New report: Donor transparency and aid allocation

Jörg Faust recently released a paper which shows that aid donor governments with higher levels of political transparency often allocate more aid according to recipients’ neediness and institutional performance.

The report, ‘Donor transparency and aid allocation’ is an analysis of the impact of domestic political transparency (as measured by standard corruption indices) on donor countries’ formal promotion of aid transparency. This includes not only their participation in the International Aid Transparency Initiative, but also their concrete aid allocation patterns. It highlights that;

“..like areas of domestic social policy, the field of foreign aid is plagued by special interest groups […] Aid allocation can also be used to promote the interests of specific economic sectors or to gratify politically allied governments in the developing world. If such non-development oriented motives for foreign aid gain ground, the development-oriented selectivity of aid resources will decrease. Given this framework, it is argued that the responsiveness of donor governments to special interest groups tends to increase with decreasing levels of political transparency. Consequently, the level of political transparency in a donor country should impact on both, the formal engagement to make aid more transparent and the way aid is allocated among developing countries.” P. 1-2

Faust is Head of the Governance, Statehood and Security Department at the German Development Institute.

Read the paper here.

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