It is every donor’s hope that their efforts will contribute to the development of the target country and provide the necessary resources to fill gaps in relevant sectors. However, because foreign aid will often be distributed through the State, understanding its effects on the fiscal behaviour of governments is a necessary condition.
Aid effectiveness is expected to address development challenges through proper planning and management to achieve development outcomes. This means the stated objectives of the aid interventions must be clear enough and can be delivered after the remission of Official Development Assistance (ODA) by a donor country to a recipient country.
Aid effectiveness has increasingly been accorded high attention at a global level and its principles are expected to guide coordination, monitoring and management of aid by both development partners and recipient countries to ensure effective use of aid resources for sustainable development. In Ghana, aid has been found to increase the tax base, facilitating higher revenues and thus allowing the government to increase spending without borrowing more.
In Uganda, support through ODA by partner governments, UN agencies and the World Bank played a great role in the country’s recovery, growth and poverty eradication efforts between 2003 and 2007. In 2012, Western donors suspended aid to Uganda over alleged corruption in the Office of the Prime Minister after it was established that aid from Ireland, Norway, Sweden and Denmark had been transferred to unauthorised accounts.
The unexpected reduction in donor assistance and commitments distorts public financial management and execution of aid resources. This set the platform and need to have aid effectiveness principles implemented to regulate misuse of aid resources.
Principles of mutual accountability and transparency, harmonisation and alignment with government systems should be given priority in order to achieve effective utilisation of aid resources.
Information dissemination on aid resources enables the public to demand high standards of ethics, transparency and accountability public resource managers. These are values of good governance.