Transitioning from Foreign Aid: Is the Next Cohort of Graduating Countries Ready?

Abstract

In the coming years, over a dozen middle-income countries (MICs) are likely to transition from multilateral concessional assistance, including assistance from the International Development Association (IDA) and Gavi, the Vaccine Alliance (Gavi). The cohort of upcoming graduates, which includes Nigeria and Pakistan, may find the transition more challenging when compared with the experiences of previous countries that have already graduated. Many upcoming graduates, for example, still have high rates of child and maternal mortality and large proportions of the population living in poverty. Is the upcoming cohort more vulnerable and less “ready” to transition than those countries that previously graduated? If it is, do multilateral agencies need to adjust their transition policies? To help answer these questions, in this working paper we compared two cohorts of countries: a “previous cohort” that graduated from IDA between 2010 and 2015, and an “upcoming cohort” that is anticipated to graduate from IDA, Gavi, or both in coming years. We compared the two cohorts across five categories of indicators: macroeconomic conditions, health financing, health performance, governance, and overall levels of poverty and inequality. Overall, our findings suggest that, on average, the countries that graduated from IDA in the previous 2010-15 period had stronger capacity to manage the donor transition than that of upcoming graduates. The upcoming cohort seems to have, on average, lower per capita income, greater indebtedness, weaker capacity to efficiently use public resources, more limited and less effective health systems, weaker governance and public institutions, and greater inequality.