Budget Support Versus Project Aid

Author/Editor:

Tito Cordella ; Giovanni Dell'Ariccia

Publication Date:

April 1, 2003

Electronic Access:

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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.

Series:

Working Paper No. 2003/088

Subject:

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

English

Publication Date:

April 1, 2003

ISBN/ISSN:

9781451851182/1018-5941

Stock No:

WPIEA0882003

Pages:

32

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