Aid, Conditionality, and Debt in Africa

This paper presents a diagnosis of the current dysfunctionalities of the aid, conditionality and debt regime in Africa. It is argued that the key feature of the current system is that of aid dependence, which is characterized as an unhealthy process of interaction which afflicts donors and recipients alike. Until this dependence is addressed through institutional reforms, which may lead to or require lower volumes of aid, and which need to be framed in the context of deep debt relief, aid effectiveness will lag far behind expectations in Africa. * T.H. Lee Professor of World Affairs and Professor of Economics, Cornell University. The perspectives set out in this paper arise largely as the result of my experiences as the World Bank’s Resident Representative in Ghana, 1992-1994, and then as Chief Economist of the Africa Region of the World Bank, 1994-1996, during which time I also served on the joint World Bank/IMF task force which developed the Heavily Indebted Poor Countries (HIPC) debt relief initiative. I am indebted to Kwesi Botchwey, former Finance Minister of Ghana, for discussion and debate over many years on these topics--I have benefited greatly from our discussions, even when we have disagreed. The ideas in this paper were presented to seminars at Cornell University, the University of Minnesota, the University of Vermont and Vanderbilt University during academic year 1997-98. The paper is part of a broader project on the future of multilateral development assistance, which is being conducted under the auspices of the Overseas Development Council. I am grateful to Raji Jayaraman and David Pottebaum for research assistance.