2.5 Implications of Literature Review
The negative relation between aid and growth dominates aid.
Nonetheless, it remains paradoxical that aid is still highly significant across
regressions. This prompts researchers us to continue thinking about how to
improve the effectiveness of aid. Reforms are certainly necessary, not only for
recipients but also for donors, especially multilateral aid agencies.
It is widely accepted that aid works well in good-policy
environment and in reality there are many good examples of success, for
instance Ethiopia, Uganda, Viet Nam, India etc (World Bank, 1998).
The implications are therefore obvious: Aid is more
effective when it is used to facilitate timely and efficiently the reforms
initiated by the local governments, not to condition the reforms. Put it
another way, the reform should be internalized, not imposed by outsiders. What
aid does is «to help good governments to survive long enough to solve the
problems» (World Bank, 1998). Countries may learn from the successful
experiences of others, but need to tailor appropriately their own action plans.
Aid is more effective and viable if it finances government bureaucrats training
or policymakers? overseas education and then nurture the reforms initiated by
them.
In reality, the World Bank structural adjustment programs and
IMF stabilization programs failed in many cases due to the lack of
appropriateness and strict penalty upon bad performance. Conditionality is
unlikely to bring about lasting reform if there is no strong domestic movement
for change (World Bank, 1998). Therefore, conditionality should work in the way
that ensures the effectiveness of loan where the reforms are in place.
Rewarding good performers in aid allocation is a good way to encourage other
recipient countries to learn from them. More importantly, the penalty should be
implemented strictly upon the violation of conditional terms. Loans should be
postponed or even terminated unless further positive evidence is accorded. The
current patterns of channelling aid through centralized governments in
recipient countries may reduce the timeliness and efficiency of aid. It is
found that the aid is more effective if it is delivered directly to the working
level local authorities. Hence, the emerging role of NGO community is widely
attracting attention (World Bank, 1998). The present coordination and
cooperation among donors is problematic. Most of donors and aid agencies have
their own objectives and different plans in providing aid. «Raising
flag» is a common phenomenon among donors and aid agencies.
Therefore, instead of cooperating, they are normally stepping on
each other?s toes by
undertaking different approaches. As a result, the
overall aid effectiveness on the growth of the
nation most of the time fails to succeed, even though many aid
projects are assessed effectively.
In the final analysis most of the literature on the impact of
foreign aid is highly generalized and
guided by the statistical interpretations of World Bank and other
Bretton Woods institutions.
There is hardly any literature based on the local representations
of the impact of aid on economic
and social development. This study is situated in this niche,
with special focus on the responses
of the actors in the aid matrix in
Gasabo District, Rwanda.
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