Increased Aid vs Absorptive Capacity: Challenges and Opportunities Towards 2015

This article examines several constraints on aid effectiveness associated with the key problem of absorptive capacity, and then proposes an array of actions to address these problems. The constraints take diverse forms: macroeconomic; institutional and policy-oriented; technical and managerial; and those associated with donor behaviour. The constraints can be eased if donors do their homework; harmonise and align their strategies; design interventions with care; pay attention to macroeconomic management; renew their focus on infrastructure; and adopt innovative delivery mechanisms. The article concludes with an agenda for research which can facilitate such efforts. It is important to analyse successful examples of macroeconomic management in periods when aid flows increased; political economy factors driving countries' development strategy choices, including the incentives created by domestic politics and by aid relationships; as well as particularly effective sectoral strategies, the use of natural resource rents, and of reform efforts that allowed for a significant step-change in public sector performance. Tables, References. Adapted from the source document.