POLICY PAPER

What is the Role of Aid in Middle-Income Countries?

We develop screens and principles designed to maximise the impact of aid, especially in richer recipients. All else equal, a dollar spent in the poorest countries will have a larger impact on well-being than a dollar spent in richer countries, so ODA should be concentrated in those countries. But where it is used in middle-income countries, it should be aimed at (i) a major development challenge; (ii) where relatively small amounts of finance can be expected to have a significant return; and (iii) consistent with the political economy of the recipient country or that is likely to induce a shift in the political economy. That implies aid should focus on severe challenges faced by geographic or demographic sub-groups; using a range of tools beyond grants; with the goal of bringing forward, rather than replacing, state capacity; and using multilateral approaches wherever possible. An examination of aid practice suggests it is considerably at odds with what this approach would suggest.

CITATION

Dissanayake, Ranil, Charles Kenny, and Mark Plant. 2020. What is the Role of Aid in Middle-Income Countries?. Center for Global Development.

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