Reforming Foreign Aid

Foreign aid evokes much emotion. Proponents view it as a moral imperative and the instrument of the West for ending global poverty. The opponents see it as a waste of taxpayer funds. Still others see it as a potential tool to ensure security threatened by fragile or failing states. The World Bank, the single most important and influential source of foreign aid, has in the last 50 years made a nearly a trillion dollars in grants and soft loans to nearly every developing country. Has this aid made a difference? Moreover, is it still a relevant institution in the world of today, when many developing countries have successfully moved to the ranks of middle-income or even upper income countries? In Reforming Foreign Aid: Reinvent the World Bank, drawing on his own experiences over 40 years of work in international development, Inder Sud argues that aid has been successful in promoting development only in those few countries that have had the leadership committed to helping their people and who were able to utilize foreign aid to support their own, home-grown, national development agenda. Unfortunately, aid donors are driven increasingly by their own political compulsions, or pressures from their domestic constituencies, and end up pushing initiatives that detract from the country's priorities or are simply wasteful. Sud suggests that the World Bank, as the most significant and influential aid donor, can take a lead in setting a new path for delivering foreign aid effectively. First and foremost, Sud argues, that aid should only be channeled to countries that have the requisite national leadership with a track record of pursuing sound development policies and programs. The World Bank still has a role to play in supporting such countries provided it undertakes major reforms in its governance, modus operandus, instruments, and most importantly moving back to its roots of not being influenced by political imperatives of major donor countries, notably the United States.