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Aid allocation rules

Briefing/policy papers

Written by Paddy Carter

Donors are frequently criticised for allocating their aid sub-optimally. Such questions arise not only from donors allocating their aid on the basis of their own political or economic interests rather than developmental ones, but also from competing conceptions about what optimal aid allocations look like.

Income per capita has a notable and growing influence over aid allocations, but has been increasingly challenged as a narrow indicator of country need. Others therefore advocate for a much stronger role for multi-dimensional measures of country need, including poverty, human development and broader economic indicators. Yet another perspective is reflected in the use by many aid agencies (especially multilaterals) of measures of how effectively/efficiently countries can use aid to address poverty to direct their aid allocations, which implies that in some cases allocations should be less sensitive to poverty levels.

ODI’s Centre for Aid and Public Expenditure (CAPE) has published three pieces that present new data exploring ODA allocations from the perspective of these different schools of thought and policy. The two blogs Getting to zero poverty by 2030 – stop giving more to those that need it the least by Marcus Manuel and Following the money: good news and bad news for aid to low-income countries by Gideon Rabinowitz address questions about how effectively ODA has been shaped by the numbers of poor people across countries and focussed on low-income countries.

Paddy Carter’s paper explores new ideas for how absorptive capacity and efficiency measures can be applied to aid allocation, and the implications of such approaches for future ODA allocations across different groups of countries. Free access to this article is available until 5 November 2014 here.

Paddy Carter