Are Foreign Donors Engaging in Effective Transparent Aid Practice: Foreign Aid and Best Practices

Abstract

Abstract: I seek to understand whether foreign aid donors are meeting their own commitments and engaging in effective transparent best aid practices. As arguably the most important measure of best practices, transparency allows public access into the activity of foreign aid donors. Without transparency, there is little chance for donor accountability. I evaluate 82 foreign aid agencies on transparency by creating two indices. I use 2018 data from the Organization of Economic Co-operation Corporation (OECD) reporting system for a first index and hand-collected overhead costs from each agency's annual reports as a second index. Overall, my results indicate that donors are not meeting their transparency best aid practice commitments and they have become worse over time. Donors were found to be more transparent when reporting to the OECD than with reporting their overhead costs. Multilateral donors ranked the highest in transparency measures and have improved since 2004, while Development Assistance Committee (DAC) donors have worsened. Available data from 2012, also suggest that although non-DAC donors have improved over time, they continue to be the worst performers on transparency. The top performing donors include DAC bilateral donors: Australia, New Zealand, United Kingdom; in addition to multilateral agencies: Asian Development Bank, Global Fund, Inter-American Development Bank, IMF, Nordic Development Bank, OPEC Fund, UN-International Fund for Agricultural Development, and UNRWA. Bottom performers were non-DAC donors, Mexico, Hungary, Chile, China, Brazil and Thailand and multilateral agencies UN Women and UN Democracy Fund. DAC donor Slovenia also performed poorly.