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The pilot IFF gets the go-ahead. Now is the time to start talking about the future aid architecture

Written by Simon Maxwell

Eurostat and the UK Office of National Statistics have announced an important decision which will pave the way for governments to contribute to the pilot version of Gordon Brown's proposed International Finance Facility, and perhaps eventually to the full-scale IFF. This means aid will rise even faster than already planned. A conversation about how to reshape the aid architecture becomes ever more urgent.

Both the IFFIM and the full-scale IFF are designed to front-load aid, and work by governments borrowing capital sums from bond markets against future repayments. The question was whether statistical authorities would insist that the totality of contributions to the immunisation pilot be counted against government expenditure at the time of the original borrowing, or whether they would be counted only when repayments were made. If the former, then the benefit of the mode of financing would effectively disappear.

The decision is summarised in a press release from the ONS. The key paragraphs read as follows:

'The proposed International Finance Facility for Immunisation (IFFIM) is an initiative where an international vaccination and immunisation alliance would securitise donations from several governments.

Eurostat has today announced that IFFIM should be classified as an ‘international organisation’ in the Rest of the World sector for National Accounts. IFFIM’s debts would be recorded in that sector. The donations from governments would be classified as current transfer payments and would be recorded when the annual payments are due, affecting Public Sector net borrowing at that point. The National Statistician has authorised adoption of Eurostat’s decision for use in the UK National Accounts.

This scheme relates specifically to immunisation and is viewed as a pilot scheme for the larger scale International Finance Facility (IFF).

The IFFIM decisions do not set any precedents for the IFF: the features of the schemes may differ and each case is examined on its separate merits.'

More money for immunisation is undoubtedly desirable, and the increase in aid it implies will be welcomed (though some sceptics remain opposed to additional aid).

However, as aid increases, questions about the aid architecture become more urgent. Will we see more vertical funds like the Global Alliance for Vaccines and Immunisation (GAVI), the main beneficiary of the IFFIM? Will additional money go straight to the World Bank? Will bilateral aid continue to dominate? And who is deciding?

ODI has published quite a few contributions already on this topic. See:

We are also launching a Forum on the Future of Aid (FFA) as part of a project titled 'Southern Voices for Change in the International Aid System'. The project seeks to capture the views and opinions of civil society organisations in the South on the way the international aid system currently works and on whether/how it should be reformed. The FFA is an interactive virtual forum dedicated to research and opinions about where aid architecture should go next. To encourage the participation of Southern CSOs in the discussion, limited funds will be available through the FFA to support the work of Southern contributors on issues related to the international aid system.

What do I think about this? That more aid is welcome. That we should be strategic about the implications for aid architecture. That there needs to be diversity and competition in the aid system, which means preserving and protecting the World Bank but building the UN and the EU as counter-weights. That recipients should have more choice at country level. That this implies something that looks like a regulated market for aid, with a crucial role for the regulator. And that, in general, the share of multilateral aid should rise significantly compared to bilateral aid.

We welcome contributions to the blog on these topics. See also the IFC-run blog on aid.