Policy Selectivity Forgone: Debt and Donor Behaviour in Africa

A large literature has developed on the country and other factors that influence the effectiveness of aid and the development aid business more generally. Two major findings have emerged (World Bank, 1998). First, aid is more effective when the recipient country’s policy and institutional environment satisfies some minimal criteria. Second, aid and debt relief have not been particularly targeted to countries with adequate policies and institutions.1 In this chapter, we concentrate on understanding the dynamics behind the second finding. To do so, we analyse the donor and official creditor side of the aid process. Our specific hypothesis is that the growing debt of poor countries since the 1980s and its composition has affected the process of granting new loans and grants by donors and official creditors.