The Macroeconomics of Scaling Up Aid

With most African countries already highly reliant on aid, large-scale increases in assistance would unavoidably create challenges for macroeconomic management. To set against the benefits, it is now recognised that such ‘scaling-up’ could create disincentives for exporters and other local producers. There need to be strong supply-side responses to offset these. Enlarged aid inflows could be a powerful stimulus to raising productivities and investment but experience suggests that such outcomes should not be taken for granted. The case for larger aid quantities cannot be divorced from measures to raise aid qualities and results are likely to vary across countries.

These issues, and their policy implications, were explored in this meeting, building on ODI-led country research.