“Pity the Finance Minister”: Issues in managing a substantial scaling up of aid flows

Peter S. Heller

Published: December 2005

Substantial scaling up of aid flows will require development partners to address many issues, including the impact of higher aid flows on the competitiveness of aid recipients, the management of fiscal and monetary policy, the delivery of public services, behavioral incentives, and the rate of growth of the economy. Other issues will include the appropriate sequencing of aid-financed investments, balancing alternative expenditure priorities, the implications for fiscal and budget sustainability, and exit strategies from donor funding. Donors will need to ensure greater long-term predictability and reduced short-term volatility of aid. The international financial institutions can play a critical role in helping countries address these scaling-up issues.