Foreign Aid's Impact on Public Spending
Foreign Aid's Impact on Public Spending

Author: Tarhan Feyzioglu

Publisher: World Bank Publications

Published: 1999

Total Pages: 48

ISBN-13:

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May 1996 Using a model of aid fungibility, the authors examine the relationship between foreign aid and public spending. Based on a panel of cross-country and time-series data, their results show that roughly 75 cents of every dollar given in net development assistance goes to current spending and 25 cents to capital spending in the recipient countries. But concessionary loans - a component of development assistance - stimulate far more government spending. Their results also show that aid increases both public and private investment. To test aid fungibility across both public spending categories, they use a newly constructed data series on the net disbursement of concessionary loans. They find that concessionary loans given to the transport and communication sector are fully nonfungible. But loans to the energy sector are converted into fungible monies and part of the funds leak into transport and communications. Loans to agriculture and education are also fungible. There is no evidence of concessionary funds being diverted for military purposes. Their results show that total public spending in the health sector has no impact on reducing infant mortality, but concessionary loans to the health sector do. This finding leads the authors to conclude that linking foreign aid to an agreed-upon public spending program in areas critical to development might be an effective way to transfer resources to developing countries.

Foreign Aid's Impact on Public Spending
Foreign Aid's Impact on Public Spending

Author: Vinaya Swaroop

Publisher:

Published: 2016

Total Pages: 48

ISBN-13:

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Using a model of aid fungibility, the authors examine the relationship between foreign aid and public spending. Based on a panel of cross-country and time-series data, their results show that roughly 75 cents of every dollar given in net development assistance goes to current spending and 25 cents to capital spending in the recipient countries. But concessionary loans - a component of development assistance - stimulate far more government spending. Their results also show that aid increases both public and private investment. To test aid fungibility across both public spending categories, they use a newly constructed data series on the net disbursement of concessionary loans. They find that concessionary loans given to the transport and communication sector are fully nonfungible. But loans to the energy sector are converted into fungible monies and part of the funds leak into transport and communications. Loans to agriculture and education are also fungible. There is no evidence of concessionary funds being diverted for military purposes. Their results show that total public spending in the health sector has no impact on reducing infant mortality, but concessionary loans to the health sector do. This finding leads the authors to conclude that linking foreign aid to an agreed-upon public spending program in areas critical to development might be an effective way to transfer resources to developing countries.

Assessing Aid
Assessing Aid

Author:

Publisher: World Bank Publications

Published: 1998

Total Pages: 164

ISBN-13: 9780195211238

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Assessing Aid determines that the effectiveness of aid is not decided by the amount received but rather the institutional and policy environment into which it is accepted. It examines how development assistance can be more effective at reducing global poverty and gives five mainrecommendations for making aid more effective: targeting financial aid to poor countries with good policies and strong economic management; providing policy-based aid to demonstrated reformers; using simpler instruments to transfer resources to countries with sound management; focusing projects oncreating and transmitting knowledge and capacity; and rethinking the internal incentives of aid agencies.

The Impact of Foreign Aid on Government Expenditure in Ethiopia
The Impact of Foreign Aid on Government Expenditure in Ethiopia

Author: Fikadu Goshu

Publisher: GRIN Verlag

Published: 2014-12-17

Total Pages: 76

ISBN-13: 3656862702

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Scientific Study from the year 2014 in the subject Economics - Case Scenarios, Wollega University (Department of Economics), language: English, abstract: This study has examined the impact of foreign aid on government expenditure in Ethiopia over the period 1981 to 2012 using Multivariate Vector Auto Regression analysis. All the necessary time series tests such as stationary test, co-integration, weak exiguity, and other tests are conducted. The empirical result from the long run fungibility equation result indicates that sectoral aid has negative effect on its sector spending in developmental sectors except for agricultural sector government spending. The estimate of agricultural aid also support that a 1percent increase in agricultural aid leads to a 0.83percent increase in agricultural spending. Aid other than health aid also has positive impact on health spending. The positive coefficient of aid other than the health implies that there is an aid diversion towards health sector from the others. The negative coefficients of sectoral aid on the sector spending and the negative coefficients of aid other than sector-specific aid, indicate diversion of aid away from the specific sector. Negative coefficients of explanatory variables may arise when there is a diversion of categorical aid from developmental investment towards non developmental expenditure such as general service government expenditures. The result also shows education aid is fungible both in short and long run. Health aid is fungible in the long run but not in the short run. Agriculture aid is non fungible in both long and short run in Ethiopia. The coefficient of aid other than education aid has positive sign that implies the diversion of foreign aid to the education sector. Foreign aid have also negative impact on all of non developmental government spending In order to get the desired benefit from foreign aid, Ministry of Finance and Economic Development has to set sound financial management system which stimulates economic growth and mitigate any diversion of developmental sector aid to other non developmental expenditure particularly in education and health sectors. Therefore, effective and efficient monitoring system which was purpose oriented utilization of foreign aid is central to make sectoral spending non fungible in Ethiopia.

