3 September 2008

Africa: Continent Told to Manage Aid Inflows

Kampala — AFRICA should manage aid inflows to ensure its effectiveness in reducing poverty on the continent, a top World Bank official advised this week.

"Our emphasis is to have Africa in the driver's seat. It should be Africa's responsibility to maintain control over inflows and ensure the best use of aid," said Obiageli Ezekwesili, the World Bank vice-president for Africa

She urged donors and recipient countries to focus on output and impact of aid as opposed to amounts of money spent.

"Outcome should be the central part of the aid agenda," she said via a videoconference from Accra, Ghana at the ongoing aid conference on Tuesday.

The three-day conference is aimed at improving the delivery of development assistance.

Ministers and officials from more than 100 countries that give and receive aid, along with leaders of humanitarian, lending and relief agencies, will also review the Paris Declaration on aid effectiveness adopted in 2005 where the donors and recipients agreed on the principle of developing countries having control of aid.

Ezekwesili cited Uganda as one of the countries that had performed well in making effective use of aid, adding that the country would likely meet one of the Millennium Development Goals of halving poverty by 2012.

Regarding China's increasing presence on the continent, she said institutions like the World Bank would want to facilitate improving Africa's capacity to negotiate the best deals from any financiers.

"Africa is best suited to determine the nature of engagement to respectable providers of finance.

They need capacity to maximise negotiations.

"The important issue is that no matter what partner Africa deals with, they should ensure they do not repeat failures of the past where level of debt unsustainability was high," she added.

But economists are critical of this view of the continent taking the lead regarding aid inflows, noting that taking the so-called driver's seat may not put Africa in control.

"When looking at aid, we have to consider its nature, conditionalities, tenure and ultimate use. How can you be in control when you cannot even predict the aid flows," said the economist.

The economist added that while some African countries had received debt waivers in the past, they were not instant and were effected over a long period of time.

"Debt waiver is not a clean slate. Because of this, governments still lack enough domestic resources to finance their budgets, so they bridge the gap by sourcing for more finances.

This may in turn lead to unsustainable debt if the funds are spent on consumption as opposed to productive sectors of the economy," said the economist.

The World Bank noted that Africa needs to look at multiple sources of funding including Sovereign Wealth Funds (SWF) to plug the financing gap.

WB suggests that for the continent to be able to compete favorably a combination of aid, government and private sector involvement is needed.

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