Up Front

Uncovering the Quality of Official Development Assistance

Homi Kharas and Anirban Ghosh

Official foreign aid to developing counties is currently a $120 billion industry. Such levels of annual giving are indicative of global goodwill toward helping the poor and assisting in the economic development of poorer nations. However, goodwill is not the same as good results. President Obama recently announced the creation of a new U.S. foreign aid policy, promising to focus on results, “whether we’re actually making improvements in people’s lives.” These remarks are welcome. As the largest donor nation, improvements in how the United States disburses its aid can affect the overall quality of global aid, and U.S. actions can also lead to positive changes in the operations of other donor nations.

The first step to make aid more effective is to accurately measure its effectiveness. In a joint effort with the Center for Global DevelopmentGlobal Economy and Development at Brookings has created a Quality of Official Development Assistance (QuODA) assessment. This assessment compares each donor country or agency to its peers. Through such benchmarking, we hope to “move the needle” by bringing differences in performance between agencies to the fore.

The Quality of Official Development Assistance assessment is comprised of annually updatable, objective indicators. By measuring performance in a quantitative way, the assessment will put a spotlight on countries that perform well and those that are below their peers. This pushes the aid argument away from how much to how. Simply put, better understanding of donor actions can lead to better donor practices, ultimately resulting in more sustainable development.

QuODA rates 31 donor countries and multilateral agencies across four dimensions or pillars of aid quality built up from 30 separate indicators. The four pillars of aid quality are:

  • Maximizing Efficiency;
  • Fostering Institutions;
  • Reducing Burden; and
  • Transparency and Learning.

Each of these pillars is consistent with international standards of aid effectiveness as outlined in the Paris Declaration and the Accra Agenda for Action. By using a comprehensive set of 30 indicators, donors should be able to evaluate their effectiveness and find areas for improvement. Further, QuODA compares the aid quality of 152 individual development agencies across the same four pillars described above.
The assessment’s quantitative index complements the qualitative assessment of aid, most notably by the OECD Development Assistance Committee’s peer review process, and also builds upon, and extends, previous quantitative assessments by experts in this area.
QuODA reveals that no one country or agency dominates across all four categories. Additional key findings include:

  • There is room for improvement for the United States as it ranks 24 (or lower) out of 31 in all four dimensions, even though some U.S. agencies such as the Millennium Challenge Corporation score above average.
  • The World Bank’s International Development Association (IDA) ranks in the top 10 for each of the four dimensions and is the only large donor to do so.
  • There is no relationship between the volume of aid and the quality of aid. Some large donors, such as the U.K. and IDA score relatively well, while Japan and the U.S. perform relatively poorly.

QuODA will be launched on October 5, 2010, at the Center for Global Development.