Research On The Effectiveness Of Assistance From Multilateral Development Banks

Multilateral Development Banks(MDBs)emerged after the World War II,aiming at reconstructing the post-war global economy,promoting economic reforms and eradicating poverty.With decades of operation,the MDBs have played an important role in promoting the world's economic development.The MDBs offer development financing to developing countries at below-market interest rates with professional consultation and are major providers of global public goods.As a result,despite of the significant improvement of the private financial sector,the MDBs still play an irreplaceable role in the world's inclusive development.However,the aid effectiveness of the MDBs is facing multiple challenges.This paper studies the effectiveness of MDBs' aid from macro and micro perspectives.At the macro level,this paper analyzes the MDBs' establishment background,governance structure and historical aid practices.This paper finds that the MDBs have,to some extent,offset the imbalanced distribution of the bilateral aid.But it is still difficult for lower-middle income countries to benefit from the existing bilateral and multilateral aid system.The paper also compares the UN Sustainable Development Goals with the MDBs' aid volume and distribution.It finds that there is still room for improvement in the MDBs' aid practices in income equality,education,infrastructure and economic structural reform.At the micro level,this paper analyzes the factors that might affect the effectiveness of aid projects and explores the impact mechanism.This paper builds a new database by collecting data from 340 projects that completed by the World Bank since 1996.Compared with the World Bank's own project database,this database has some new indicators: planned and actual construction period,planned and actual project cost,planned and actual amount of funds from the borrower country and the World Bank,name of the co-funders,planned and actual amount of funds from the co-funders etc.With the help of this database,the paper explores the impact mechanism of the MDBs' micro aid effectiveness through empirical research.This paper has drawn the following conclusions.First,the aid and loan from the MDBs have partly offset the biased distribution of bilateral development aid.However,the allocation of the funds by the MDBs is still subject to political interference from developed countries,which has affected the banks' decision-making.Therefore,the multilateral development financial system needs to take measures to compensate the imbalanced distribution of existing aid.Second,the scale of aid from the MDBs is still insufficient to meet the needs of the developing countries.It is necessary to boost the scale of aid by increasing the MDBs' registration capital.Co-financing model is also an option to increase the scale of aid,but the co-funders that need to be developed are those institutions outside the official development assistance committee,so as to bring additional funding into the existing aid system.Third,the micro-effectiveness of aid projects is the crucial for improving the macro-effectiveness of aid.The MDBs need to fully understand the factors that affect micro aid effectiveness to better manage aid projects so as to maximize the benefit with limited funding sources.Fourth,The MDBs need to pay attention to the interrelationship and mutual influences between the macro and micro effectiveness of aid.It is important to better coordinate the two aspects,so as to comprehensively improve the effectiveness of multilateral development assistance.