Performance-Based Conditionality: A European Perspective

Abstract

For several years, the conditionality underpinning budgetary support to developing countries has been the object of severe criticism. This criticism has led to the belief that the “ownership of policies” by the recipient country governments is essential for the effective implementation of economic reform programmes. To this end, it has been suggested that traditional conditionality based on policy measures be replaced by a conditionality in which aid is based on performance outcomes. In this spirit, the European Commission has reformed its adjustment aid. The present article provides an assessment of this experiment based on the experiences in Benin, Burkina Faso, Madagascar and Uganda. It demonstrates the danger of a shift towards intermediate indicators, which are too distant from the final impact of the policies, and suggests several improvements to implement genuine performance-based conditionality.Conditionality, developing countries, fiscal policy, Aid