Conditionality in aid and debt relief: Is it justified?

Devendra Raj Panday, David Ndii, Dieter Frisch, T. C. I Ryan, Madhav Ghimire, Ameli Lueders-Luban, 10th IACC, Workshop report, Financial Sector

 

Does it work?

Chair:
Devendra Raj Panday, President, Transparency International Nepal

Panellists:
David Ndii, Transparency International Kenya
Dieter Frisch, former Director General, European Commission, Germany
Prof T. C. I Ryan, former Economic Secretary, Ministry of Finance, University of Nairobi, Kenya
Madhav Ghimire, Joint Secretary/Head of Foreign Aid Division, Ministry of Finance, Nepal
Dr. Ameli Lueders-Luban, Head of Division, Planning and Development, GTZ, Germany

Papers presented to the workshop:
- Conditionality in aid and debt relief, Transparency International United Kingdom - discussion document

Main Themes Covered

  1. Link between corruption, irresponsible lending and debt

  2. Link between debt relief/debt cancellation and anti-corruption

  3. Negative effects vs. potential use of conditionalities

  4. Unequal nature of development partnership

  5. Transparency and accountability of development agencies

Main Conclusions

  1. Externally imposed conditions on aid have failed to induce reform. Reasons:

    • lack of ownership on the recipient side

    • lack of consistency in implementing conditionalities by donors

    • number/load of conditionalities not in proportion to the capacity of recipients to follow them up

    • However, mutually agreed conditions have sometimes helped to strengthen reform constituencies in the recipient countries.

  2. The debt burden of poor countries is the mutual responsibility of creditors and recipients. Donor countries pursued geopolitical and commercial objectives, and an incentive structure in aid agencies and IFIs that rewards quantity of lending as opposed to impact. This perverted incentive structure is still in place.

  3. The workshop supported unconditional debt relief/cancellation. However debt relief/cancellation has to go hand in hand with provisions and efforts to ensure the transparent and accountable use of the money released.

  4. Externally imposed conditionalities are a reflection of an unequal development partnership. Recipient countries accept conditions they cannot fulfil, because they are desperate for money. The solution is to develop a partnership which is based on a shared vision, genuine participation of development stakeholders in recipient countries and a real negotiation process.

  5. Commitment to Good Governance is far more difficult to measure or verify than traditional objectives of development co-operation. Donors and recipients need to arrive at mutually acceptable criteria of what will constitute the commitment and performance.

docConditionality in aid and debt relief: Is it justified?

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