Aid effectiveness during the COVID-19 pandemic: This time it must be better

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I am not an expert in aid or aid effectiveness. As most of you, however, I can recognize that developing countries are in desperate need of assistance –money, supplies, knowledge– to face the pandemic crisis. It is the worst economic crisis since the Great Depression. It may worsen poverty, hunger, and destitution for hundreds of millions of people around the world, making 2020 the first year since 1998 that the global rate of poverty increases (Mahler et al. 2020).  We have seen calls for help coming from policy experts, international organizations, and academics (for instance, Brown and Summers 2020, United Nations 2020, Lakner, Ozler and Van der Weide (2020), and Gourinchas and Hsieh 2020). And international financial institutions, such as the IMF and the World Bank, have responded with “decisive action,” pledging financial support in the hundreds of billions of dollars (World Bank 2020). 

To avert an economic and humanitarian catastrophe, and to save millions of people’s lives and livelihoods, aid must be well used.  However, we cannot ignore the evidence that international aid has not always fulfilled its objectives and that, at times it has been misguided, misused, wasted, or even stolen. 

The stakes for aid effectiveness this time around cannot be overestimated. So, what can be done to improve it? As I said before, I am not an expert, so I decided to contact people who are – people who have devoted much of their careers to think about, assess, and improve international aid. Most experts I contacted graciously replied, and this blog serves to collect and organize their advice. My touch will be very light, just connecting the dots of what the experts have to say. I will do it by outlining six principles, each presented before an expert’s contribution.

1. To fight the pandemic, international aid should be seen as a global public good.  To dispense it at scale, introduce flexible mechanisms and update international rules to fit new realities.

Ibrahim Elbadawi (Minister of Finance and Economic Planning, Republic of Sudan) writes,

“This pandemic represents a once in a century event that threatens people and economies around the world. It continues to disrupt our lives and industries and holds up a mirror to the inequities within and between our societies. The virus more than anything has revealed how interconnected we all are; and it’s clear that if we want to defeat it, it must be defeated everywhere. In that vein, countries have banded together to set up a global fund to be distributed by the Bretton Woods institutions.  This international aid should be thought of as a public good. In this case, aid will provide life-saving medical devices, medication, laboratory diagnostics, technical assistance to support a robust outbreak response, and social protection programs for the population during the implementation of social and physical distancing to stop the transmission of the virus. While the principles to ensure effectiveness should be respected, the mechanisms to dispense aid at the scale that is needed should be made more flexible and, if necessary, revised. Take, for instance, the case of Sudan. In Sudan, another once in a lifetime event happened last year. A nonviolent revolution peopled by women and youth managed to collapse thirty-year rule of a kleptocratic junta.  Unfortunately, because of the sins of the old regime, Sudan has been shut out of this global fund to combat COVID-19. This pandemic threatens to collapse the health system, put millions at risk, and possibly derail Sudan’s democratic transition. In view of the strategic geo-economics and politics of the country in Africa and the Middle East, a vulnerable Sudan will undoubtedly constitute a ‘weak link’ that could also affect the effectiveness of the aid provided to its neighbors.”

2. International aid should be unbiased. Donors: help those who need it (and forget about other motives).

Christopher Kilby (Professor of Economics, Villanova University) writes,

“As aid donors and international institutions respond to the COVID-19 pandemic impacting emerging and developing economies, the crisis presents an opportunity to depart from business as usual.  On the donor side, this clearly means a rapid and less bureaucratic response.  But it also means setting aside the usual calculus of using aid to achieve multiple objectives, forgoing the possible economic and geopolitical benefits to instead focus purely on effectiveness and need.  Although there is mixed evidence regarding bilateral aid, the news looks better for multilateral development finance.  The World Bank has responded rapidly with 53 new COVID-19 loans between April 2 and April 30, totaling $2.7 billion and ranging from $2.5 million loans to the Marshall Islands and Sao Tome and Principe to a $1 billion loan to India.  Looking across World Bank borrowers, these loans are more likely to go to larger and poorer countries (though there is no statistically significant link to the number of reported COVID-19 cases).  To date, there is no apparent bias toward geopolitically important countries—measured by United Nations General Assembly voting alignment—and only one loan to a current UN Security Council member (Niger, which would likely qualify based on need).  One can only hope that this initial response will set the pattern during the pandemic and that all donors will see the wisdom of a single-minded approach to addressing the immense challenges this crisis poses for communities across the globe.”

3. Aid effectiveness can be improved if driven by the right incentives to deliver. Donors can help, but success depends ultimately on domestic ownership and accountability.

Nancy Birdsall (Senior Fellow and President Emeritus, Center for Global Development) writes,

“The nature of aid is changing, and so should the ways to ensure aid effectiveness. 
How is aid changing? More aid is relying less on traditional conditionality. 1) The Chinese aid and lending abjure ex ante conditions. 2) With climate change, a higher proportion of future Western aid is bound to go to humanitarian assistance for disaster relief, and to refugee support. 3) The global financial crisis and today’s pandemic are triggering debt relief, multilateral bank commitments to fill fiscal gaps in poor countries quickly, new allocations of IMF SDRs for all countries, and renewed attention to financing cash transfers in poor countries – perforce without concern about traditional effectiveness.   
How should the mechanisms for aid effectiveness change? For the portion of aid meant to be effective, “aid for outcomes” is emerging as a 21st century approach: that donors and lenders give recipient governments agency (that is, discretion and power) in implementing a donor-financed program or project. In this ironic version of the principal-agent model, the principal (donor) does not monitor the agent’s implementation of a jointly desired program (e.g. to educate children) but, apart from initial costs, pays the agent (poor country) ex post on delivery of the outcome they both want. This is coming in many forms – the most ambitious is Cash on Delivery Aid, but kudos to Problem-Driven Iterative Adaptation (PDIA) and the design (ambitious on paper but often defaulting to traditional in implementation) World Bank’s Program for Results. The theory is that recipients with “ownership” and accountability to citizens not donors, will find ways to be effective, will learn from failure and learn by doing, whereas even experienced and well-intentioned outsiders cannot and will not.”

