Foreign Aid, Conditionality and Ghost of the Financing Gap : A Forgotten Aspect of the Aid Debate

Assessing Aid: What Works, What Doesn't, and Why (The World Bank, 1998) generated a new wave of controversy about foreign aid and policy conditionality that had seen several decades of intense debate. Much of the recent debate has focused on the aid-growth relationship and the role of "good" policies. While a great deal has been said about qualitative aspects of aid effectiveness (that is, fungibility, among other things), little attention has been paid so far to some important quantitative aspects. The author draws attention to this neglected aspect of the aid debate to show that the level of aid requirements of a country is an equally important and integral part of aid and aid effectiveness. The author compares the World Bank/IMF approaches to estimation of external assistance requirements of a country in quantitative terms with an alternative model, the "balance of payments constrained growth model" (based on the Harrod trade multiplier). He finds that the latter model is not a real alternative as it is an incomplete model. More important, he shows that international financial institutions use these quantitative frameworks in a very flexible and pragmatic way to carry on a meaningful policy dialogue with both donors and recipient countries, which has an important bearing on aid effectiveness.

Bibliographic Details

Main Author:	Ranaweera, Thilak
Language:	English en_US
Published:	World Bank, Washington, DC 2003-04
Subjects:	FOREIGN AID, DEVELOPMENT ASSISTANCE, CONDITIONALITY (FINANCE), FINANCING OPTIONS, POLICY FRAMEWORK, QUALITATIVE DATA, FUNGIBILITY OF MONEY, QUANTITATIVE ANALYSIS, BALANCE OF PAYMENTS, GROWTH MODELS, GROWTH POLICY, TRADE REGULATION, INTERNATIONAL FINANCIAL INSTITUTIONS, QUANTITATIVE DATA, POLICY DIALOGUES, AID CONDITIONALITY, AID EVALUATION ACCOUNTING, ADJUSTMENT PROGRAMS, AID, AID ALLOCATION, BORROWING, CAPITAL ACCOUNT, CAPITAL FLOWS, CAPITAL FORMATION, CAPITAL GOODS, CAPITAL INFLOWS, CENTRAL BANK, CONCEPTUAL FRAMEWORK, CONDITIONALITY, CONSUMPTION FUNCTION, COUNTRY LEVEL, DEBT, DEVELOPING COUNTRIES, DEVELOPMENT AID, DEVELOPMENT ECONOMICS, DEVELOPMENT ISSUES, DEVELOPMENT PLANNING, DEVELOPMENT POLICIES, DISPOSABLE INCOME, DIVERSIFICATION, DOMESTIC CREDIT, ECONOMIC DEVELOPMENT, ECONOMIC GROWTH, ECONOMIC STABILIZATION, ECONOMIC STRUCTURE, ECONOMISTS, ELASTICITIES, EMPIRICAL EVIDENCE, EMPIRICAL WORK, EQUATIONS, EXCHANGE RATE, EXPECTED VALUES, EXPORTS, FINANCIAL INSTITUTIONS, FORECASTS, FOREIGN EXCHANGE, GAP ANALYSIS, GAPS, GDP, GROSS DOMESTIC PRODUCT, GROWTH MODEL, GROWTH PROJECTIONS, GROWTH RATE, GROWTH THEORY, IMPORTS, INCOME, INCOME ELASTICITY, INCOME ELASTICITY OF DEMAND, INCREASE GROWTH, INFLATION, INFLATION RATES, INTERNATIONAL DEVELOPMENT, INTERNATIONAL ORGANIZATIONS, KEYNESIAN ECONOMICS, M2, MACROECONOMIC ADJUSTMENT, MACROECONOMIC FRAMEWORK, MACROECONOMIC POLICY, MACROECONOMICS, MARKET PRICES, OIL, OUTPUT GROWTH, POLICY INSTRUMENTS, POLICY MAKERS, POLICY PACKAGE, POLICY RESEARCH, POST KEYNESIAN ECONOMICS, POVERTY REDUCTION, PRICE ELASTICITY, PRICE ELASTICITY OF DEMAND, PRIVATE CONSUMPTION, PRODUCTIVITY, PUBLIC INVESTMENT, PUBLIC SECTOR, REAL EXCHANGE RATE, REAL GDP, REAL INCOME, SAVINGS, STRUCTURAL ADJUSTMENT, SUSTAINABILITY, TAX REVENUE, AID EVALUATION, ACCOUNTING,
Online Access:	http://documents.worldbank.org/curated/en/2003/04/2243834/foreign-aid-conditionality-ghost-financing-gap-forgotten-aspect-aid-debate https://hdl.handle.net/10986/18260
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