Five steps to smarter multi-bi aid: a new way forward for earmarked finance

Abstract

Multi-bi aid – donor contributions to multilateral organisations earmarked for specific purposes – is an important channel for financing development, and is expected to grow. Yet multi-bi aid poses significant challenges for both multilateral and bilateral actors, including lack of alignment with recipient-country priorities, aid fragmentation, and increased transaction costs. This report explores the potential for smart reforms of multi-bi aid. A five-step plan to improve multi-bi aid requires: better data-access and management; recovering the full economic cost of earmarking; fee structures for improving impact; stronger internal rules to curb fragmentation; and better country ownership and participation. These reforms can make multi-bi aid more effective and efficient while enhancing its legitimacy in the eyes of recipients.

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