News from this weekend suggests that DfID will be reversing its hitherto strong backing to the Paris Declaration on Aid Effectiveness. My initial reactions were of shock and disappointment. Shock because DfID has been an ardent supporter of the Paris Declaration and Accra Agenda for Action. Disappointment because it was so unexpected: it has a strong, highly competent aid effectiveness department and has also used the Declaration to push Government reform.
I’ve noted after viewing the original leaked memo that the original advice was in favour of maintaining the Paris Declaration as a commitment by DfID. Most of the other commitments dropped simply serve to cut the amount of ringfencing of DfID’s budget and therefore increase its flexibility to meet the needs of different developing countries.
The decision to rescind their commitment to the PD is a much more problematic one, however. The issues essentially break down as follows:
What has DfID Reversed?
The Paris Declaration on Aid Effectiveness (PD) is an agreement signed by donor agencies and Governments and aid-recipient Governments in 2005. The Declaration establishes a number of best practices in aid management that all parties promise to adhere to, and twelve targets which all parties are to be assessed on. These targets and commitments were strengthened by the Accra Agenda for Action (AAA) in 2008.
The idea behind the PD and AAA is to make it easier for Governments to manage, use and report on aid by simplifying the way aid is contracted, disbursed and evaluated. It also seeks to maximise the benefit to the developing country by untying aid and ensuring that aid be channelled through the working local process of the aid-recipient Government. Thus aid is promised to be channelled through the local budget process, use the local accounting and audit procedures and be evaluated according to local processes. It further stressed the need to make aid as flexible as possible by using fungible General and Sector Budget Support.
Recipient Governments also made pledges to improve their own systems: of audit, budgeting and so on, and to be assessed independently on them.
The Paris Declaration has two very big positive points. The first is that it seeks to increase the ability of local actors to respond to their own problems flexibly and not be dictated to by a multitude of individual donors. It thus helps reduce the coordination problem of aid and encourages local solutions and visions of development.
The second major benefit, related to the first, is that it moves the lines of accountability of aid. Instead of aid money being handled by the donors, in which case the donors are accountable to their own taxpayers and no-one else, it creates dual accountability. First the donor gives money to the recipient Government to use. That Government is thus accountable to the donor, and must show that the money was used appropriately. But far more important than this, because aid money is now on budget and managed by local Governments a second line of accountability is created: of the recipient Government spending the money to the local electorate. Through the budget debates in Parliament, these people have the chance to contest the use of aid through their elected representatives; they also have the ability to vote a Government out of power if it doesn’t use aid money well. The Government now has to justify aid money in the same way it does tax money.
Additionally, the PD addresses lots of smaller, niggling issues that seriously hamper the capacity of Governments, for example setting a target for the reduction of cumbersome and time consuming donor missions by combining them.
The primary weakness of the PD is that it is actually not about the effectiveness of aid itself. At no point does the PD focus squarely on what aid achieves. The most it does is specify that each country *should* examine this. It focuses instead on processes of accountability which should stimulate effectiveness.
What DfID’s Reversal Does NOT Mean
Before going on to the criticisms that DfID opens itself up to by abandoning the Paris Declaration, it’s important to be clear about what DfID has not abandoned. It has not abandoned the impulse towards better, more effective aid. As I’ve pointed out above, the PD does not directly address or measure the effectiveness of aid. Thus, even without the PD, DfID is quite capable of pursuing the effectiveness of its aid portfolio.
DfID has also not abandoned any hope of coordination with other donors nor of making aid easier to manage. These can be addressed from without the framework the Paris and Accra agreements provide. Ideas like the marketization of aid are not covered in the PD.
What DfID’s Reversal Means for DfID
So why all of the hand-wringing? If DfID can continue to pursue more effective aid and coordinate with other donors in each country, why am I disappointed that it has rescinded its commitment to the Paris Declaration? DfID’s decision will cause itself a problem in its dealings with developing country Governments and will also hamper developing country Government efforts to get the most out of aid.
Firstly, there is the message it sends to developing countries. DfID made a multilateral commitment to take action and pursue targets for better aid provision and has unilaterally decided that this is no longer important. This is an appalling message to send to a plethora of developing countries which have made similar commitments to crucial reform processes that are painful, unpopular and against the interests of the ruling elite. Governments which rescind their backing to reform opaque budgeting and auditing systems can now point to DfID’s example and say they remain committed to ideals but no longer wish to tie themselves down on targets, deadlines or specific changes.
Closely allied to this problem is DfID’s loss of moral authority with developing countries. Up until now, DfID have been able to use their leadership on the PD agenda as a lever to push change in developing countries. They could push reforms when they themselves had reformed and were willing to take risks and use recipient-country systems. When local Governments show reluctance to improve their accounting or withdraw support for an independent Auditor General, DfID’s protests are now likely to be met by a response of: ‘What do you care how systems are reformed? Renew your commitment to using them before you start to tell us how to manage them.’ Even worse, the unspoken anger at donor hypocrisy, so tangible in every developing country Government I’ve worked in or advised, will only be strengthened.
More than a diffuse moral authority that comes with the commitment to use Government systems, DfID will also lose the ability to make legitimate threats or remind recipient Governments of their requirements under the PD. The PD actually makes it explicit that the amount of aid that the donor is required to funnel through a Government depends on how good their public financial management systems are, as independently assessed. This carrot and stick are now removed from DfID’s armoury.
What DfID’s Reversal Means for Developing Countries
On the recipient Government side, the defection from the aid coordination game by DfID has different potential problems. The PD is a very powerful document for developing countries because it ties all donors to a set of targets which are transparently and publicly assessed. Developing country Governments can use the PD to push reform through the targets and the commitments made. This is an important tool. Most donors wanted to do well on these targets, either due to central directives or sheer competitiveness. Governments have been able to use this impulse to drive them to greater use of Government systems, strengthening the budget process and hence creating contestability and local accountability in aid. These are significant gains where they have been made.
The reversal of DfID’s support to the PD has two major consequences. Firstly, it provides other donors with an ‘out’, particularly those donors who find it difficult to meet PD targets due to their own institutional strictures. Secondly, it removes a front-runner from the pack, leaving the rest with less of a catch-up distance when the PD is assessed.
What’s more DfID’s support in pushing other donors to improve their practices in line with the PD has been a major driver of change in many countries – one which they now lose some of their capacity for. Without adhering to the PD themselves, it’s difficult to see how they can continue to exert pressure on other donors without backlash.
Finally, technocrats in developing country Governments have been able to use the PD and donor pressure to fulfil the terms of it to push domestic reform processes by demonstrating to political leaders the importance of them to increase aid allocations and reorganise the types of aid received. DfID was again a powerful voice in this, but has lost some authority.
Of course, one donor defecting from the agreement hasn’t at a stroke reduced it to a mess. But it sets a bad precedent and removes on of the strongest proponents of it. It’s also true that the PD hasn’t resulted in gains everywhere. But where the domestic Government has made an effort with it, it has been useful, and this shouldn’t be overshadowed by other places where efforts have been weak.
Reform of aid and developing country processes is painful, slow and difficult. We don’t really need anything to make it more so.