Foreign Aid, Aid Effectiveness and the New Aid Paradigm: A Review

This paper reviews the co-evolution of thoughts on development and foreign aid, and empirical findings on aid effectiveness. The review recognizes the emergence of a new aid paradigm. The new aid paradigm embraces a set of principles such as holistic long-term development strategy; enabling policy and institutional environment; good governance; country ownership; simplified and harmonized aid procedures; increased reliance on and alignment with government systems and procedures; mutual accountability and partnership; ex-post conditionality or selectivity; predictability of aid flows; and results-based management. The paper shows that these principles are largely knowledge-based and able to make aid more effective, in theory. Achieving results in practice, however, requires challenging changes within donor agencies as well as recipient country governments. The paper also outlines the major challenges ahead in implementing the new aid paradigm.

Sri Lankan Journal of Agricultural Economics Vol.(12-13)No. 1 (2010-2011) pp. 39-81