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Gilles Nancy and Boriana Yontcheva

main worldwide determinant of NGO aid allocation. NGOs do not respond to strategic considerations. Their funding source does not seem to exert a great influence on their aid allocation decision. We also find differences across regions. Militarization and the political nature of the regime of the recipient country affect aid allocation in the Middle East. Life expectancy influences aid allocation in countries in the Western Hemisphere and the Middle East. The paper is organized as follows. Section II presents the literature on foreign aid allocation. Section III

Gilles Nancy and Boriana Yontcheva
This paper studies the aid allocation of European nongovernmental organizations (NGOs). Once population is controlled for, poverty consistently appears as the main worldwide determinant of NGO aid allocation. NGOs do not respond to strategic considerations. Their funding source does not seem to exert a great influence on their aid allocation decision. We also find differences across regions. Militarization and the political nature of the regime of the recipient country affect aid allocation in the Middle East. Life expectancy influences aid allocation in countries in the Western Hemisphere and the Middle East.
Boriana Yontcheva

T he debate over aid effectiveness continues unabated, but the economic literature has so far focused almost exclusively on official bilateral aid. Nongovernmental organizations (NGOs), however, account for a growing share of development assistance, and the proponents of NGO aid argue that it is allocated for the “right” reasons and is distributed directly at the grassroots level. Therefore, NGO aid is considered untainted by the two sins commonly attributed to official bilateral aid—namely, that it is given for political reasons unrelated to development and

International Monetary Fund. External Relations Dept.
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Mrs. Nadia Masud and Boriana Yontcheva

government to a recipient one, which is the standard measure in the literature, and aid projects led by international non-governmental organizations (NGOs) in developing countries. We choose the latter measure of aid for two reasons: first, as NGOs play an increasingly prominent role in the development scene and channel a growing share of development assistance, it becomes necessary to verify whether NGOs are effective in reducing poverty. So far, evaluations of NGO aid have been conducted solely at the project level. Second, as NGOs have been shown to allocate aid

Boriana Yontcheva and Mrs. Nadia Masud
This paper assesses the effectiveness of foreign aid in reducing poverty through its impact on human development indicators. We use a dataset of both bilateral aid and NGO aid flows. Our results show that NGO aid reduces infant mortality and does so more effectively than official bilateral aid. The impact on illiteracy is less significant. We also test whether foreign aid reduces government efforts in achieving developmental goals and find mixed evidence of a substitution effect.
International Monetary Fund. Research Dept.

deaths per 1,000 births. The effect can be seen as a lower bound of the actual effect, as not all health aid is spent on reducing infant mortality. Using a dataset of both bilateral aid and nongovernmental organization (NGO) aid flows, Masud and Yontcheva (2005) find that NGO aid reduces infant mortality and does so more effectively than official bilateral aid. The impact on illiteracy is less significant. References Arellano , Cristina , Aleš Bulíř , Timothy Lane , and Leslie Lipschitz , 2005 , “The Dynamic Implications of Foreign Aid

International Monetary Fund. External Relations Dept.
The Web edition of the IMF Survey is updated several times a week, and contains a wealth of articles about topical policy and economic issues in the news. Access the latest IMF research, read interviews, and listen to podcasts given by top IMF economists on important issues in the global economy. www.imf.org/external/pubs/ft/survey/so/home.aspx
Mr. Craig Beaumont

COUNTRY FOCUS: Australia’s enduring expansion Wide-ranging structural reforms and improved monetary and fiscal policy frameworks have helped Australia’s economy grow since 1992. Unemployment, inflation, and government debt remain low, while the economy has become more resilient. But this did not happen overnight. Australia’s incremental approach, particularly to labor market reform and trade liberalization, spread adjustment costs over time and enabled the country to sustain its reform efforts.

International Monetary Fund. External Relations Dept.

In 2004, Ghana’s economy, driven by the agriculture, services, and construction sectors, grew by 5.8 percent—its fastest pace in more than a decade, the IMF said in its annual economic review. Inflation declined by half to 12.6 percent, the overall budget deficit narrowed, improvements in the external sector allowed for a buildup of international reserves, progress with reforms helped strengthen the financial sector, and debt-service indicators improved markedly. The country’s strong growth has helped reduce the poverty rate, now estimated at about 35 percent of the population.