The Sunday Times Economic Analysis

The Sunday Times Economic Analysis By the Economist

Disbursement of aid forum jackpot
Predictably the outcome of the Sri Lanka Aid forum was above expectations. The aid commitment was above the US $ 2 billion needed for the tsunami reconstruction. It was mostly in the form of grants, not loans and there were no conditions attached to them. What could be better? The amount of aid pledged was US 3 billion, 95 per cent of these amounts are grants and we are told that the donors have not laid down any conditions. Donors have also been very pleased with the first phase of reconstruction. They have said that they are pleased with the temporary housing that has been provided and satisfied with the economic programs for the next few years that were presented.

Such statements are not unusual. The Development Forum like most such fora are diplomatic exercises that are beneficial, both to the donors and the Sri Lankan government. A feel good sensation is generated; the government gains in popularity; and the donors are satisfied that they have performed a very charitable role. The realities in the country may well be very different to what was articulated at the Kandyan conference. For instance the donors may be satisfied with the temporary housing, but how many of those living in them are?

Sceptics would no doubt ask whether this dream like scenario would in fact be realised. Will the amount of aid that has been pledged be in fact committed? Will such aid be delayed and finally forgotten? What would be the ultimate amount that would be given? Will the country have a capacity to utilise the aid? Is it really correct that the donors are not insisting on any conditions or are the conditions still to be laid down? For instance is the Joint Mechanism not needed to obtain the full quantum of aid? Would the donors be content to give the aid without insisting on an equitable disbursement to the North and East? It is most likely that there would be conditions on how the assistance would be disbursed. In any case the aid would surely be released in accordance with the pace of implementation. In this sense the closing statement may be somewhat misleading. May be they have not imposed any macro economic conditions but perhaps the disbursements would include some conditions that would be worked out bilaterally between donors and the government.

The donor agencies have spoken about the need for transparency. One of the fundamental needs to ensure transparency of the aid commitment is to have an Aid Score Card that indicates the amounts pledged at the conference, gives the monthly position with respect to the actual aid received, the amounts utilised and the manner in which such aid has been used. There appears to be an international aid game in which donors pledge large amounts of money of which only a fraction is actually given.

This Score Card should form part of the monthly economic indicators released by the Central Bank of Sri Lanka. This would make the donors more accountable and the government more conscious of the need for quick implementation of the aid projects. We hope that after several months we are not told that a single cent of the aid committed has not been received.

Furthermore, there has to be a public monitoring of the aid utilisation and regular debates in parliament about the progress of the aid utilisation not merely in terms of the amounts involved, but a qualitative judgement as to whether it has been used in a cost-effective manner. There are fears for instance that land would be bought for housing at very high values from selected land owners for the benefit of influential persons and perhaps with kickbacks to politicians. Proper auditing of the accounts and regular statements in Parliament may deter such corrupt practices.

The proof of the pudding is in the eating. It is only in retrospect that we would know how much of the pledged aid was actually received. It would be of interest to know how much of the aid we were able to use. Would we be able to utilise much more of this aid than the average low rate of aid utilisation? It would be much later that we would know how well the monies were spent. Will we have a country with a much-improved infrastructure, better housing for the poor, and enhanced livelihoods. The mammoth amount of aid pledged leads us to expect these outcomes.

The realisation would depend as much on the donor commitment as the manner in which it is utilised. The success of the Sri Lanka Development Forum 2005 can be measured only after we see the implementation on the ground, not by the diplomatic rhetoric of the drumming in Kandy.

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