The Role of Aid in a Changing World Amar Bhattacharya

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The Role of Aid in a Changing World Amar
Bhattacharya

• Does Aid Work Conference?
• CIDA/North South Institute
• Ottawa, Canada
• June 17-18, 2008

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Outline of Presentation

• AidThen and Now
• Does Aid WorkThe Continuing Debate
• The New Aid CompactMonterrey, Gleneagles and the
  Paris Declaration
• The Delivery of Aid CommitmentsHow well are we
  doing?
• Aid EffectivenessA Two Way Street
• New Elements in the Aid Debate
• The Role of the BWIs in the Aid Architecture
• Implications for Accra and Doha

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Proliferation of donor activity
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Emergence of New Players

• Proliferation of multilateral channels often in
  the form of vertical funds
• New non-DAC donors including from the South
• Growing role of Private Foundations
• Proliferation of private philanthropic channels

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A Complex Aid Architecture
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The Post-Monterrey Aid Compact

• Debt Relief
• Higher Aid Commitments
• Innovative Financing Modalities
• A New Partnership on Aid Effectiveness
• Ownership
• Results Focus
• Harmonization and Alignment

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Reduction of Debt Stock (NPV terms) for the 30
Decision-point Countries
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Official Development Assistance (1975-2007)Net
Disbursements (Constant Prices, 2006 USD
millions)
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Total ODA Flows by Region
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Net ODA Flows by Type
Comprises costs for administration, in-donor
country refugees and imputed student costs.
http//dx.doi.org/10.1787/174700128051
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Development Aid for Africa has not increased
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Underlying aid flow trends do not support
scaling up commitments
Total ODA (2005 billions)
Source OECD Development Assistance Committee
(DAC)
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Reaching the 2010 Target for Africa will require
exceptional efforts
Source OECD Development Assistance Committee
(DAC) and World Bank Staff estimates.
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Aid Effort of DAC Members
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Modest Progress on Innovative Financing

• A pilot IFF for Immunization but what happened to
  the IFF
• A modest aviation solidarity levyin part to
  finance UNITAID
• Advance Market Commitments
• No agreement on financial transactions taxes
• Stolen Asset Recovery Initiative
• CDM Market -- 5 billion
• Renewed interest in a carbon tax

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Targeting of Aid to Poor Countries
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Harmonisation and Alignment
Source OECD/DAC, 2004
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Limited Progress on Aid Effectiveness

• Adoption of PRSPs but...
• Reduced conditions but...
• Greater alignment but...
• Continued volatility and lack of predictability
• Increased fragmentation

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Aid flows remain volatile
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Dead Weight Loss due to Aid Volatility Average
in percent(ODA Flows 1970-2006)
Source Kharas (2008)
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The New Bilaterals(estimated flows in 2005
billion)

• Non-DAC EU 0.5 0.7
• Other non-DAC 5.0 6.0
• Arab Countries 1.7 2.5
• TOTAL 7.2 9.2

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The Growing Role of Private Aid
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Structure of US Private Aid
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The cost of climate-proofing development
Source Data on investment from IMF 2007, data on
foreign direct investment from world Bank 20007d
data on ODA from indicator Table 18 assumptions
on climate sensitivity and cost from Stern 2006.
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Role of the BWIs in the Aid Architecture

• Learning to live with competitive pluralism
• An expanded but reformed IDA
• Re-establishing the relevance of the World Bank
  in middle-income countries
• What role in the Climate Change Agenda?
• A more effective surveillance role for the IMF
• Adequate IMF lending instruments for emerging
  markets and low-income countries
• The central issue of governance and voice

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Implications for Accra and Doha

• Adapt the Paris Declaration to the New Aid
  Realities
• Assess and clarify aid financing requirements
• Renew and establish clear benchmarks for delivery
  of aid commitments
• Incorporate new players appropriately in the aid
  architecture

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Thank You!