27 May 2010

WB Chief Economist for Africa supports cash transfers…

… for oil revenues. In a paper co-authored with World Bank Senior Economists Tuan Minh Le and Gaël Raballand, Shanta says

accountability,  and  hence  public-expenditure  efficiency,  can  be  increased  by transferring oil revenues  to citizens and  then  taxing  them  to  finance public spending ... We  conclude  that, while  it may be difficult  to  implement  such  a proposal in existing oil producers, there is scope for introducing it in some of Africa’s new oil producers.

[For more papers from the 2010 Oxford Economic Development in Africa conference, go here.]

Nancy Birdsall and Arvind Subramanian of the Center for Global Development raised this proposal in 2004 for Iraq, so it isn’t exactly brand new, but good to see the Bank looking at it.

Now, how long before the World Bank make the logical leap from decisions they have very little influence over (how developing country governments choose to use their own revenues) to decisions which they do (how rich countries choose to spend their aid in poor countries).

Oil and aid are both money into the government coffers (directly, or indirectly, via fungability), removing the need for government to bother tax people and face any accountability for its actions. In places where there is low accountability and low efficiency of government spending, why not strengthen the hand of citizens rather than the state, and give our aid money directly to the poor.

Cut out the middle-man.

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