Development Assistance and Development Finance: Evidence and Global Policy Agendas
This paper reviews current evidence regarding impact of aid on growth and poverty reduction, and examines aid trends in sub-Saharan Africa and the Pacific. It also presents recent discussion on innovative development finance sources and considers the influence of research on policy debate.
Aid is expected to meet many objectives including economic growth, poverty reduction and conflict prevention. Its benefits for the poor and their participation in the growth process can be enhanced by well-designed aid programs that improve market access of the poor, build human capital, and create infrastructure that supports small holder and microenterprise livelihoods. The paper concludes that:
- Aid works;
- Poverty would be higher in the absence of aid;
- Shortfall in aid during the 1990s has made it more difficult to meet Millennium Development Goals;
- Aid increases public expenditure, including those that are pro-poor in orientation.
The paper recommends a considerable increase in aid and other development finance flows to reduce poverty by 2015.
