During the 1980s and 1990s much foreign aid to African nations was targeted at the stimulation of economic policy reform. This book, produced by the World Bank, provides detailed analysis of the experiences of 10 African nations during the 1990s. All these countries were the recipients of large amounts of aid and all enacted structural adjustment programmes overseen by the international financial institutions. The policy outcomes were variable. The countries are categorised into the following groups: successful reformers, post-socialist reformers, mixed reformers and non-reformers. These country case studies question the relationship between aid and reform. How can foreign aid best support economic policy and poverty reduction? Have donors provided undifferentiated or tailored assistance to different countries? How can the political economy of reform best be characterised?
Two decades ago government intervention was the norm in most African countries. During the early stages of this era aid was often ideologically driven as a component of the donor nation’s foreign policy. Thus, little effective targeting of aid occurred. Despite considerable financial inflows, living standards failed to improve. Donors responded by inducing governments to reform their economic policies. However, only two of the 10 case study countries could be considered to be successful reformers. Domestic factors and donor practices have impacted upon the effectiveness of reform.
- Reform appears to be inextricably linked with a crisis, such as rampant inflation. Support for reform then grows when those who have gained from past policies begin to suffer.
- Reform requires immense political courage, thus the status of the leader is important.
- The second stage of the reform process (civil service reform, privatisation and fiscal controls) can be a major stumbling block. This is partly because of a need for increased levels of technical expertise and partly due to the need to challenge vested interests.
- An effective team of technocrats who have the support of the political leadership is necessary for effective reform implementation.
This technical analysis of aid outcomes has important implications for future disbursements of aid:
- Donors should avoid passing large quantities of financial aid into ineffective policy environments. Such monies tend to sustain corrupt and incompetent governments and perversely enable governments to delay reform.
- Conversely, sustained or increased financial support for positive policy environments helps to further promote effective policy outcomes and sustains domestic political support. Donors should maintain a high level of financial input into productive environments.
- Donors must be aware that economic policy is primarily driven by domestic politics. Donors can support an internally-driven reform process. Conditionality is a useful tool for signalling a commitment to reform, although negotiated conditionality tends to be vastly more effective than imposed conditionality.
- The Ghana and Uganda cases demonstrate that donor support in the guise of technical assistance is vital in creating the pre-conditions for reform. Financial support can be increased as government commitment to reform evolves.
- Once reform is well established, conditionality should be reduced in order to give governments a sense of ownership over their policy programmes.
- Ultimately, donors need to be more discerning and flexible in the provision of financial and technical aid.
