Budget Support Versus Project Aid

April 1, 2003

Preview Citation

Format: Chicago

Tito Cordella, and Giovanni Dell'Ariccia. Budget Support Versus Project Aid, (USA: International Monetary Fund, 2003) accessed September 20, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Should donors who are interested in the effectiveness of developmental programs rely on conditional budget support or on project aid? To answer this question, we present a model in which only a subset of the developmental expenditures can be subject to conditionality. We show that budget support is preferable to project aid when donors and recipients' preferences are aligned, and when assistance is small relative to recipients' resources. Then, we test our model estimating a modified growth model for a panel of developing countries, and find evidence in support of our predictions.

Subject: Budget planning and preparation, Capital spending, Expenditure, Financial institutions, Foreign aid, Poverty, Poverty reduction, Project loans, Public financial management (PFM)

Keywords: Aid policy, Asymmetric information, Budget planning and preparation, Budget support, Capital spending, Conditionality, East Asia, Empirical growth models, First derivative, Policy Index, Poverty reduction, Project aid, Project loans, Recipient government, Sub-Saharan Africa, WP

Publication Details

Pages:

32
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2003/088
Stock No:

WPIEA0882003
ISBN:

9781451851182
ISSN:

1018-5941

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