic accommodation. Just one example of how funds can be misused without actually being ’stolen’.
But it seems to me that the whole debate over western aid is increasingly irrelevant because the western donors are increasingly being sidelined by the Chinese and Indians.
The Chinese in particular have no concerns about corruption and are very happy to inject money directly into projects (such as building the offices mentioned above), and into the pockets of officials and ministers, in return for a ‘no questions asked/no duties paid’ approach to the rape of forests and other natural resources they are currently conducting.
Yes, aid in whatever form. is bound to increase dependency. But as we all know, grand corruption goes far beyond the theft of aid funding. I am convinced that this problem is much worse now that it was ten years ago. I am also convinced that the only way that officials from DFID and other agencies can live with themselves (and continue to draw the very lucrative expenses they get in overseas postings) is to pretend that this isn’t the case.
Sorry to go on, and on, but I’m very concerned about these issues. I feel very strongly that DFID are throwing petrol on the fire. They are making things much worse than they would otherwise be. If they were just throwing money away, I wouldn’t be quite so concerned.