A worms eye view of aid architecture…. Gaps and Challenges for Reform beyond the Paris Agenda Andrew Rogerson, Overseas Development Institute

Framework Subsidiarity principle Paris agenda and its results A word on aid agency incentives Competition or Collective Action 5 supra-national policy steps

Subsidiarity principle Assume perfect harmony locally Derive minimum changes globally Example: fragmentation Example: predictability Example: global public goods

Paris Agenda and implicit results framework The Aid Effectiveness Pyramid Seven Habits Different country perspectives Transaction costs and their limitations

Building partnerships that make aid more effective Harmonisation Alignment Ownership Common arrangements Simplification of procedures Sharing information Alignment on partners priorities Reliance on partners systems Partners set the agenda

An alternative results framework Aid tail and domestic finance dog (More downward accountability) Input= institutional change Output= better resource management Outcome link= Institutions-> poverty But: Transplants? Causality? Proof?

Aid Agency Incentives Preferences Diverge (trust, information) Agencies Mediate Conditions and commitment Devices Transaction costs versus uncertainty Perfect trust and staff incentives

Competition vs Collaboration Increasing, but low fragmentation Cartel view and risks vs costs Unilateral action by recipients Unilateral action by donors Exhortation or financial pressures?

Five complementary actions Balancing cross-country aid allocation Matching predictability and results Raising resources for ambitious PRS Mutual accountability and sanctions Code of conduct for vertical funds

Balancing Allocations Problem: bilateral aid objectives diverge And: multilaterals performance based Therefore: donor darlings and orphans Rebalancing via multilaterals, IFF

Alternative aid instruments Recipient : longer horizon, risk spread Donor: tangible results MDG outcome-based programs Large-scale recurrent cost support Verifiable outputs and outcomes

Mutual Accountability Correcting basic asymmetry Assessing donor performance (eg DRI) Value at country level (Mozambique) But also need incentives/sanctions Market-based, eg IFF, discipline Unbundling aid funding and delivery

its the money, stupid PRS closed on needs or availability? Too slow, not transparent adjustment Sachs: fast-tracking several countries But individual donor funds do not clear Need liquid reserve fund across donors