A quick post after a long hiatus.
Aid donors have, for a long time, asked recipient governments (or agencies) to come up with counterpart funding, or in layperson’s terms, to pay a share of the cost of a programme. It is a slightly complex issue, given that money is fungible – for instance, if the UK’s DFID were to offer a country £9 million for an HIV treatment programme on the condition that the country would stump up a further £1 million, that £1 million has to come from somewhere. We’d like to imagine it is going to be taken off the defence budget but the chances are it will come from somewhere else in the health budget. Either way, it means the donor is using their financial clout to influence how the recipient government’s spending decisions.
There’s another conundrum. Often a donor will pay out on a co-funded programme on the basis that the recipient government has given a guarantee or commitment that it will pay its share. But what if that share never comes – either due to bad will, or because there were other, more pressing claims on that pot of money? Should donors “trust” commitments from recipient governments? If they’ve got reason to believe that the co-payment might not be forthcoming, should they decide to spend the money in another country, where the government is going to co-pay? Do they take the risk and fund the programme with an unreliable co-funding commitment? Or do they decide to scrap the co-payment condition and give the funds anyway, so as to avoid the embarrassment and reputational risk of the co-funding never coming through?
The last scenario seems to defeat the whole purpose of co-payment policies, but it probably means more lives will be saved (which is, after all the purpose of aid). But what is worrying about it, is that it means the donor is taking responsibility for the possible/probable default of the country. Whose responsibility is it?