Absorptive Capacity and Achieving the MDGs

Abstract

The recent discussion about the need to scale-up official development assistance (ODA) in order to make significant progress towards the MDGs has highlighted the concept of ‘absorptive capacity’. On one side are advocates of a general scaling up who rely on calculations of the amount of additional annual aid per capita needed in the next ten years to reach the MDGs. On the other side are advocates of ‘aid effectiveness’ cautioning against too much aid being delivered beyond the actual ‘absorptive capacity’ of a country. Absorptive capacity refers loosely to the ability to use additional aid without pronounced inefficiency of public spending and without induced adverse effects, for instance the ‘Dutch Disease’, or the crowding out of domestic saving. 1 These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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