The costs and benefits of aid transparency

1. This paper sets out the costs and benefits of greater aid transparency. We believe this is the first effort of its kind, and it aims to assemble what is known and stimulate further research. We have set out our detailed working and assumptions in 6 appendices. This paper is a draft on which we would welcome comments.

2. We estimate that it will cost the International Aid Transparency Initiative (IATI) signatories a total of $6m to implement IATI. The range of our estimates is $3.8m to $8m and these are one-off costs. These estimates are based on discussions with four donor agencies. More detailed information from a broader range of donors is needed to verify these estimates.

3. Based on a survey of donor country offices, we estimate that donors currently employ the equivalent of 350 full time staff at country level to provide detailed information about aid both to country aid management systems and to meet other information requests about aid. We estimate that routine publication of detailed aid information in an accessible form will save approximately $7 million a year for IATI signatories because it will reduce, though not eliminate, this duplicate manual reporting of aid information. These savings would cover the estimated costs of implementing IATI in about a year.

4. Increased transparency opens the way to improvements in the effectiveness of aid by reducing diversion and capture, reducing unpredictability, improving accountability and service delivery, improving coordination, facilitating research, improving aid allocation and increasing public support for development. The size of these benefits is uncertain. Based on a thorough analysis of existing literature, we estimate that reduced diversion of funds and increased predictability alone could result in very large improvements in aid effectiveness, perhaps equivalent to an increase in aid of $1.6 billion a year.

5. Overall we estimate that increases in effectiveness from increased aid transparency by IATI signatories might lead to improvements in aid effectiveness which are approximately equivalent to a permanent increase in global aid of 1.3%. If the IATI standard were implemented by all DAC donors we estimate that this would enable improvements equivalent to a permanent increase of 2.3% in global aid, or $2.8 billion a year. These increases in aid effectiveness would produce benefits in less than a single day that exceed the estimated costs of implementing IATI. At a time when aid budgets are under pressure, these would be significant increases in poverty reduction without adding to aid spending.

6. We have attempted to summarize the best available information rigorously and transparently. We have set out ranges for each estimate, based on reasonable interpretations of the available evidence. Under any scenario, we find that investing additional resources in aid transparency represents very good value for money.

The complete report can be downloaded here