The effectiveness of aid

The new book by Dambisa Moyo entitled "Dead Aid" has reopened the debate on if aid to the underdeveloped world really works. In her book, Moyo makes the claim that cutting off all assistance to Africa would stimulate growth in the continent.

But let's be clear here, international aid has helped, Africa is growing, but it might not be the perfect solution. Of course, we would all want to see Africa self-supporting, but removing all non-emergency aid will not make that happen. Making the aid more effective will help, as well as more free market solutions, which Moyo also proposes.

From this IRIN article that touches on Moyo's book, it examines how Norway has critiqued their own aid and altered it to do more good.

"Norwegian aid constitutes 3 percent of the total aid to Zambia, which was equal to 0.8 percent of Zambia's GDP in 2005. Our report showed that aid is more successful when it is channelled towards technical support. So the dialogue between NORAD and Zambia has become less political and more technical," NORAD's Ase Seim, coordinator of the report, told IRIN. A follow-up report is due to be released in 2009.

An example of a technical programme was computerizing Zambia's Office of the Auditor General, which received $1.6 million between 1997 and 2008, with support for restructuring and staff training, which means there are now regular audits of government activities - making a direct improvement in governance.

The financial downturn has hit Zambia hard in recent months, with copper prices - the mainstay of the economy - dropping dramatically on the back of falling global demand. Shrinking government revenues mean less state spending.

"Right now we are doing the annual audit. However, our budget has been cut by 17 percent by the government because they have less money than last year. So, yes, we have improved our audit methodology through the creation of manuals and computerization in the past few years; in the long term we still have areas that are not fully sustainable without consistent funds," Louis Mwanga, deputy director of Planning at the Office of the Auditor General, told IRIN.

Prescription to African governments

While Dead Aid criticises bilateral and multilateral aid, it also offers some alternatives to prevailing policy, such as the increased use of global capital markets by African policy-makers to raise investment funds: Moyo does not believe that the current financial environment should be a deterrent.

"In the current climate, my prescription to African governments is to focus on ensuring that when the market bounces back, which it will, then they need to be ready to go into the international marketplace to raise bonds. My view is that there is a lot of preparatory work that needs to be done to get bond ratings and to familiarize their countries with international investors."