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Opinion: Supporting the IDA is thrifty and smart

World financial leaders to consider aid to International Development Association.

Pakistani flood victims
The gatherings of world financial leaders at the annual World Bank and IMF meetings will discuss contributions to the International Development Associaiton which funds aid projects. Here a girl and a young baby are pictured by a fire in a Pakistani army-run relief camp in Sehwan, in the Sindh province, on September 15, 2010.(Carl De Souza/AFP/Getty Images)

WASHINGTON — As world financial leaders gather here for the annual meetings of the IMF and World Bank, they will discuss what to do about replenishing the coffers of the International Development Association (IDA) — the World Bank’s window for making grants and concessional credits to the poorest countries in the world.

The talks are likely to be tough-going for aid and IDA champions. Advanced countries are struggling with their own debt and fiscal problems and ongoing fears of a second dip into recession. Although aid is a tiny fraction of most rich countries’ budgets, it is subject to even worse political pressures than other discretionary spending.

Tough choices will be made. Donors are already squeezing their pledges to other multilateral funds — recent commitments to the concessional fund at the African Development Bank barely kept pace in real terms with the past, and the new replenishment of the Global Environmental Facility was less than half the original proposal.

What about the IDA? Short-changing the IDA would make no sense, according to independent evidence just published by the Center for Global Development. Our new research assessing the quality of aid from donor countries and aid agencies shows that the IDA, as well as a handful of other multilateral funds, spent aid money “smarter” than most bilateral funds, extracting far more value for money in building a more stable, safer and more prosperous global system.

We applaud countries like the United Kingdom that have promised to protect their aid budgets. But the tough reality is that at a time of huge fiscal deficits in advanced countries, it is unrealistic to expect the rich world to be much more generous.

The answer is to be smarter about aid, to increase its impact in terms of development and poverty reduction for each dollar spent.

Our assessment of the quality of official development assistance (QuODA) looks at how donor countries and aid agencies score on 30 indicators spanning four dimensions of aid quality: maximizing efficiency, fostering institutions, reducing the burden on recipient countries and transparency and learning. These dimensions were chosen based on academic research, the principles of aid effectiveness to which official donors have publicly and repeatedly committed, and the concerns expressed by aid recipient countries themselves.

The maximizing efficiency index gives points to those who give money to the poorest countries, to well-governed countries, and in ways — such as not tying their aid to their own suppliers and contractors — that ensure the most efficiency in terms of development projects and programs on the ground.

The fostering institutions index rewards those who link their aid with recipient country development plans and who support the implementation of the countries’ own priorities. It penalizes agencies that set up parallel systems instead of providing aid whenever possible through local institutions.