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Last Updated: Tuesday, 9 May 2006, 18:08 GMT 19:08 UK
Direct aid to governments 'works'
Kabul street children, AP
However aid is given, the key is that it reaches those who most need it
Giving aid directly to governments in developing countries is as effective as funding specific projects and no more prone to corruption, a study says.

The report by the Paris-based organisation of industrialised nations (OECD) shows that aid funds are being increasingly channelled this way.

The OECD says this helps recipient governments plan anti-poverty schemes.

The report is the first major review by Western countries of how billions of dollars of development aid are spent.

Aid is big business, with rich countries spending about $100bn annually, says BBC world affairs correspondent Mark Doyle.

But fashions change in how this money is spent.

During the Cold War, governments often received aid for geo-strategic reasons with very little money actually reaching poor people.

One example was US support for the late dictator of Zaire, Joseph Mobutu, because he was seen as anti-communist.

After the Cold War, more aid was given to specific projects which were closely monitored by donors to try to prevent funds being illegally siphoned off.

Ghana schools

The OECD report released on Tuesday includes a long-term evaluation of aid policies in Nicaragua, Vietnam, and five African states.

It shows that a growing share of aid - currently 5% or some $5bn - is being given directly to the budgets of developing countries' governments.

The OECD says this boosts countries' capacities to manage their own affairs, and there is no evidence that money given directly to government budgets is more affected by corruption than other forms of aid.

British officials say almost a quarter of UK government aid is now spent on what is known as "direct budget support", and this has increased expenditure on the poor.

They cite the example of Ghana where budget support allowed the government to employ 10,000 more teachers and boost school enrolment.

They say budget support is not always the best technique to use, but is an important tool in directing aid.

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