Major new Bank report on aid

15 December 1998

A major new Policy Research Report by the Bank argues that it is pointless to provide aid money to countries unless they have certain economic policies and a good institutional environment. Assessing Aid maps the impact of aid flows on growth and poverty reduction, and finds that aid is only effective when governments have “good policies”. The Bank defines these as low inflation, good fiscal balances, and open trade regimes. These must be accompanied by “high-quality institutions” to protect private property and the rule of law, with little corruption. Where these are absent aid agencies should transfer knowledge rather than finance.

This report is being well received in the mainstream press, and is likely to be influential for some time. It is unclear how this approach of giving money only to countries with a predetermined policy mix fits with the Bank’s aims to allow borrower governments and civil society groups to determine their own development paths.

A briefing note is available from the Project.