The evidence we have certainly confirms that a very high proportion of discrete aid projects of both official aid donors and Non-Governmental Organisations (NGOs) unequivocally has had positive short-term effects. For official aid, the success rates are well over 75 per cent: aid is helping to expand school places and health facilities, and to provide bed-nets and anti-retroviral drugs to tens of millions of people, and to expand access to clean water, thus contributing to the achievement of many of the Millennium Development Goals (MDGs). Likewise, most projects run by NGOs with grass-roots communities succeed in making a difference to the lives of those assisted.

However, there have been and continue to be aid project failures: some aid is wasted and some aid continues to be siphoned off by those with power, diverting funds into their own personal use. Yet, at the project level, successes clearly outweigh failures and both aid failures and corruption are not confined to poor countries: the United States' Government Accounting Office estimated that some 16 per cent of funds provided to the survivors of Hurricane Rita and Katrina in New Orleans were lost to fraud, amounting to some $1.4bn.

Additionally, most aid to the poorest countries has not "worked" in terms of having resulted in a sustainable and long-term impact on aggregate growth, wealth creation and poverty reduction. Yet this is not so surprising when one realises that official aid only accounts for about 10 per cent of the total wealth created in the 50 poorest countries of the world, down from 12 per cent in 1990. Changes in the prices of imports or exports, prices, the weather and what happens in the country next door can and often do eclipse the effects of aid. The recent rise in the price of oil has "wiped out" the spending power of aid two or three times over in most poor aid-importing African countries.

The fact that most aid may not directly lead to sustained poverty reduction provides insufficient grounds for concluding that it should not be provided. The fundamental dilemma facing all aid donors is that aid is needed most in precisely those environments where its beneficial impact is less easy to achieve. The central question that donors, scholars and the public ought to be asking is not whether aid has worked in the past, but how it can be made to work better in contexts where it is urgently needed and where its impact is currently disappointing. The focus ought to be on identifying and in trying to address those factors impeding the greater impact of aid, and holding back faster and more sustainable development.

Part of the answer lies within the recipient countries. Donors have learned that the impact of aid depends – perhaps, most critically – on the commitment and increasingly the capability of recipients to use it well. But they have not sufficiently altered their practices to reflect these insights. Donors need to support initiatives to strengthen citizen groups and democratic institutions within recipient countries to ensure that recipient governments are more internally accountable for how they spend public funds, including aid monies, dramatically reducing the external conditionalities they continue individually to impose on recipients.

Yet even if this is done, its overall effect on aid impact will remain limited unless donors are willing to radically change the way they continue to provide and allocate aid. Almost 40 years ago, the first international commission on aid, chaired by the former Canadian Prime Minister Lester Pearson, said that the international aid system, with its profusion of agencies, lacked coherence and direction, and that if aid was to have the intended impact it was necessary to separate the giving of aid from short-term political considerations. In a similar vein, a decade later the Brandt Commission judged that the time had already passed when aid funds should be provided to poor countries through some sort of automatic mechanism.

The time is long overdue for the donor community to heed, rather than to continue to ignore such calls.

If it is to work, aid needs to be divorced from the short-term political interests of the major donors. In 1999, less than two per cent of all official aid went to Afghanistan, Pakistan and Iraq. Five year later, these three countries accounted for a quarter of all official aid, a 30-fold increase. British aid to these countries had risen at an even faster rate – 35 times.

If aid is to work better, it also needs to stop being provided by a myriad of different agencies overseeing hundreds, sometimes thousands of different, often unconnected and unco-ordinated, projects and programmes. It needs to be provided in a way which ensures that aid promises are kept and poor countries can plan expenditure knowing that the total aid pledged is actually provided. Today it is not.

This is most likely to happen by replacing today's voluntary contributions made by governments with a system of compulsory payments made by the richest countries based on the ability to pay, which are pooled together and allocated to the poorest countries on the basis of a rigorous needs-assessment, and overseen by an agency not beholden to the political whims and micromanagement of the donor agencies.

Until this happens, donors will continue to remain partly responsible for the ineffectiveness of large amounts of aid they provide.


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Roger C. Riddell is a non-executive director of Oxford Policy Management, a principal of The Policy Practice and author of Does Foreign Aid Really Work? published by Oxford University Press, price £9.99.