A Panel Data Analysis of the Fungibility of Foreign Aid

Feyzioğlu, Tarhan; Swaroop, Vinaya; Zhu, Min

doi:10.1093/wber/12.1.29

Cited by 411 publications

(269 citation statements)

References 20 publications

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“…The fungibility of aid may undermine donor attempts to direct more funds to specific targets. However, aid for, say, basic education or rural infrastructure is unlikely to be fully fungible (Feyzioglu, Swaroop and Zhu 1998). 17 This is particularly true in countries heavily dependent on aid, where the large contribution of aid to public budgets 8 limits the discretion of local governments to shift resources.…”

Section: The Sectoral Allocation Of Aid: Some Stylized Factsmentioning

confidence: 99%

Do Donors Target Aid in Line with the Millennium Development Goals? A Sector Perspective of Aid Allocation

2007

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We analyse the aid portfolio of various bilateral and multilateral donors, testing whether they have prioritized aid in line with the Millennium Development Goals (MDGs). Employing Tobit models that combine sectorally disaggregated aid data with various indicators reflecting the situation of recipient countries with regard to the MDGs, we show that donors differ in the extent to which their sectoral aid allocation is conducive to achieving major MDGs. Some MDGs, notably the fight against HIV/AIDS, have shaped the allocation of aid. However, with respect to other MDGs such as primary education, there is a considerable gap between donor rhetoric and actual aid allocation. This invites the conclusion that the current focus on substantially increasing aid is unlikely to have the desired effects unless the targeting of aid is improved.

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Section: The Sectoral Allocation Of Aid: Some Stylized Factsmentioning

confidence: 99%

Do Donors Target Aid in Line with the Millennium Development Goals? A Sector Perspective of Aid Allocation

2007

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“…As Altincekic and Bearce (2014) argue, aid has never been as fungible as many scholars imply. They point out that the evidence about aid fungibility relies largely on a single paper (Feyzioglu et al 1998), which found high fungibility only in one sector: agriculture. Moreover, donors have grown less inclined over time to give aid as direct budget support, which is likely easier for elites to capture.…”

Section: Introductionmentioning

confidence: 99%

Citizen preferences and public goods: comparing preferences for foreign aid and government programs in Uganda

2016

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Different theories about the impact of aid make distinct predictions about citizens' attitudes toward foreign aid in recipient countries. We investigate their preferences toward aid and government projects in order to examine these different theories. Are citizens indifferent between development projects funded by their own government versus those funded by foreign aid donors, as aid capture theory suggests? To address this, in an experiment on a large, representative sample of Ugandan citizens, we randomly assigned the names of funding groups for actual forthcoming development projects and invited citizens to express support attitudinally and behaviorally. We find that citizens are significantly more willing to show behavioral support in favor of foreign aid projects compared to government programs, especially if they already perceive the government as corrupt or clientelist or if they are not supporters of the ruling party. They also trust donors more, think they are more effective, and do not consistently oppose aid conditionality. This experimental evidence is consistent with a theory that we call donor control which sees donors asbeing able to target and condition aid so that it is not fungible with government revenues and thus to be able to better direct it to meet citizens' needs.

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“…When confronted with a counterpart payment schedule, governments may decide to cut back on their own efforts and reduce projected budget allocations for mitigation-related spending. A certain degree of so-called 'fungibility' is innate to most aid instruments, but arguably more pronounced in the case of specifically targeted support, including debt swaps (see Feyzioglu et al, 1998). So, how does our case perform in terms of these two forms of additionality?…”

Section: Delivering More Resources For Climate Change Mitigationmentioning

confidence: 94%

Financing the Clean Development Mechanism through Debt-for-Efficiency Swaps? Case Study Evidence from a Uruguayan Wind Farm Project

2013

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As one of Kyoto's three flexibility mechanisms, the Clean Development Mechanism (CDM) allows the issuance of Certified Emission Reduction credits from offset projects in non-Annex I countries. As little attention has been paid to how CDM projects are financed, this article assesses whether offset schemes with public bodies should utilise debt swaps as a form of funding. Specifically, we examine whether a debt-for-efficiency swap between Uruguay and Spain within a wind power project increased project finance and generated greater development co-benefits. We assess the transaction using a simple evaluative framework: whether it delivered additional resources to the debtor country and/or government budget; whether it delivered more resources for climate change mitigation; whether it had a sizeable effect on overall debt burdens (creating 'indirect' benefits); and whether it aligned with government policy and systems (elements of the new aid approach). We find evidence that cautions against using the Spanish-Uruguayan case as a model for future debt-for-efficiency swaps.Parmi les trois mécanismes de flexibilité du Protocole de Kyoto, le Mécanisme de Développement Propre (MDP) permet la diffusion des crédits de carbone provenant des projets compensatoires dans des pays nonAnnexe I. Manque de réflexion sur les modes de financement des projets MDP, cet article vise à évaluer l'utilisation, par des bailleurs de fonds officiels comme intervention d'aide publique au développement, des opérations de conversion de la dette officielle comme mode de financement utile. Plus particulièrement, nous examinons dans quel mesure une opération de conversion de dette au bénéfice des économies d'énergie entre l'Uruguay et l'Espagne dans le secteur d'énergie éolienne, inclue dans un projet MDP, a bénéficié au financement du projet et à la disponibilité des ressources additionnelles pour le pays débiteur et pour la mitigation climatique, a créé des avantages complémentaires sur le plan du développement, et s'inscrit dans la nouvelle approche « d'alignement » de l'aide au développement aux politiques et systèmes du pays récepteur. Nos résultats mettent en garde contre l'adoption du cas espagnol-uruguayen comme modèle exemplaire pour des opérations futures de conversion de dette au bénéfice des énergies propres dans le cadre MDP.

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A Panel Data Analysis of the Fungibility of Foreign Aid

Abstract: , seminar participants at the World Bank, and three anonymous referees. Vinaya Swaroop acknowledges financial assistance from the World Bank (research grant RPO 679-76).

Cited by 411 publications

References 20 publications

Do Donors Target Aid in Line with the Millennium Development Goals? A Sector Perspective of Aid Allocation

Do Donors Target Aid in Line with the Millennium Development Goals? A Sector Perspective of Aid Allocation

Citizen preferences and public goods: comparing preferences for foreign aid and government programs in Uganda

Financing the Clean Development Mechanism through Debt-for-Efficiency Swaps? Case Study Evidence from a Uruguayan Wind Farm Project

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