The macroeconomics of doubling aid to Africa and the centrality of the supply side

Abstract

The proposed doubling of aid to Africa by 2010 is a less simple proposition, from a recipient point of view, than is commonly supposed. This article argues that it is difficult to manage large and rapidly increasing aid inflows in ways which do not disadvantage producers of tradeable goods, and the private sector generally. This difficulty can be averted if conscious efforts are made to offset it and to stimulate positive responses from the supply side. Whether such responses prevail over the shorter-term management difficulties depends on the efficacy of state actions -and of aid -to bolster the supply side. The outcome is likely to be mixed, depending on country circumstances. © 2007 Blackwell Publishing Ltd.