Last month, the International Crisis Group came out with a report describing the “profound and all-pervasive nature of corruption in Tajikistan,” and recommending that the international donor community “institute a totally new framework for the provision of aid to Tajikistan.”
Since “most” of the substantial amount of money provided by international donors (some $300 million in 2006) “is believed to be lost to corruption before it gets anywhere near its intended recipients” the ICG reasonably recommended that donors take another look at whether it is good idea to give Tajikistan direct budget support (that is, provide cash directly to the Ministry of Finance to go into the budget for public spending). If the government doesn’t get into shape, they said, donors should keep on funding humanitarian relief but cut off direct budget support.
We wondered what Tajikistan’s donors would say about these recommendations. In an ideal universe of flexible, accountable aid, surely donors would welcome impartial, externally-funded research. They would have in place some mechanism to evaluate the recommendations and determine whether existing aid programs should be tweaked or even discontinued in light of new findings…right?
To their credit, the donors we spoke with were aware of the ICG recommendations, and all responded (though some more slowly and reluctantly than others) to our questions.
The IMF told us that the majority of the ICG findings didn’t apply to them: the IMF doesn’t give direct budget support, and it doesn’t fund specific projects. As it happens, though, a new IMF loan of $120 million was announced the same week the ICG report came out. The loan will go the central bank to bolster Tajikistan’s foreign currency reserves. “As is the case in all IMF programs, we will also conduct a safeguards assessment that seeks to confirm that IMF resources are used as intended” said the IMF rep in an email message. We just wonder if this is the same safeguards assessment that was conducted before the last six misreporting incidents between Tajikistan and the IMF, the most serious of which required Tajikistan to give back some $50 million dollars and hire Ernst and Young to conduct an independent audit of the National Bank.
So who is giving direct budget support to Tajikistan? The World Bank’s portfolio for 2006 to 2010 includes $30 million in direct budget support. A new agreement, also reached the same week that the ICG report came out, will add $20 million to that figure, bringing budget support to 30 percent of the World Bank’s total grants in Tajikistan.
Reached via email in Dushanbe, the World Bank rep said of the ICG report: “We do not find ourselves in a position to comment on those recommendations…what we can say though is that the World Bank is aiming to support the people of Tajikistan…and the monitoring and audit systems in World Bank-funded projects are carefully designed to ensure that the funds reach those whom they were intended for.”
At the same time, though, the World Bank rep sent us a case study commissioned by Brookings (forthcoming) on aid effectiveness in Tajikistan. This report’s key conclusions are worth quoting at length:
The existing aid coordination architecture and interaction mechanisms between the Government and development partners are unable to ensure efficient use of foreign aid resources being provided to Tajikistan. As a result, planned (or expected) results and impact are substantially different from those realized on the ground. External assistance…has resulted in the perverse situation of a lack of incentives and inability to focus on and pay attention to the long-term determinants of domestic growth and appropriate political and economic institutions.
What do you think? Are donors in Tajikistan and elsewhere doing enough to safeguard aid funds and make sure they reach the poor? Or are they taking the path of least resistance, responding to strong institutional incentives that require donor organizations to keep the money flowing? What more do you think can be done?
10 Comments
Fantastic reporting.
So does anyone know who else accounts for the rest of that $300M in 2006?
How about other examples out there? Tajikistan can’t be the only case.
The best way to minimise corruption is to fund aid projects where there is a clear demand. If government X has a clear demand for a project, then it will also have an incentive to reduce corruption to ensure that its demand is met.
Where corruption is present as reported above, it suggests that (1) the government of Tajikistan has no real demand for aid projetcs paid for by donors and, (2) the donors have decided to run projects despite knowing that there is no real demand.
In this case surely the best way to safe-guard aid funds is to redirect them to a country or government that actually wants them?
How does this square with this blogs suggestion last week “that governments should be accountable to their people not to Aid agencies?” Or does that only hold for democratic governments that actually have a responsible electorate? You can’t have it both ways. Although I agree that the behavior of the WB and IMF in these cases is inexcusable.
Philip,
I think it’s useful here to remember the distinction between budget support and projectized aid.
Alanna
(full disclosure: I live in Tajikistan and I am consulting for a donor-funded project)
Alanna,
Thanks for pulling me up on this one. Can I ask what you would say the differences are between the two, and the different effects that they have?
As I understand it, aid agencies run projects rather than giving budget support either when there is a particular expertise that they have that they want to share, or because they don’t trust the government to use budget support properly. This really amounts to the same thing: they both pay for something that the government would otherwise not have been able to do, though I concede that money is less likely to go missing in a donor project.
I think a more useful distinction lies between aid that goes through governments and aid that doesn’t. Aid projects run at the behest of a government have the same result as with budget support, ie, they only work where there is a real demand for the money and / or expertise.
I didn’t mean to say that aid projects don’t ever work, because they sometimes do. The issue I was trying to address was what are the conditions under which they do or don’t work.
Philip,
I hear what you’re saying, and I do agree that aid project efforts can leave governments free to use their money on unsavory, corrupt, or just dumb, things. However, I would posit that a government that will do that with its funds will do so regardless of whether aid projects are taking place in country. The recent introduction of pizza to North Korea would be an example.
My original point, which we agree on, was that projectized aid generally does reach its intended recipients.
And Santa is a real person.
Hellloooooo? Some days it is hard to cope with the make-believe going around in the mega-aid world.
p.
Hi Everyone, Thanks very much for your comments. I wanted to respond in particular to Michael’s thoughtful question. Michael, you said:
I think Andrew Mwenda’s point is that once a government becomes dependent on aid (rather than taxation or domestic production) for a large percentage of their revenue, this creates an environment in which countries can only be held accountable to aid agencies: there is no longer any direct mechanism that holds them accountable to their own people. In the case of Takjikistan, it seems reasonable that aid agencies should expect the government to spend aid money as it agreed to when the money was granted or loaned. Further, I would argue that aid agencies have the responsibility to enforce these agreements once they are entered into, rather than allowing the money to be wasted or stolen when there is strong evidence that this might be happening.
Best,
Laura
corruption is a market and behaviour set. Feed or facilitate it and it grows.
Like most behaviour sets it can be changed with systemic shifts and feedbacks mechanisms. Not saying it is easy, but definitely part of the answer. I still wish projects could compete on audited ends basis vs means. ROI of some sort tied into human development index etc. which is of course tough to do.
A lot of the aid business is a market not for the poor but for the donors. Thinking one is doing good allows a person to feel good, that is a service business for the donor which delivers a hedonic lift. The recipients end of the deal if unmeasured is unknown, but the donor is winning as they keep coming back and feeling great.
An innovative idea. AID only given if it accompanies a 3% set aside out of the budget for whistle blower programs. The ROI on the 3% would be huge. Independant auditors would spring up from nowhere to provide feedback. Create a market for efficiency in the process.