Budget Support Versus Project Aid

IMF Working Papers, April 1, 2003

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Budget Support Versus Project Aid

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Bibliographic details

• Authors: Tito Cordella, Giovanni Dell'Ariccia
• Published: April 1, 2003
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451851182.001

Research question and approach

• Research question: Should donors who are interested in the effectiveness of developmental programs rely on conditional budget support or on project aid?
• Analytical approach:
  • Present a model in which only a subset of the developmental expenditures can be subject to conditionality.
  • Test the model by estimating a modified growth model for a panel of developing countries.

Theoretical findings

• Budget support is preferable to project aid when:
  • donors and recipients' preferences are aligned, and
  • assistance is small relative to recipients' resources.

Empirical findings

• Empirical estimation of a modified growth model for a panel of developing countries finds evidence supporting the model’s predictions (i.e., the conditions under which budget support is preferable).

Subject areas and keywords

• Subjects: 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

Content in this bundle

• Budget Support Versus Project Aid - WP/03/88
  • Budget Support Versus Project Aid - WP/03/88 (Markdown version)
  • Budget Support Versus Project Aid - WP/03/88 (PDF)