Predictably Inconsistent

Returned to Dar. City is quiet. Empty roads, empty cafés. After three weeks away, I’m one of the first of my friends to come back to the city. Expats take long holidays.

I met with a World Bank colleague when I returned. He reminded me that he’s leaving Tanzania in March—his contract is up. He’s thinking of heading to Vienna, or maybe even Kabul of all places, for another gig.

—You’re leaving so soon, I said. We were just getting to know each other!

But it’s like that here. People come and go. Sometimes they move away, sometimes they have extended travel and dip in and out of your life. This is so common that the joke goes there are three questions expats ask each other when they first meet:

1. Where are you from?
2. What do you do? (and)
3. How long will you be here?

Get that last question out of the way early and you can gauge whether or not to invest in a friendship. (This is only partly a joke.)

The expat life is full of inconsistency and unpredictability—which makes it a lot like development aid. Volatility in foreign assistance has always been a problem. Homi Kharas, in Measuring the Cost of Aid Volatility, estimates that the cost to aid recipients of historic unpredictability of committed aid flows is 15 percent.

And because most developing countries have limited access to international capital markets, they can’t borrow when expected aid fails to arrive. As a result, recipient governments must often adjust spending plans at the last minute when promised aid is not provided or when additional aid is disbursed unexpectedly.

Poor countries rely on aid to supplement domestic resources for essential services such as primary education and immunization. In many sub-Saharan African countries, close to half of all basic health sector funding comes from development assistance. When aid decreases, these services can be disrupted with an immediate negative effect on the poor.

And although more aid, even disbursed on short notice, might seem like a good thing, it's difficult for governments to spend on useful things when they can't predict what next year’s aid will amount to. For example, governments can't hire teachers with a boost in aid this year, when they don't know if they will have money to pay them next year.

In Tanzania, where total aid accounts for about 10 percent of GDP and finances on average 40 percent of outlays by the government, there is a high degree of variance between committed and disbursed levels of aid, according to forthcoming World Bank analysis. This is particularly true for project aid, (the kind favored by the United States) where actual disbursements have been well below expected levels for at least the last two fiscal years.

U.S. official development assistance channeled through the U.S. Agency for International Development is discretionary spending, which must be renewed each year, making it particularly volatile. The Brits do better: the U.K.’s Department for International Development often signs three-year agreements with governments and even has some ten-year partnership agreements. (See The Impact of U.S. and U.K. Legislatures on Aid Delivery for an interesting comparison of the two systems.)

But overall, donor aid is unpredictable. Maybe developing country governments should begin their conversations with donors the way expats begin their's:

Hello, donor. Tell me, where are you from, what do you do, and how long will you be here?