This article addresses the nexus between aid and poverty reduction. It challenges the conventional wisdom that enhanced aid is central to poverty reduction.
There is a rich literature reviewing the impact of aid on poverty.It is now generally accepted that unless aid flows are located within a policy framework which is locally designed and owned its impact on poverty reduction will be muted. Furthermore, ownership over policy must be backed by effective governance to enhance its impact on poverty reduction. This argument is not new. It originated in the critique of aid policies going back to the early 1980s with the move by the Bretton Woods Institutions (BWI) towards policy-based lending conditional on structural adjustment reforms (SAR) in the less developed countries (LDCs). It was then argued that externally driven reforms which ignored the socio-political context of the reform process would be unsustainable. It was not till the late 1990s that the World Bank and other donors recognised that without ownership and improved governance their capacity to influence reform had been minimal.
This article comes from the IDS Bulletin 36.3 (2005) Increasing Aid for Poverty Reduction: Rethinking the Policy Agenda