Ideas to Action:

Independent research for global prosperity

Tag: aid

 

Why Isn’t the World Bank Asking What Works Before It Revamps Its Procurement Rules?

The World Bank is in the process of reforming its procurement system, the set of rules that borrowers have to follow when they use Bank financing to buy goods and services. Most of the proposals sound very sensible: much less “prior review” of the process for smaller contracts (World Bank staff looking over bid documents, evaluation reports, and contract documents before they are finalized); more flexibility to use other people’s procurement systems if they’re high quality; more flexibility to use quality alongside cost in evaluating bids in return for greater transparency.

More on the Definition of ODA: Proper Credit for Credits

CGD’s recent publication of my paper on improving the statistical definition of Official Development Assistance (ODA) brought me into contact with several people involved with the ongoing review of this issue. (For the history of that process see my previous post.) Those conversations have stimulated my thinking. They have also helped me appreciate that among the questions in play, the hottest is how to count loans in ODA—where “hot” is some blend of complicated and controversial.

I wrote about loans in my last post. But I focused on arguing against factoring the probability of default into the assessed financial value of a loan. Here, I’ll explain some other loan-related recommendations. In another post, I’ll talk about other questions.

The Crisis in Official Development Assistance (ODA) Statistics: Needed Revamp Would Lift Japan, Lower France

Not to be melodramatic, but the official system for counting foreign aid is in crisis. The longstanding mathematical rule determining whether a loan’s interest rate is low enough to qualify it as aid has gone out of sync with the times. The rule’s benchmark interest rate of 10% per year was reasonable when adopted in 1972, but not now. Today, wealthy governments can borrow below 3%, lend a couple percent higher, come in well under the 10% bar, and count the potentially profitable lending as aid.

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