Innovative aid instruments and flexible financing: providing better support to fragile states

Marcus Manuel, Alastair McKechnie, Maia King, Erin Coppin, Lisa Denney
2012

Summary

This paper presents evidence, analysis and evaluation of the use of aid instruments in fragile states, based on a literature review and questionnaire responses from members of the OECD International Dialogue on Peacebuilding and Statebuilding Working Group on Aid Instruments. It highlights the importance of factors including: a mix of aid instruments (based on context); aid that is speedy, flexible and predictable; longer-term capacity-building; use of government systems; and aligning aid with the budget. It reflects the state of the literature and the international discussion as of June 2011.

Donors use a multiplicity of aid instruments in fragile states, with varying characteristics and levels of success. There are six categories of aid instruments in common use: general budget support; sector budget support; government-managed pooled funds; jointly managed trust funds; project support; and support to and through non-state actors. The following recommendations emerged from the study. They focus in particular on the factors that have been shown to have a determining impact on the success of aid instruments.

  1. Recognise that a mix of instruments is required to deliver better results in fragile states
  2. Make a ‘new deal’ with fragile states: identify a group of fragile states where the risks of the return to conflict are so high and the needs for rapid development are so great that a set of standard changes or exemptions to normal aid regulations/practices should be applied
  3. Increase speed and flexibility of aid in fragile states
  4. Recognise the g7+ has both a clear preference for more aid through government systems and a clear willingness to accept more safeguards to manage the risks involved
  5. Align all support in fragile states – including project aid, humanitarian aid and security support – to the country’s budget and ensure all support prioritises peacebuilding and statebuilding objectives
  6. Provide more predictable, sustained financing in fragile states
  7. Ensure aid delivery also supports development of long-term capacity
  8. Strengthen transparency, results, accountability and value for money in fragile states.

Source

Manuel, M., McKechnie, A., King, M., Coppin, E., & Denney, L. (2012). Innovative aid instruments and flexible financing: providing better support to fragile states. ODI.