Budget Support and Democracy: a twist in the conditionality tale

Budget support—aid delivered directly to developing country government budgets—accounts for a growing proportion of overseas development assistance. In theory it has multiple benefits over other forms of aid in terms of attaining poverty reduction and development objectives. However, recent years have seen several incidents of budget support being frozen, halted or redirected because of slippage in the democratic credentials of certain countries, including Ethiopia, Uganda, Nicaragua, Honduras, Madagascar and Rwanda. This article analyses these incidents in relation to debates over aid conditionality. It finds that donors are willing to apply political conditionality when otherwise good performing governments go politically astray, but it questions whether budget support is a viable instrument for pushing for democratic change. Co-ordinated donor action appears to be increasing, but aid flows to the countries discussed remain high and the governments in question tend to be dismissive in the face of such pressure.