4. Use existing domestic institutions to deliver aid but be flexible in adopting new ways to reach the most affected. This can help in times of crisis… and also improve governance.

Ben Olken (Professor of Economics, Massachusetts Institute of Technology) writes,

“I'd advocate three key guidelines for making aid effective in the crisis. First, to the extent possible, countries should build on whatever institutions for delivering aid to their citizens they currently have, as it is difficult to create and scale new programs quickly. This means that each country's response is going to look somewhat different depending on what institutions are already in place. Second, at the same time, it is important to recognize that the people who need aid assistance now are likely to be somewhat different than people who needed aid in the past. Most existing anti-poverty programs in the developing world target those who are in long-run poverty, but we have many people now who were gainfully employed in February but now have no job, little savings, and need assistance. So, while existing institutions should be the cornerstone when possible, new mechanisms may also be needed to fill the gaps left over by existing institutions. A variety of approaches can be used -- such as community-based approaches, on-demand applications with limited verification, or targeting based on mobile phone records -- to help fill in the gaps. Third, aid must be delivered in ways that respect social distancing. Mobile-money or other cellphone-based payments are great examples when they can be used. The key point is that there is going to be substantial need for assistance to ensure that the COVID health crisis does not become a humanitarian economic crisis as well.”

5. Aid effectiveness depends on knowledge and information: Accountability requires real time data, and efficiency requires evidence-based strategies.

Amanda Glassman (Executive Vice President, Center for Global Development) writes,

“COVID-19 aid aims at two ambitious goals -- to minimize COVID-19 and other excess mortality, preserving the health system and its providers, and to cushion the economic shock and avoid fiscal collapse. But despite the transcendent importance of measurable impact against these goals, funds must also be executed rapidly as revenues run out in real-time. The only workable financial modality given the constraints: repeated rounds of budget support with minimal conditions for disbursement. Under these constraints, what is reasonable to expect in terms of accountability? 

Better real-time data and evidence. With inaccurate and incomplete administrative data, health systems in many countries have been flying blind for a long time. For example, despite decades of global health aid, the United Nations Statistics Division (UNSD) found that less than half of deaths are recorded in Ghana and Kenya. The 2016 Global Burden of Disease study found that 38 of 55 countries in Africa did not produce any reliable data on cause of death from 2010 to 2016.  As aid responds to COVID, there is an opportunity to transform routine, disease-siloed, and paper-based practices for better disease and mortality surveillance. Population and community-level surveys and better real-time facility and household data are needed; and low-cost technologies are now available to measure, map, and use disease and risk data in more agile ways. In turn, better data can feed into more locally relevant COVID modeling and reductions in restrictive lockdowns.  

We should consider linking aid to the adoption of evidence-based strategies, including testing levels (and, in the future, vaccine implementation) – after all, why should taxpayer-backed monies go to countries that ignore (likely) best practices? There is still much we do not know about this novel virus; and it is likely that better, faster data and lived experience from different countries alongside international dialogue to share information will drive an evidence-based national response.”
 

6. Don’t lose sight of long-run objectives. The world’s poorest people live in continuous crisis: interventions now (and ever) should help them in pragmatic and sustainable ways. 

Finn Tarp (Professor of Development Economics, University of Copenhagen), writes,

“For the world’s poorest people, each day is a crisis: of finding work, enough to eat, and safety. Theirs is an ongoing and continuing crisis. Other crises, such as wars, natural disasters, pandemics, and economic shocks, are often unexpected or on a scale exceeding any forecast. Technological innovation, economic transformation, advance and retreat in the control of disease, climate change, and tensions within and between nations will all shape the crises of the future. Those responding to crises, including governments, international agencies, NGOs, civil society and private citizens, can take action in ways that are good or bad. In responding, they must not only get the facts right. They must pay close attention to the tensions that arise in responding to the continuing crises of the poor while dealing with the unexpected and immediate crises. Moreover, while unexpected crises demand responses, they can draw attention and resources away from continuing crises—slowing or stalling international action on poverty, hunger and disease—and leave little if no space to prepare for future events. Giant challenges require giant responses by the world community. An old saying suggests that success is not doing the extraordinary thing but doing ordinary things extraordinarily well. High impact aid is associated with doing many ordinary things well, but also with doing the extraordinary, in less than ideal circumstances.” 

My intention for this blog is not to be exhaustive: I know that there are other important principles for aid effectiveness. I do hope, however, that even in the middle of a terrible crisis, when hundreds of billions of aid will flow to developing countries, we can retain the composure, open the discussion, and remain vigilant to ensure that the poor and disadvantaged do benefit from international aid at this critical time.

 

*I am grateful to Aart Kraay, Bob Rijkers, and Chisako Fukuda for valuable comments. I warmly thank the aid effectiveness experts who provided written inputs: Nancy Birdsall, Ibrahim Elbadawi, Amanda Glassman, Christopher Kilby, Ben Olken, and Finn Tarp.

 

Authors

Norman Loayza

Lead Economist, Research Department, World Bank

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ABDALLA Khidir
May 14, 2020

We need to hear the voice and insights of those who are directly involved in the humanitarian and aid organization