Maximising multilateral aid impact

Maximising multilateral aid impact

How can aid donors be engaged more effectively to deliver smart, sustainable growth?

Key challenges

There are over 150 multilateral aid donor agencies. Some of the best known are the UN (and its various agencies), the Asian Development Bank, the African Development Bank and the World Bank (which usually gives loans rather than grants). Also there are over 50 bilateral donors and 230 international organisations, funds and programmes. These also look to coordinate significant proportions of their aid budgets through multinational frameworks (in 2008/09 DFID channeled over 50% of its aid through multilateral organisations).

Some key challenges are:

  • The multilateral framework is often regarded as an equitable and humane approach of channelling external development funds to developing countries
  • However because many of these institutions date from the postwar era, they do not necessarily reflect today’s distribution of power and influence. Nor do they fully face up to today’s global challenges: climate change, growing global inequality, effective humanitarian aid and stagnant progress against the MDGs
  • Still, international institutions provide an unparalleled platform for co-operating with others to find common solutions. Engagement to improve performance is key

IMF and World Bank

  • Some argue that the IMF and World Bank have been misused by creditor governments and are not functioning as truly multilateral institutions representing all of the member governments
  • Their original mission and potential however is to act as champions of economic justice and enlightened globalisation – a key requirement in helping reduce poverty and shape sustainable development
  • Their high levels of experience and technical sophistication can be utilised if their true role is restored

The UN

  • A major challenge to the UN’s legitimacy and effectiveness has been the reluctance of powerful countries to cede more authority to international institutions
  • The specialised agencies such as the Children’s Fund, WHO, FAO clearly have a core role to play in future development and the UN is uniquely qualified in terms of work and operations on the ground
  • Re-engagement of powerful countries like the US in multilateral activities is key to making the UN work.
  • The growing role of China and other emerging economies in international institutions should be seen as an opportunity

Align agency, donor and counrty goals, and give countries 'ownership' of programmes

Multilateral and bilateral donors, as well as partner countries, need to harmonise their operational policies, procedures and practices and align their support with country-owned poverty reduction strategies. The Paris Declaration on Aid Effectiveness (2005) outlines a set of five inter-related principles to help in delivery of multinational and bilateral aid:

  1. Ownership: Developing countries must exercise leadership over development policies and co-ordinate development assistance (implicitly this suggests donors should be enabling ‘ownership’ and reducing the imposition of outside agendas)
  2. Alignment: Donors must base their support on the recipient country’s national development strategies, institutions and procedures
  3. Harmonisation: Donors need to improve the co-ordination of their actions and adopt simple and transparent procedures for providing aid
  4. Managing for results: Aid should be managed in ways that focus on desired results and use information to improve decision-making
  5. Mutual accountability: Donors and partners should be answerable to one another and to their citizens for development results

A new international aid architecture?

Only by acting together through the international system will an increasingly interdependent world be able to tackle global issues such as climate change and achieve the MDGs. Opportunities to go beyond the Paris Declaration to create a new way of delivering aid include:

  • Giving recipient countries a stronger voice on ‘Harmony and Alignment’, or even choice over donors
  • Streamlining aid through a smaller number of major multilateral agencies – see ODA reference below

Further reading:

  • ODA (2006) Reforming the international aid architecture: Options and ways forward
  • The Paris Declaration on Aid Effectiveness, 2005
  • The N-S Institute (2008) The International Development System: Southern Perspectives on Reform
  • The International Aid Transparency Initiative
  • Aid Harmonization and Alignment
  • Woods, N (2008) From intervention to cooperation: Reforming the IMF and World Bank
  • Sachs, J. (2005) The End of Poverty