The Impact of Foreign Aid Conditionality on Poverty Alleviation in Bangladesh: A Recipient’s Perspective

Donors provide aid to the recipient government with conditions to implement some policies so that the recipient government can use aid effectively and able to improve its economic, social, and political situation as well as reduce its poverty. However, concerns have been raised that aid conditionality has promoted reforms that could not reduce the poverty situation in some countries such as sub-Saharan Africa, while some countries in East Asia were able to break out of poverty and find themselves better off than before the conditional aid was accepted. Hence, the purpose of this study is to examine the impact of foreign aid conditionality on poverty alleviation in Bangladesh. The paper is qualitative in nature and a case study on Bangladesh. The study has been conducted by using secondary data, like journal articles, research papers, and Bangladesh government and aid donors’ reports. The study finds that Bangladesh has started to show considerable improvement in reducing poverty, though it is still ranking low on the Human Development Index. The findings have important implications for policymakers and captured insights about the foreign aid conditionality in Bangladesh.

Democracy without Rights

This chapter is motivated by the following question: What explains the determinants of illiberal democracies in Latin America and the prevalence of regime transitions from liberal to illiberal governance? The chapter argues that counternarcotic aid is the financial and diplomatic mechanism through which the corporatist drug enforcement regime has replicated essential features of the U.S. national security state in aid-recipient countries in Latin America for the purpose of fighting the drug war. The replication of the national security state and thereby the creation of a drug war national security state undermines the process of democratization and, in the process, produces illiberal regimes in the region. The drug-war-induced national security state explains not only the emergence of illiberal democracy in the region but also regressive regime transitions from liberal to illiberal governance. Probabilistic econometric models are used to analyze data for 19 Latin American countries covering the period 1978 to 2011. The findings show that U.S. counternarcotic aid increases, by 56 percent, the probability that a recipient government will be an illiberal democracy. And the risk of a liberal democratic government receiving aid and reverting to illiberal democracy increases by 44 percent.

Development partner support to the health sector at the local level in Morogoro region, Tanzania

Background: The Tanzanian health sector receives large amounts of funding from multiple international development partners to support a broad range of population-health interventions. However, little is known about the partners’ level of commitment to sustain funding, and the implications of uncertainties created by these funding mechanisms. This study had the following objectives: 1) To present a theoretical model for assessing funding commitments by health development partners in a specified region; 2) to describe development partner funding commitments against this framework, using a case study example of Morogoro Region, Tanzania; and 3) to discuss policy considerations using this framework for district, regional and national level.Methods: Qualitative case study methodology was used to assess funding commitments of health-related development partners in Morogoro Region, Tanzania. Using qualitative data, collected as part of an evaluation of maternal and child health programs in Morogoro Region, key informants from all development partners were interviewed and thematic analysis was conducted for the assessment. Results: Our findings show that decisions made on where to commit and direct funds were based on recipient government and development partner priorities. These decisions were based on government directives, such as the need to provide health services to vulnerable populations; the need to contribute towards alleviation of disease burden and development partner interests, including humanitarian concerns. Poor coordination of partner organizations and their funding priorities may undermine benefits to target populations. This weakness poses a major challenge on development partner investments in health, leading to duplication of efforts and resulting in stagnant disease burden levels.Conclusion: Effective coordination mechanisms between all stakeholders at each level should be advocated to provide a forum to discuss interests and priorities, so as to harmonize them and facilitate the implementation of development partner funded activities in the recipient countries.

