Aid instruments in fragile states: making the right choices

Donors are increasingly looking to improve their aid assistance to fragile states - where governments fail to maintain their central functions and deliver basic services to the majority of their people. In these situations, the choice of the type of aid given (aid instruments) becomes critical and depends on the context in which it is going to be used.

Researchers from the UK Department for InternationalDevelopment (DFID) address how aid can be increased and improved in fragilestate environments, in a working paper intended to stimulate discussion and notpresent DFID policy. They identify a number of aid instruments currently used by donors:budget support; technical cooperation; projects; social funds; pooling offunds; global funds and partnerships; and humanitarian aid. Threeobjectives for aid in fragile states are: meeting immediate needs anddelivering basic services; building sustainable systems within and outsidegovernment to formulate policy and deliver services; and supporting pro-poordomestic political reform.

The current approach to the selection of aid instruments infragile states emphasises restricted expenditure, usually on projects outsidegovernment control, often humanitarian. Although this approach has some valueit does not meet the policy challenges of working more effectively in fragilestates. A number of other approaches have been more effective to theseobjectives infragile states.

The report finds that:

• There is no single instrument: a range ofinstruments with different levels of risk are needed and planning long-term andprogrammatically from the outset is better.
• Partnerships for programme implementation thatinvolve all parties, including the state, United Nations, civil society and theprivate sector could be beneficial.
• Frameworksthat prioritise and plan interventions that offer greater coherence betweensecurity, development and diplomatic interventions are needed.
• Donors opt for temporary solutions: applyinggeneral principles to fragile states could be better.
• Resourcesto help experimentation and flexibility based on local knowledge, with along-term commitment to monitoring and evaluation, finance and dedicated employeesare important.

A focus on context and policy objectives, combined with aflexible use of various aid instruments can have a significant impact onpoverty reduction. There is no single perfect approach and risk can be reducedbut not eliminated.  However, theresearchers offer some general suggestions:

• Wherethe state has the capacity to govern (in terms of a functioning political,bureaucratic and judicial system) but no commitment to poverty reduction,donors should consider off-budget, joint, national or regional programmes withpooled funding and should use humanitarian projects only in response to need.
• Where there is both little capacity and littlecommitment, donors should follow a similar pattern, but also with a focus onrelationships with civil society and strengthening the vulnerable communitiesthough appropriate resources and training and transfers.
• Where there is commitment, but little capacity,donors should establish an arrangement between national governments and donorswhich would cover political, security and development strategies; createmulti-donor trust funds for budget support and investment; and providetechnical cooperation for developing local skills and capacity.