Beitrag vom 12.11.2011

The Nation, Kenya

How foreign donors can deliver aid differently and effectively in Kenya

By WOLFGANG FENGLER

The World Bank and IMF have received much media attention in recent weeks in Kenya.

The Kazi Kwa Vijana (work for the youth) initiative, which the Bank has been supporting through its Youth Empowerment Project, and government's decision to request substantial IMF funding to support macroeconomic stability have been the source of heated debate in Parliament.

This gives me an opportunity to zoom in on the role that so-called "donors” play in Kenya and to share some ideas from Delivering Aid Differently, a book which Homi Kharas and I co-authored and launched in Nairobi and Washington a year ago.

In recent years, the aid industry has been the focus of critical examination and object of debate.

Aid experts such as Peter Singer and Jeffrey Sachs advocate for huge increases in foreign aid and see enduring poverty as a direct by-product of the West's stinginess. Their message: aid works, only we don't provide enough of it.

On the other hand, there are aid critics such as William Easterly and Dambisa Moyo, who claim that aid has actually stifled progress in poor countries by undermining the accountability link between aid-receiving governments and their citizens.

Somewhere in between those two extremes, aid practitioners argue that foreign aid could, in fact, work if only it was done right.

Where does that leave us and who should we believe? If development aid really was so ineffectual then why has it increased so rapidly over the last decade?

In the last decade, major developments have radically reshaped the aid architecture. Today, the main paradox is that despite increasing flows and more players, aid has declined in relative importance in most countries.

Kenya is a case in point, reflecting these global shifts in the aid architecture: there are many new players on the aid scene in Kenya and increasing aid fragmentation as a result.

In addition, Kenya has been exposed to a high degree of aid volatility due to the "stop-and-go” behaviour of many donors.

The relationship between the Kenyan government and the international community has often been contentious and is based on three misperceptions of the role of aid in East Africa's largest economy.

Myth number one: Kenya needs donors to finance its budget. Kenya doesn't really need donors — although it could use their funds to bolster its development spending, as many emerging economies have demonstrated. Unlike other African countries, Kenya is not aid dependent.

Only some 15 per cent of its public expenditures are foreign financed, compared to about 40-50 per cent in other EAC countries.

Kenya boasts one of the strongest revenue performances in Africa and most of its public services are indeed financed by taxpayers.

Myth number two: Kenya's financial management systems are too weak to permit direct budget support.

Donors typically channel their resources in two ways: project financing, which is tied to a specific activity or budget support, which is a direct infusion of cash into the Treasury in support of government spending.

Clearly, there are still major weaknesses in Kenya's budget system and many of these have in fact been exposed by Kenyan institutions.

But if Kenya had no shortcomings then there wouldn't be much reason for aid in the first place.

The sticking point for donors is their perception that "corruption with impunity” still flourishes in Kenya, despite a public financial management architecture that has been greatly improved over time.

Myth number three: to deliver outcomes, make your projects small and "ring-fence” then tightly from government processes.

Small projects can deliver many benefits. They can spur innovation and reach isolated communities.

But, they also contribute to aid fragmentation, multiplying administrative costs and complicating donor coordination by recipient governments.

Unfortunately, although aid volumes have been growing in recent years, average project size has been shrinking, even for traditional donors.

Moreover, ring-fencing donor funding almost guarantees that even successful projects will leave a lasting improvement in government capacity to deliver key services since the government will have been bypassed rather than engaged in service delivery.

In Kenya, the health sector is still receiving a substantial amount of international support, and most of this funding bypasses government systems.

As a result, donors feel confident that their money is well-spent, but they are making no contribution to improving the quality of the much larger government spending in health.

So how can we deliver aid differently? In Kenya, as in other emerging economies, it is high time to rethink the old aid model: the North channels money to the South to finance discrete development projects.

Today, this model is increasingly irrelevant because strong growth in developing countries, including Africa, has reduced the prominence of aid.

Aid should catalyse and leverage itself into larger transformative programmes inside and outside the government. Donors should not seek to build their own successes, but instead identify local success stories and help amplify them.

In Kenya, the best way to do so is to use information technology, which can also create pressures to hold local leaders accountable.

Big players with global experience should also focus on big projects and knowledge services to help governments leverage their overall development programme.

Wolfgang Fengler is the World Bank lead economist for Kenya, Rwanda, Somalia and Eritrea

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