Letters to the Editor

Aid recipients must be more accountable

Peter Heller ("Making Aid Work," September 2005) has highlighted some important challenges facing aid agencies and recipient countries. He correctly points out that more needs to be done to achieve tangible results in aid programs. However, he makes only passing reference to another important challenge: ensuring that aid recipients are sufficiently motivated to work with aid agencies. Many aid programs still lack specific incentives for aid recipients-especially government agencies-to ensure that aid does in fact reach its intended final beneficiaries. Aid program-related performance pay for key government officials in recipient countries could do wonders in this regard. Accountability of recipient countries remains limited. Indeed, if one aid program fails, the next one is as sure to come along as day follows night. Unhealthy donor competition ensures that.

Ownership of aid programs by recipient authorities has fortunately been given a lot more prominence since poverty reduction strategy papers (PRSPs) became the cornerstone of World Bank and IMF programs. Still, the reality is that the staff of multilateral institutions and their consultants draft substantial portions of these papers and then ask recipient governments and civil society representatives to sign off on them. Result: true ownership remains limited. Finally, penalties for noncompliance with aid program rules and reporting requirements rarely go beyond the temporary suspension of aid disbursements. Donor competition ensures that these penalties are soon forgotten. Specific penalties should not only be imposed at the country level but should also affect the remuneration of key government officials in recipient countries.

Lucien Peters

Public Finance Expert European Statistical Office, Luxembourg

Why not limit new borrowing?

According to Raghuram Rajan ("Debt Relief and Growth," June 2005), debt relief is useful but no panacea. It is preferable, he argues, for a country to receive "additional" (new) resources rather than only debt relief. His argument goes like this: a country that pays $100 million a year to service its debt should be indifferent as to whether it receives $200 million in new loans without debt cancellation or debt cancellation of $100 million plus $100 million worth of new loans. The annual net inflow of money is...