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Article Summary International DevelopmentCooperation
Does foreign aid really work? – Roger C. Riddell
Some might say that the fact that we are still asking this most basic question about aid over 60 years
since official aid started to flow in the late 1940s is an indication of how little we still seem to know
about aid’s impact and influence. My own view is that robust and reliable information on aid’s impact
certainly remains a significant problem. However there are two other reasons why the question
continues to be asked.
- Aid has been constantly changing: it has been provided in different forms to address a
succession of different problems or to fill different gaps seen as critical at particular points of
time.
o 1950s: physical infrastructure and technical skills
o 1960s: the savings and investment gaps
o 1970s: meeting basic needs
o 1980s: the productive sector
o 1990s: governance, human rights and human development
o today (not unlike the 1970s): assistance targeted on the achievement of key
Millennium Development Goals.
- The question has been understood differently at different periods of times. Broadly speaking,
there are three ways that the question has been interpreted:
o 30 years ago, when most people asked whether aid works they principally wanted to
know if different aid projects met their immediate objectives.
o More recently, most people have wanted answers to the broader and more general
questions of whether aid makes a lasting difference to the lives, incomes and well-
being of poor people and helps to lift them out of poverty - and if so how much aid is
needed to lift everyone out of poverty - and whether aid makes a significant
difference to a recipient country’s growth and development path.
o Today, a significant and growing number of people have begun to raise an even more
challenging question: whether poor country economies are better off with the aid
they receive than they would be without such aid.
For years, aid’s critics have argued that poverty falls faster and economic growth and development
rises more rapidly without aid, then on this basis aid is judged not to have “worked”.
Today, one way this question is now being approached is by looking more closely at the systemic and
long-term effects of donors providing aid focused increasingly on addressing immediate short-term
poverty problems.
More specifically does the way aid is currently given, with more and more donors funding more and
more projects aimed at maximising immediate and visible benefits result in holding back the long-
term development prospects of recipient country economies by failing to address underlying
development problems, or even by actually creating new obstacles?
The strongest case for aid will be made if all three can be answered affirmatively:
if aid projects achieve their immediate objectives and these can be sustained;
if aid contributes to an aggregate fall in poverty levels, and to faster growth and sustained
development;
if aid-giving rather than adding to the systemic problems which constrain a recipient’s long-
term development prospects, helps to reduce them.
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,For the first 30 years of official aid-giving no one really much bothered with trying to answer the
question Does Aid Work? This is because trying to help address the needs and solve the most
pressing problems of poor countries was seen as a sufficient justification in itself for providing aid.
Today in sharp contrast, demonstrating that aid does have a positive impact is quite widely seen as
providing the (sole) ground for determining whether aid should be given.
Aid’s critics and emergency aid
Most prominent public debates around the question Does Aid Work? have been focused almost
entirely on development aid. Is this because emergency aid works and development aid doesn’t?
While the information we have of the impact of humanitarian aid remains poor and patchy, the
evidence we do have indicates a range of problems. Public support however, for emergency aid
remains strong spurred on by media.
Another reason for raising the issue of emergency aid is that the historical distinction between
emergency aid and development is nowhere near as clear-cut as it was. Increasingly in recent years a
growing amount of emergency aid has been is used not to save lives nor respond to the immediate
aftermaths of a disaster but to help to rebuild the lives and restore the livelihoods of those affected
by emergencies. At the same time, billions of dollars of “development aid” is now regularly
channelled into immediate-life-saving initiatives by providing clean water, through mass
immunisation programmes. An important reason why people are so supportive of emergency aid is
because it perceived as the aid which “saves lives”.
Thus, in short, the public remains a strong supporter of emergency aid when there is firm evidence to
suggest significant impact problems and critics of development aid laud emergency aid for saving
lives when a growing amount of development aid is doing precisely that.
