Within the scope of the 21st replenishment of its financial resources, the International Development Association (IDA) faces a difficult task: mobilize enough funds to maintain their high concessional rates available to 75 low-income economies, as well as its current multiplier capacity of aid estimated at $4 of financial support per $1 of contribution. Amidst turbulent times, this is of even greater concern given the continuing fragmentation of the development global architecture, defined as the simultaneous operation of multiple development agencies in one setting.
Such an environment has brought contrasting results in the field of development. It is important to note that measuring aid effectiveness is a complex issue, particularly given that there is not a consensus on a unified definition of aid. Notwithstanding, the numbers from the Development Aid Committee of the OECD are a notable frame of reference used by official channels. In this regard, figures are striking. From 2002 to 2021 official financial flows have doubled, but the number of entities providing such finance has also grown from 215 to 565. With the increase of aid available, it is important to discern quantity from quality of development funds, and how they are administered particularly at the budget level. In fact, the current development architecture seems to establish new challenges and opportunities for collaboration concerning the role of parliamentarians in international development notably at the level of multilateral coordination.
Despite the increase of finance available to developing countries, the number of competing donors can nuance development results creating the need for further coordination at the global level. Recognized positive and negative impacts of fragmentation seem to vary across countries and development sectors, such as health, governance, and education. While there is still low consensus in the literature concerning the overall effects of fragmentation, the effectiveness of aid linked to donor concentration and coordination is widely assessed. Studies show that donor coordination benefit economic growth in less developed countries, while significantly reducing corruption. Similarly, it allows recipient countries to preserve result-oriented frameworks, align their efforts with the international development goals, while preserving a marge of maneuver to concentrate on their regional and local priorities. On the other hand, low cohesiveness between donors could lead to contradictory objectives, smaller projects, and, in the long-term, to the decline of high concessional loans and grants due to donor competition. This is a risk IDA could be facing in the following years and impact negatively on the lowest income countries.
In this context, despite the decline of financial contributions to concessional multilateral development banks in real terms, multilateral development channels are still at the forefront of eradicating poverty and working towards the achievement of Sustainable Development Goals. Nonetheless, to preserve their current efforts and positive trends, parliamentary action and coordination is increasingly necessary at the global scale both in and between donor and recipient countries. At the recipient level, parliaments can exercise their oversight role on the use of donor funds by the executive, as well as work on secondary legislation for aid to be brought onto budget and avoid executive bypassing. In this regard, parliamentary oversight is of particular importance when dealing with budget support and macroeconomic assistance from international financial institutions (IFIs). On the other hand, donor parliaments can diminish the rate of fragmentation by channeling funds through multilateral development banks to preserve the effectiveness of their investments and they can hold accountable national development agencies when the flows are bilateral. For both sides, aid fragmentation is susceptible to lead to a decline in governance results when aid falls outside budgetary scrutiny highlighting the need for increased parliamentary action.
As stipulated by the Paris Declaration on Aid Effectiveness and the Accra Agenda for Action, the role of budgetary oversight and transparency is key to ensure positive development results. By making sure ODA and other external resources are includes in the budget, Parliaments can exercise supervision on the effectiveness of these flows on development, as well as overseeing governments and implementing agencies, including IFIs, to ensure transparency and better results. Therefore, building parliamentary capacity in recipient countries, as well as strengthening donor coordination and concentration by channeling resources through multilateral institutions are two complementary leads for action to build bigger and better projects for those who need them the most. To achieve this, stronger international cooperation between parliaments and IFIs along with increased budgetary control over international aid could contribute to a better definition of common development priorities and scaling up of aid effectiveness. The world can benefit from both a better global architecture, as well as increased parliamentary action and cooperation for development. As such, this defining year of 2024, in which half the world will be electing their representatives, opens a unique window of opportunity for creating the necessary momentum to revitalize our multilateral efforts to achieve better results for a better future.
Sources:
AWEPA. (2009). Parliaments and Aid Effectivenes. Brussels.
Furukawa, M. (2020). The effect of project aid fragmentation on economic growth. Development in Practice, 220-233.
Gehring, K, et al. (2017). Aid Fragmentation and Effectiveness: What Do We Really Know? World Development, 320-334.
International Development Association. (2024). Financing the Future: IDA’s Role in the Evolving Aid Architecture. Washington DC: The World Bank Group.
The World Bank. (2024, June 23). Contributor Countries. Retrieved from International Development Association: https://ida.worldbank.org/en/about/contributor-countries
Travers B. Child, A. L. (2021). Aid Fragmentation and Corruption (Working Paper). Chicago: Becker Friedman Institute.
UNDP & ParlAmericas. (2019). Parliament’s Role in Implementing the Sustainable Development Goals. Ottawa: UNDP.