The Commission for Africa envisages that development assistance must be doubled if Millennium Development Goals (MDGs) are to be met. To bridge the short to medium-term gap in financing (the difference between doubled aid and current donor commitments), it is proposed that the International Finance Facility (IFF) will use the value of long-term donor commitments to the IFF to raise large sums in the short to medium-term by issuing bonds on international capital markets. By bringing forward the value of long-term donor commitments, the IFF will enable a critical mass of aid to be invested in the short-term (“frontloading”), while leaving current donor commitments unaffected. The IFF will seek to use existing effective bilateral and multilateral mechanisms to disburse funds raised through the Facility and will ensure that disbursements reflect donor’s preferred delivery channels.
For Uganda, the prospect of doubling aid through donor’s preferred delivery channels conflicts with a number of our strategic objectives in our revised Poverty Eradication Action Plan (PEAP). The PEAP is Uganda’s Poverty Reduction Strategy Paper (PRSP). The strategic objectives that conflict with increased aid are:
- Fiscal deficit reduction, private sector/exportled growth and reduced aid dependency.
- Improvements in efficiency/value-for-money of public expenditure and closer alignment to PEAP priorities.
- External debt sustainability.
This article comes from the IDS Bulletin 36.3 (2005) Implications of Substantially Increased Development Aid: The Case of Uganda