Macroeconomic Challenges of Scaling Up Aid to Africa

A Checklist for Practitioners

Edited by Sanjeev Gupta, Robert Powell, and Yongzheng Yang

©2006 International Monetary Fund
March 20, 2006

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1. The Macroeconomic Effects of Scaling Up Aid

2. Managing the Real Exchange Rate

3. Using Monetary Policy for Sterilization and Inflation Management

4. Mobilizing Adequate Domestic Revenues

5. Projecting the Impact of Increased Aid on Economic Growth

6. Meeting Other Fiscal Challenges

7. Strengthening Governance

8. Maintaining Debt Sustainability

9. Summary: Five Primary Guidelines

Appendix 1. The Relationship between Aid Flows and Exchange Rates in Sub-Saharan Africa

Appendix 2. The Macroeconomics of Aid

References

Box

1. Absorption of Financing for HIV/AIDS Programs

Figures

1. Impact of Scaling Up on External Debt

2. Impact of Scaling Up on Fiscal Debt

Tables

1. Patterns of Aid Inflows in Five African Countries

2. Possible Combinations of Absorption and Spending in Response to a Scaling Up of Aid

3. Mitigating Aid Volatility