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In the context of an increased focus on aid to the poorest countries this paper examines the issue of aid to Middle Income Countries’ (MICs). The paper explores the characteristics of MICs as well as the significance of aid to this group of countries. It also presents some issues of best practice regarding aid to MICs.

Findings of the study include:

• in most "Middle Income Countries" (MICs) there is not an overall and immediate and critical shortage of either human capital or financial resources
• the role of donors must be to support the agenda of those local actors, government or otherwise, who are working for the kind of change that a donor judges worthwhile
• if a Middle Income Country has a track record of rapid improvement in the welfare of its population, aid may primarily be justified to speed things up, not only to increase welfare but also to expand the market for OECD (and LIC) goods and services as well as to build good international relations
• conversely, if no or little progress is being made, aid may be justified because of the very lack of progress in poverty reduction that may be due to deep structural inequalities and exclusion of much of the population. The choice of channels and instruments of aid may be rather different and great care should be taken to ensure that commercial and political interests of the donor government do not undermine the aid effort
• when the purpose of aid is to reduce inequalities a donor may need to be there for the long haul with a commitment and preparedness to invest staff time in developing and maintaining institutional relationships
• finally, good aid practice needs to take account of the diversity among MICs and the significance of regional groupings that cut across the MIC-Low income country divide. The case for specific, non-country based support to regional institutions should always be considered.

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