2021 already has some hope of being better than 2020. In this blog, our CEO, Mark Henstridge reflects on why, in a post-pandemic world how aid gets spent and secures impact is often more important than how much we spend – for developing countries as well as donor countries.
2020 was difficult. A raging global pandemic made for a turbulent twelve months, leading to millions of deaths and contributing to a global recession.
Decades of progress on human development were reversed in 2020, hundreds of million people thrown back into poverty, and the public finances of countries hit by recession are in crisis: tax revenues are squashed, and increased needs for education (especially girls – many schools remain closed around the world), health, and social protection are further under-funded.
At the same time, in 2020 the G-20 richest countries were able to finance the equivalent of US$10 trillion to do whatever it takes to support households and businesses through the impact of the pandemic and lockdowns.
‘Doing whatever it takes’ is simply not possible in poor countries, where there is no such elastic access to finance, and people suffer dreadfully as a result.
Looking forward through the rest of 2021 glimmers of hope do exist: the global roll-out of vaccines offers the prospect of life getting back towards normal around the world.
With governments and policymakers talking about building back better it is time to start filling in some of the details around how this happens.
Our research, which modelled the impact of the pandemic on low-income economies in sub-Saharan Africa, showed that the impact of the pandemic, lockdowns, and the global recession means that international development finance (more precisely, ‘Overseas Development Assistance’, ODA) – or ‘aid’ in plain English – will be crucial for swift economic and social recovery.
In 2020 finance from the multilateral system, especially the IMF and World Bank, helped low-income countries enormously. Aid flows help soften the domestic economic policy responses to recession and lower tax receipts, such as reduced public spending. Sustained support is needed for a sustained recovery.
But domestic reform is also critical. The reform challenges for developing countries will include strengthening domestic revenue mobilisation – tax policy and administration – as well as systems for public service delivery – especially in health, education, and social protection – to support recovery. But reform will be strengthened when backed by sufficient development finance.
At the same time, many donor countries are also hard-pressed, and with global human development gains at risk, it’s unsurprising that headlines have focused on cuts to foreign aid budgets. The many high-profile voices speaking out against the UK Government’s scaling-back of its annual commitment on aid being a recent case-in-point.
With cash being tight for bilateral donors, innovative ways of leveraging development finance – most likely more through multilaterals, especially a new issue of SDRs from the IMF – will become increasingly important for financing sustained recovery.
The cuts in UK aid should now act as a sharp prompt to move on a key part of the conversation: it’s time to focus on how bilateral aid can be best spent.
How to spend aid?
This raises the key question: what does effective bilateral development programming look like as the world begins to transition into a recovery phase? Truly effective development programming not only helps countries onto the path to recovery, it helps them sustain progress beyond recovery to lasting growth.
That means supporting developing countries to address post-pandemic priority policy challenges: helping governments implement public policy reforms, strengthening existing public services, and protecting vulnerable people.
At the same time, when development programming is supported by hard-pressed taxpayers in the midst of a global recession, aid also has to be clearly in the national interest of the donor country: the politics of the UK aid cut do not obscure that point.
But how to move forward?
First, be clear that a coherent package of aid spending is in the national interest of the donor: it is a foundation for secure and effective foreign policy. Done right, a development programme strengthens long-term strategic relationships across a mix of countries, and strengthens the basis of trust, upon which diplomacy can then build.
As the UK has already found, being a global leader in development accumulates the soft power which then strengthens leadership on other issues of the national interest – security in particular.
But that means doing aid – development programming – right: how aid is spent matters more for the UK national interest than how much is spent.
Second, that means the starting point is the priorities of developing countries which aim to accelerate recovery from the pandemic. Supporting their policy reform priorities strengthens the UK’s global leadership. That it might be strengthened obliquely does not dilute the cumulative effectiveness of development soft power in the national interest.
Then, third, be careful in diagnosis of underlying challenges. For example, a priority to increase domestic tax collection needs to address why a country’s tax system isn’t working in the first place. Simply focusing on achieving the target at the expense of deeper investigation is likely to result in sticking-plaster ‘solutions’ that achieve little in the longer term.
Instead, ensuring changes to a national tax system are effective and sustainable requires a deep, context-specific understanding of the relationships between people, processes and institutions within that country. This sort of a ‘thicker’ policy diagnostic approach is critical in identifying entry points for effective reform – changes in one area that may lead to greater improvements elsewhere, positively impacting the system as a whole.
Another example is comes from realising that rescuing learning outcomes from long school closures needs to reflect why schooling has so often left children behind anyway – securing strengthened learning outcomes for girls means diagnosing existing education system incoherence.
Fourth, be flexible and adaptive in implementation. A ‘thicker’ diagnostic also lays the foundations for more iterative way of working, allowing policymakers to respond and adapt quickly to changing needs and leverage ‘pockets of reform’ as and when they arise – with development partner support.
This approach for development partnership is sustainable and effective – and it critically hinges on how such programming is delivered.
We’ve seen the positive impacts of this sort of approach in our work with the Government of Punjab in Pakistan during the first phase of the pandemic last year. Here, thanks to a deep understanding of sub-national government structures, processes and institutions, we were able to support the Government of Punjab design social protection and economic stimulus plans for the Province, including an employment guarantee scheme targeting one million jobs.
We have seen similarly striking results in our work with partner governments in Ghana and Nigeria: the way we deliver the partnership supports the development objectives of aid spending, and therefore the national interest of the donor.
Wrapped up in this is the urgent need to move away from doing development ‘on’ rather than ‘with’ people. We know that reforms are most likely to be effective and lasting if there is a sense of national ownership around them. But there’s much more to effective development programming than simply ensuing national involvement. Over the last year, we’ve spent a lot of time thinking about technical assistance and the need to move the conception of it away from something provided by development organisations towards a policy option for solving complex challenges and making real change happen.
Our own Oxford Policy Fellowship programme is a useful, practical, and highly effective example of this re-conceptualisation in practice and we continue to draw on learnings from this unique model of embedded technical assistance and its usefulness in times of social and economic upheaval.
The path to recovery…and beyond
As some hope starts to arrive in 2021, there is scope for strengthening international support to accelerate recovery in low- and middle-income countries. Development finance will remain crucial, and it is time to look beyond the amounts of money available and consider carefully how aid money is actually spent to achieve donor objectives through effective programming.
Aid and development programming – delivered through partners with deep and eclectic expertise and experience – needs to shift the focus from targets to lasting impacts and develop more considered, context-specific approaches to programming that supports reforming policymakers and real, sustained reform. Only then will we start to see development finance used to its full potential, to the benefit of all concerned, donor countries included, in transforming the path to recovery into a path to sustained prosperity.
Mark Henstridge is the Chief Executive Officer at Oxford Policy Management