Development aid projects and programme aid
Development aid is still predominantly provided in the form of discrete projects. Most projects are
still not evaluated, and only a small proportion of projects are the focus of any in-depth evaluation.
Even today, few official agencies and no NGOs undertake aid impact assessment in a systematic way.
The most common way of judging success is still probably whether aid projects achieve their
immediate objectives. Even allowing for an upward bias in these results, the results indicate that
most aid projects “work”. Furthermore, both historical and more recent data indicate that there has
been a steady rise in the proportion of aid projects which have succeeded in meeting their
immediate objectives. There have also been failures. Overall donor data suggest that between 10%
and 25% of projects have failed to meet their immediate objectives, have had extremely limited
success. Importantly, too, some types of aid have been less successful than others. Additionally,
immediate project success doesn’t necessarily mean permanent success. A major component of aid
is provided as “technical assistance” (TA). Such aid generally has not been at all successful in
sustainable capacity development including the retention of high level skills and the strengthening of
public institutions.
NGO aid projects
Assessment of the impact of NGOs projects is often more challenging as most NGOs view the aid they
give in terms of the tangible outputs they seek to deliver as only part of a wider purpose of seeking
to empower beneficiaries to be better able to shape their own lives in the future. Nonetheless,
recent evidence is broadly consistent with the early donor-based surveys of impact, though with a
broader spread of successful projects than for official aid projects and with often more challenging
sustainability problems, with projects typically requiring continued external financial support.
Programme aid
Most assessments of sectoral support have focussed on the performance of aid given by particular
donors or groups of donors rather than on its overall impact. Those that have attempted an overall
assessment have suggested that these “new aid modalities” have usually worked “reasonably
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,effectively”. Assessments of budget support as an aid modality have also been mixed. In spite of
donor commitments to increase programme aid, its popularity in the early 2000s and the positive
outcomes in many contexts, there has been a fall in the share of aid channelled to budget support in
recent years. Some people today are quite happy to look at aid projects and if the majority achieve
their immediate objectives (as they undoubtedly do) conclude that “aid works”.
Aid and growth
There has been a long tradition of academic studies which have analysed the aggregate relationship
between official aid and economic growth and which continues to this day. Most studies have
suggested that aid has made a positive contribution to growth though perhaps the more interesting
recent finding is that the impact of aid on growth has been comparatively small: a sustained
contribution of aid of about 10% of GDP raises GDP levels by only about 1%.
Aid and the reduction in poverty
For many, the key question that needs to be answered is what the overall contribution of aid is to
poverty reduction. The aid-poverty relationship is particularly important in contemporary aid
discourse because of the number of large donors who have linked their recent and current aid-giving
to help to achieve the MDGs. Far fewer studies have been conducted which examine the aggregate
relationship across countries between aid and poverty reduction compared with the aid and growth
studies. These almost all suggest that aid does “work” in helping to reduce the numbers living in
poverty, though quite a common finding is that aid has not been so successful in reaching and
assisting the poorest and most marginalised. Analysing the impact of aid on the MDGs is challenging
because of a number of methodological and data problems. For example, in March 2007, the
Director of the United Nations Statistics Division acknowledged.
Against this backdrop of uncertainty and lack of conceptual clarity, has aid helped to achieve the
MDGs and further reduce poverty? Some said that there was insufficient evidence to enable them to
say whether the MDGs had contributed to poverty reduction.
Aid at the country level
For more than two decades, donors have also conducted or commissioned numerous country studies
on aid impact. However these studies have predominantly been assessments of the impact of their
aid interventions at the country-wide level and not of all aid. Today, individual bilateral donors are
still unable to produce robust and unambiguous evidence to document the direct contribution their
own aid is making to aggregate growth and poverty reduction. A common thread through these
country evaluations has been the reluctance of evaluators to be drawn into making firm conclusions
about the direct link between the aid provided and wider outcomes. Two reasons are most
commonly cited:
- the lack of information and hard data upon which to track the narrow impact of the aid
provided
- the knowledge that a range of influences other than the aid provided was also influencing
outcomes at the sectoral or national levels.