Lives in the Balance
Lives in the Balance

Author:

Publisher: Brookings Institution Press

Published: 2010-07-23

Total Pages: 199

ISBN-13: 0815732899

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Investigates the use of foreign aid by developing countries and offers solutions for making sure the money goes where it should. Original.

Politics and the Effectiveness of Foreign Aid
Politics and the Effectiveness of Foreign Aid

Author: Peter Boone

Publisher:

Published: 1995

Total Pages: 72

ISBN-13:

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Critics of foreign aid programs have long argued that poverty reflects government failure. In this paper I analyze the effectiveness of foreign aid programs to gain insights into political regimes in aid recipient countries. My analytical framework shows how three stylized political/economic regimes labeled egalitarian, elitist and laissez-faire would use foreign aid. I then test reduced form equations using data on nonmilitary aid flows to 96 countries. I find that models of elitist political regimes best predict the impact of foreign aid. Aid does not significantly increase investment and growth, nor benefit the poor as measured by improvements in human development indicators, but it does increase the size of government. I also find that the impact of aid does not vary according to whether recipient governments are liberal democratic or highly repressive. But liberal political regimes and democracies, ceteris paribus, have on average 30% lower infant mortality than the least free regimes. This may be due to greater empowerment of the poor under liberal regimes even though the political elite continues to receive the benefits of aid programs. An implication is that short term aid targeted to support new liberal regimes may be a more successful means of reducing poverty than current programs.

Leave No One Behind
Leave No One Behind

Author: Homi Kharas

Publisher: Brookings Institution Press

Published: 2019-10-29

Total Pages: 335

ISBN-13: 081573784X

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The ambitious 15-year agenda known as the Sustainable Development Goals, adopted in 2015 by all members of the United Nations, contains a pledge that “no one will be left behind.” This book aims to translate that bold global commitment into an action-oriented mindset, focused on supporting specific people in specific places who are facing specific problems. In this volume, experts from Japan, the United States, Canada, and other countries address a range of challenges faced by people across the globe, including women and girls, smallholder farmers, migrants, and those living in extreme poverty. These are many of the people whose lives are at the heart of the aspirations embedded in the 17 Sustainable Development Goals. They are the people most in need of such essentials as health care, quality education, decent work, affordable energy, and a clean environment. This book is the result of a collaboration between the Japan International Cooperation Research Institute and the Global Economy and Development program at Brookings. It offers practical ideas for transforming “leave no one behind” from a slogan into effective actions which, if implemented, will make it possible to reach the Sustainable Development Goals by 2030. In addition to policymakers in the field of sustainable development, this book will be of interest to academics, activists, and leaders of international organizations and civil society groups who work every day to promote inclusive economic and social progress.

How Information about Foreign Aid Affects Public Spending Decisions
How Information about Foreign Aid Affects Public Spending Decisions

Author: Brigitte Seim

Publisher:

Published: 2020

Total Pages: 121

ISBN-13:

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Does foreign aid shift public spending? Many worry that aid will be "fungible'' in the sense that governments reallocate public funds in response to aid. If so, this could undermine development, increase the poorest's dependency on donors, and free resources for patronage. Yet, there is little agreement about the scale or consequences of such effects. We conducted an experiment with 460 elected politicians in Malawi. We provided information about foreign aid projects in local schools to these politicians. Afterwards, politicians made real decisions about which schools to target with development goods. Politicians who received the aid information treatment were 18% less likely to target schools with existing aid. These effects increase to 22-29% when the information was plausibly novel. We find little evidence that aid information heightens targeting of political supporters or family members, or dampens support to the neediest. Instead, the evidence indicates politicians allocate the development goods in line with equity concerns.