Innovative ways of making aid effective in Ghana: tied aid versus direct budgetary support

In 2003, the government of Ghana and its development partners agreed on an aid package dubbed the multi-donor budgetary support (MDBS), which would ensure continuous flow of aid to finance the government's poverty related expenditures. This paper examines the MDBS, specifically focusing on how it overcomes the problems of tied aid and other project support. It concludes that the MDBS is innovative and could work in Ghana, but it would need trust and a well-designed, coordinated effort on the part of the government of Ghana and its development partners. Second, its effectiveness would depend crucially on measures to help reduce the debt burden, so that the government would not be compelled to use aid inflows to service its debt. Finally, the MDBS could be more effective if it did not have to operate alongside other project support. Copyright © 2005 John Wiley & Sons, Ltd.