Supporting Effective Aid: A Framework for Future Concessional Funding of Multilateral Development Banks

Abstract

Powerful global trends demand a wholesale rethinking of the system of international development assistance. A key issue is the future of concessional aid provided by multilateral development banks. What should be the future role of MDB concessional aid? And what is needed to maintain donor countries' support? In a rapidly changing global environment, there is still a strong case for maintaining MDB concessional aid. However, that case only holds provided a new approach is taken which adapts the roles of MDB aid to development lessons of the recent past and changing global conditions. This study argues that without these conditions, continued donor country support cannot and should not be expected. The study lays out a new framework for future decision-making of MDB funding, based on: a new performance-based approach to aid allocations among countries; an expansion of MDB investments in regional and global problem solving; the resolution of specific operational issues that stand in the way of greater effectiveness in delivery of aid; and changes in the burden-sharing and governance arrangements of individual MDBs.

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