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Presentation by Elliott Harris, Advisor, Policy Development and Review Department, IMF

UN General Assembly Panel Discussion on Scaling Up Aid October 20, 2006 Macroeconomic Issues and Challenges of Scaling Up Aid. Presentation by Elliott Harris, Advisor, Policy Development and Review Department, IMF. EDMS: 3092403v1. Introduction and Overview. Scaling up to meet the MDGs

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Presentation by Elliott Harris, Advisor, Policy Development and Review Department, IMF

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  1. UN General AssemblyPanel Discussion on Scaling Up Aid October 20, 2006 Macroeconomic Issues and Challenges of Scaling Up Aid Presentation by Elliott Harris, Advisor, Policy Development and Review Department, IMF EDMS: 3092403v1

  2. Introduction and Overview • Scaling up to meet the MDGs • Resources, policies, and institutions • Aid and the MDGs • Issues/Challenges • Absorbing the aid • Fiscal and debt sustainability • Predictability and volatility of aid flows

  3. Scaling Up to Meet the MDGs • More conducive external environment • More effective use of available resources • Better policy planning and implementation • Improved institutions • More resources – external and domestic

  4. Aid and the MDGs Recognition of need for : • massive increase in external resources • donors to increase ODA—Aid to Africa to double by 2010 • changes in aid architecture • aid effectiveness agenda • budget support; funding recurrent costs • improvements by recipients • Good planning; strengthened systems • Absorptive capacity

  5. Issues and Challenges of Scaled up Aid • Predictability and volatility of aid flows • “Absorbing” the Aid • Fiscal sustainability • Debt management/sustainability

  6. Planning and Implementing-- Alternative Scenarios For Scaling Up • Use of alternative scenarios • What could be achieved with more resources • Identify improvements in policies and institutions • Scaled up macroeconomic frameworks : • consistent with macroeconomic stability • balance ambition and realism

  7. Predictability And Volatility • Early commitments for the longer term • For effective planning and budgeting • Non-volatile disbursements • For good economic management • Steady effective implementation of programs

  8. Managing Aid Inflows -“Absorbing” the Aid • “Absorption” - Using aid to finance higher imports or reduce domestic resources used for producing exports • real resource transfer from abroad, higher current account deficit (excluding the aid) • “Spending” – A higher fiscal deficit (excluding aid) that accompanies the aid inflow • “Right” mix depends on circumstances

  9. Fiscal sustainability • Current versus future fiscal space • Future cost implications • Future aid dependency • Effective service delivery and resource management

  10. Debt sustainability • Not all the additional aid will be grants • Danger of renewed debt distress from new borrowing • Debt sustainability analysis and for debt management systems • Private capital flows and emerging donors

  11. Key Messages • Countries: prepare early to use scaled up aid • PRSs with coherent and costed scaled up programs • Linked to MTEFs and annual budgets • Strengthened institutions, service delivery systems • Alternative scenarios • Donors: predictable and longer-term commitments and improved aid practices • Both: Careful analysis of fiscal and debt sustainability

  12. Thank you

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