Foreign Aid as Foreign Policy Tool

The majority of countries around the world are engaged in the foreign aid process, as donors, recipients, or, oftentimes, both. States use foreign aid as a means of pursuing foreign policy objectives. Aid can be withdrawn to create economic hardship or to destabilize an unfriendly or ideologically antagonistic regime. Or, conversely, aid can be provided to bolster and reward a friendly or compliant regime. Although foreign aid serves several purposes, and not least among them the wish to increase human welfare, the primary reason for aid allocations or aid restrictions is to pursue foreign policy goals. Strategic and commercial interests of donor countries are the driving force behind many aid programs. Not only do target countries respond to the granting of bilateral and multilateral aid as an incentive, but also the threat of aid termination serves as an effective deterrent. Both the granting and the denial of foreign assistance can be a valuable mechanism designed to modify a recipient state’s behavior. Donors decide which countries will receive aid, the amount of aid provided, the time frame in which aid is given, and the channel of aid delivery. The donor’s intentions and the recipient’s level of governance determine the type or sector of foreign aid. States can choose between bilateral or multilateral methods of disbursing foreign assistance in order to pursue their interests. Although bilateral disbursements allow the donor state to have complete control over the aid donation, the use of multilateral forums has its advantages. Multilateral aid is cheaper, it disperses accountability, and it is often viewed as less politically biased. Foreign aid, once the exclusive foreign policy instrument of rich powerful states, is now being provided by middle-income countries, too. The motivation for foreign aid allocations by nontraditional donors parallels the motives of traditional Development Assistance Committee (DAC) donors. A main difference between traditional and nontraditional aid donors is that nontraditional aid donors generally do not place conditionalities on their loans. The issue of fungibility can obstruct the donor government’s purpose behind the allocation of foreign aid. If the preferences of the recipient government are different from those of the donor, the recipient can often divert the aid and use it for other purposes. A recipient government may reallocate its budget after it determines how much aid it is slated to receive. The recipient government will redirect its resources to areas it deems a priority that cannot be funded externally, for example the military or prestige projects.

Aid Allocation and Targeted Development in an Increasingly Connected World

Aid donors pursue a strategy of targeted development with regard to recipient states. The determinants of aid allocation have shifted significantly. Industrialized states are increasingly unable to insulate themselves from spillovers caused by underdevelopment abroad. Donors attempt to use aid to decrease these spillovers, targeting developing countries where the effects on the donor are anticipated to be large. Once a recipient is chosen, concern for recipient government capacity guides the composition of aid. Empirical analysis of aid allocation from 1973 to 2012 demonstrates that, while explanations based on security and economic ties to the donor explain allocation well in the Cold War, the post-2001 period is best understood by incorporating a role for targeted development. This framework helps synthesize various findings in the aid allocation literature and has important implications for studying aid effectiveness.

Incentives for Conditional Aid Effectiveness

Can sanctions against foreign aid donors enhance the credibility of conditional aid policies? If such policies suffer from time inconsistency, the answer is positive. This paper proposes a mechanism to overcome the lack of credibility of conditional aid donations to developing countries. A scheme of policy-dependent transfers to the donor country is shown to achieve an optimal commitment outcome by improving the credibility of conditional aid programs. The scheme is devised to cover situations in which the cost of structural reforms is information privately owned by the recipient government.

Food Aid and Agricultural Development Assistance

What is international food aid? Food aid is the international shipment of food through “concessional” channels, as a gift, rather than through commercial channels, as a sale. The food can be given by a donor government to a recipient government, by a donor government to...

Aid Transfers, Supply Shocks, Dutch Disease and the Informal Sector

SummaryI present an integral approach for the analysis of supply shocks, financial transfers and combinations thereof in a model of monopolistic competition. Introducing an informal sector reveals an asymmetry between „spending“ the value of the transfer by the recipient government and „absorption“, i. e. selling the foreign exchange by the recipient central bank: With flexible prices, the increased demand for formal sector domestic goods does not only crowd out exports, but also informal sector products. The real appreciation after selling foreign exchange crowds out exports and cheapens nontradables. With wage and price rigidities in the formal sectors, the adjustment pressure on the informal sector is increased.

Evaluation for management and development

This article examines an evaluation currently being undertaken in Papua New Guinea. The evaluation is designed to assist an organisation (comprising a donor agency, a recipient government department and a managing contractor) with the management and further development of an aid program set in the education sector. The challenge facing the organisation has been how to devise and implement a comprehensive managerial approach that will enable improvement of the existing program, the subsequent design of a new program and, at the same time, support a third objective of creating an ongoing culture of evaluation. In responding to that challenge the organisation has committed to the use of structured evaluation processes. Specifi cally, it has decided to implement a range of ‘front end’ evaluative approaches-developmental, evaluability assessment and program logic-drawn from the interactive and clarifi cative forms presented in Owen's (1999) conceptual framework. The article outlines the interventions that have been undertaken and assesses progress to date. Examples of completed activities are outlined and some innovative monitoring evaluative tools are introduced, such as the ‘capacity scale’ and the monitoring and evaluation (M&E) template. The paper concludes with some thoughts on the role of evaluation for management and development for achieving continuous improvement.