A number of studies have been undertaken by individual donors whose own aid dominates total
official aid flows. In terms of overall aid impact, the conclusions emerging from these country case
studies are mixed: in most countries aid frequently has had a positive overall impact in some time
periods, but in some countries it has had a negative impact.
In short, aid at the country level has sometimes “worked” and sometimes it hasn’t in some countries
and at different periods of time. Recent research suggests that although aid projects tend to work
better in countries with a supportive policy and institution environment, project success seems to
vary more within than between countries. Importantly, no rigorous study has ever suggested that aid
has never ever worked in any aid-recipient country. What is more, aid’s strongest critics have never
published rigorous long-term assessments of aid at the country level. In recent years, greater
attention has been focused on the role of NGOs in aid-giving.
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, Problems and inefficiencies in aid-giving
The vast majority of aid projects “work” in the sense of achieving their near-term objectives and that
aid has probably made a positive contribution to poverty reduction and broader development.
What is therefore of particular interest is that the aid-giving and the aid relationship – the interaction
between donors and recipients – is characterised by a range of problems which taken together
seriously undermine the development impact of aid and create a very significant gap between what
aid currently achieve and what it could do if changes to the aid relationship were implemented.
- The first problem concerns the way official aid is allocated and the mismatch between who
gets aid and who needs it. Historically, the decisions that the largest donor countries have
made have always been influenced by their own national and short-term political interests as
well as development and poverty considerations.
o Should aid go to the poorest countries (currently less than half all official aid does
so), or should it go to the countries where most of the poorest people live? This
question has become increasingly important as a number of countries containing
large numbers of poor people (such as India and Nigeria) which were once classified
as low-income countries have been reclassified as middle-income countries. Today
over 80% of the world’s poorest people now live in middle-income countries. For
some donors, commercial interests, for example through aid tying, have also played
an important role in determining aid flows. Aid tying increases the cost of aid.
- Another major problem is aid’s volatility and unpredictability. Many recipients don’t know
from one year to the next how much aid they are likely to receive so they are unable to plan
how to use aid resources efficiently. This reduces the effective value of official aid. Further
inefficiencies result from the way donors actually provide and deliver aid. Official aid-giving is
characterised by an ever-increasing number of donors overseeing a growing number of
discrete projects, creating an ever-more complex web of transactions and parallel
management systems, many replicating and duplicating each other, and creating growing
demands on recipients. Individual donors often provide aid that is not harmonised with other
donors’ aid and not integrated with recipient country plans and priorities, as much aid is
managed by donors not recipients. Almost ten years ago, in 2005, the main donors signed
the Paris Declaration on Aid Effectiveness: ownership, harmonisation, alignment, results and
mutual accountability. The Declaration committed the donors to do the following by 2010:
o reduce the numbers of donors each recipient had to work with; minimise overlap in
their programmes and duplication of their parallel aid efforts; harmonise their
different aid initiatives more closely together; provide more aid through recipient
government channels; align their aid more closely to recipient priorities; work
together to help and strengthen recipient government institutions, in part, in order
that recipients rather than donors would lead in the coordination of all aid efforts.
However, only half the increases were forthcoming. The gap between rhetoric and reality has
remained almost as wide as it ever was.
Recent changes in aid-giving and aid’s systemic problems
Whether aid works or not ultimately depends upon what happens at the “recipient-end” of the aid
relationship. One approach donors have increasingly adopted to make aid “work better” has been to
channel aid into those sorts of initiatives which link aid inputs to simple, clear and tangible outcomes
that materially and directly improve the lives of the maximum number of poor people as quickly as
possible. They have pursued this approach either by providing aid in discrete projects or through
sectoral aid initiatives to fund activities whose benefits can be immediately seen. The priority given
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