Aid Effectiveness and Selectivity: Integrating Multiple Objectives into Aid Allocations

This paper reports on recent work on improving the effectiveness of aid allocations, and extends the scope of analysis beyond the aid-policy-growth-poverty linkages to include three new elements: a broader range of poverty-relevant objectives and effectiveness constraints of aid; practical experience in the application of quantitative analysis to allocations; and analytic approaches to determining shares of aid through multilateral channels and for global public goods. There is wide consensus on the main allocation criteria for effectiveness in reducing poverty through pro-poor growth: the level and incidence of poverty and the development performance of partner countries. Other variables that raise the impact of aid on growth are helping vulnerable countries adjust to shocks, debt relief and post-conflict reconstruction. Considering broader development and humanitarian objectives, aid should also be allocated to prevent violent conflict and to improve governance and social conditions in “difficult partnerships”. In addition, global public goods are severely under-funded, and there is some evidence of under-funding of multilateral programmes...