28 July 2011

New Aid Instruments for South Sudan

I went to brief the next crop of ODI fellows heading to South Sudan, in London on Tuesday (good luck folks!). ODI are also running what seems to be a really interesting Budget Support Initiative, providing further technical assistance from a more experienced team. One of the issues the team, and the broader donor community is grappling with, is what lessons to learn from recent experience in other countries with direct budget support, and what new funding mechanisms are appropriate for the new South Sudan as the pooled trust funds expire (disclaimer: I know very little of the detail of arrangements in other countries, or the state of arrangements over the last year in South Sudan - however - I'm going to wade in anyway).

I think you would have to be mad to recommend direct budget support for South Sudan. For two simple reasons.

1 - The Government of South Sudan already has more per capita revenues than its more developed neighbours Kenya or Uganda.

2 - Spending control is poor.

If you want to increase aid to South Sudan, I would propose testing some new ideas, like

1 - Direct unconditional cash transfers to citizens. Run a pilot, it would be relatively easy to rigorously test and monitor to see whether markets can respond to new demand in remote areas, or

2 - Cash-on-delivery aid; offer the government a contract promising payment for outcomes, incentivising the government to figure out the best way of delivering effective services to its people.

And finally, are you really sure we should be giving more aid to South Sudan anyway? Remember it has only 8 million people, less than many cities. Remember it is an enormously expensive place to do business, so you get far less bang for your buck than is possible in cheaper environments. Better to build 1 school in Sudan or 10 schools in India?

And I am now regurgitating old arguments, but not increasing aid does not have to mean not increasing international support. There are lots of other good places to start, such as creating trade and investment policies which are more effective for development. 

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