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The Relationship Between Governments and Donors: Aid Instruments and Service Delivery

S Lister †(2002)
16 pages (920KB)

Service delivery is vital for poverty reduction. Governments, and public expenditure, are crucial to ensure that services are delivered. Aid instruments should support government systems in this task, but what kind of aid instruments should be employed?

This paper from the DFID November 2002 retreat attempts to answer this question. It makes it clear that service delivery interplays with other agendas that have common underlying ideas but that sometimes act in contradiction of each other. To deal with these agendas, aid agencies have to find the best option from diverse financial aid instruments and use various criteria for choosing among them. This is important because particular implications for service delivery may depend as much on the details of its design as on the broad category of aid instrument employed. What would then be the best aid instrument to improve governmentís capacity to deliver services?

There is a new trend towards broader aid instruments that are much more integrated with the recipientís own system of public expenditure management (PEM). Improving PEM is a central, strategic political issue to improve accountability, contain corruption and to improve efficiency and value for money. Clearly then, the use of new aid instruments ought to be strongly complimentary to the service delivery agenda and should integrate donor activities with government systems. Nevertheless, significant complexities may arise in the detailed design of particular instruments for particular countries. Other findings are:

  • New aid instruments can support recurrent costs, which may be critical to service delivery and to get away from the rather arbitrary traditional definitions of investment and recurrent expenditures
  • Devising indicators and targets that are well connected to service delivery improvement is rather difficult. Yet, they are necessary for donors to validate other rounds of support
  • Coordination among donors can set a limit to the proliferation of conditions and targets
  • The intersection between the agendas of better aid delivery, better public expenditure management, better service delivery and decentralisation overlap and sometimes act in opposition to each other
  • The way decentralisation is designed can affect both the amount of discretion that is gained, and the additional administrative or other burdens that have to be shouldered
  • It is difficult to carry out decentralised planning. Therefore, the best way to address the problem of aligning central and local plans may be to focus more directly on service delivery levels and service delivery targets.

Policy implications include the need to:

  • Identify monitorable indicators that are robustly linked to service delivery improvements, and to ensure that these are built into governmentís own management and resource allocation processes
  • Guard against using indicators that may be perverse or misleading and address the more interesting issues about whether resource flows match budgets and whether they provide real benefits to the poor
  • Support the budgeting process by providing timely and longer- term notification of aid resources, and taking account of the governmentís own budget calendar.

Source: Lister, S. 2002, 'The relationship between governments and donors: aid instruments and service delivery', paper presented at DFID November 2002 Retreat

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