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EU Policy Brief No. 1: A new approach to the role of development aid for poverty reduction: Trading-off needs against governance

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A criticism that is frequently levelled against the current pattern of aid allocation is the coexistence of 'aid darlings' and 'aid orphans' among recipient countries. It subsists in spite of the coming to the fore of a new approach to development cooperation that emphasized policy dialogue, country ownership and the need to get rid of conditionalities and reform overload or high transaction costs. Heralded by the Paris Declaration (March 2005) and the Accra Agenda for Action (September 2008), this approach also privileged new aid modalities, General Budget Support (GBS) in particular, considered to be especially suitable to meet the above objectives. Yet, results proved rather disappointing and ex post conditionalities were soon re-introduced, leading to suspension or disruption of GBS in countries such as Nicaragua and Honduras. Donor agencies that are well-known for their rigour, such as SIDA (Sweden) and DFID (United Kingdom), have even decided to give up budget support and return to aid modalities – programmes and projects – that better lend themselves to monitoring and sanction in the event of non-compliance with set conditions.

This European Policy Brief is also available on the European Commission website here