The idea of scaling up aid to developing countries has increased fears of “Dutch Disease” in the donor community and recipient countries. Through its impact on inflation and the exchange-rate, aid could slow down growth and human... more
The idea of scaling up aid to developing countries has increased fears of “Dutch Disease” in the donor community and recipient countries. Through its impact on inflation and the exchange-rate, aid could slow down growth and human development, undermining the aims of donors and recipients. By using the basic model of Dutch Disease, adjusting it to the circumstance of developing countries and taking a medium-term view, we explain how it is possible to avoid Dutch Disease. Important factors determining the impact seem to be: the spending pattern of aid, the amount of imports financed with aid and the coordination between the fiscal and monetary authorities. As the IMF is one of the most important participants in the discussion around this topic, we also clarify the specific terms this institution uses to discuss this sort of topics. The paper ends with referring to the fact that understanding the problem is one thing, taking these economic decisions on a political level may in certain ...
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Only flows to countries that are on the DAC list of recipients can be labelled Official Development Assistance (ODA). The countries on that list however are a mixed bag. Based on a World Bank classification, the DAC list for instance... more
Only flows to countries that are on the DAC list of recipients can be labelled Official Development Assistance (ODA). The countries on that list however are a mixed bag. Based on a World Bank classification, the DAC list for instance includes Burundi, with an income per capita in 2009 of $150, and Brazil, with an income per capita in 2009 of $ 8840. Burundi, on this count, is 59 times poorer than Brazil. And there is not just income. Burundi is small, landlocked, politically and institutionally unstable, with an unimpressive record in terms of economic growth, a modest player in Africa and an insignificant player in the world. Brazil by contrast is huge, rich in natural resources, technologically sophisticated, growing fast, ambitious, and a major player on the world scene. Recently, it has even started to think about setting up its own aid agency (The Economist, 2011a). How more heterogeneous can one get? One can pick similar contrasting pairs from the DAC list, such as DRCongo and...
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In this paper, we assess to what extent large-scale debt relief, irrevocably granted to DRC in 2010 after a decade long bumpy process, has impacted on post-conflict reconstruction, governance and public service delivery in the country,... more
In this paper, we assess to what extent large-scale debt relief, irrevocably granted to DRC in 2010 after a decade long bumpy process, has impacted on post-conflict reconstruction, governance and public service delivery in the country, more particularly in the education sector. In principle, this link potentially works through two main channels, one being increased overall resource availability, the other one through imposed conditionality to receive the debt relief. We show that resource availability indeed increased for the sector, with positive effects on e.g. teacher wages and pupil enrolment, but it did little in improving pro-poor service delivery in education. The latter is complicated by the political economy of the education sector, characterized by a system that basically transforms schools into tax points (through school fees, rather than being financed by transfers from the central level) with redistribution of proceeds to all stakeholders, a system that was rather repro...