How do you evaluate international financial assistance during crises?

1 The role of international financial assistance

International financial assistance can take various forms, such as loans, grants, debt relief, or swap arrangements. The main sources of such assistance are multilateral organizations, such as the International Monetary Fund (IMF), the World Bank, or regional development banks, bilateral partners, such as other governments or central banks, or private creditors, such as banks or bondholders. The main objectives of international financial assistance are to provide liquidity, restore confidence, support policy reforms, and facilitate adjustment and recovery.

2 The challenges of evaluation

Evaluating international financial assistance during crises is not a simple task, as there are many challenges and limitations that affect the quality and reliability of the analysis. Data on financial flows, macroeconomic indicators, and social outcomes may be scarce, incomplete, or unreliable, especially in times of turmoil and uncertainty. It is difficult to establish what would have happened in the absence of assistance or under different conditions or modalities of assistance. Isolating the effects of assistance from other factors that influence the performance and outcomes of the recipient country is also hard. Furthermore, the impact of assistance may vary over time and across different dimensions and stakeholders, such as public sector, private sector, and society at large. As such, it is essential to consider all these challenges when evaluating international financial assistance during crises.

3 The criteria of evaluation

Economists have identified criteria and indicators to evaluate international financial assistance during crises, which reflect the objectives and expectations of the assistance, as well as the principles and standards of good practice. Relevance looks at how well the assistance addresses the needs and priorities of the recipient country, while effectiveness examines if it achieves its intended results. Efficiency assesses how optimally and timely the available resources are used, while sustainability considers if it contributes to the long-term viability and resilience of the recipient country. Lastly, coherence determines if the assistance is coordinated and aligned with other sources, as well as compatible with the policies and interests of both countries.

4 The methods of evaluation

Economists use various methods and tools of evaluation to apply criteria and measure indicators. These methods can be divided into two categories: ex ante and ex post. Ex ante methods are employed prior to or during the implementation of the assistance, to gauge its potential impact and feasibility. Ex post methods are used after the assistance is complete, to assess its actual impact and performance. Common ex ante methods include scenario analysis, stress testing, debt sustainability analysis, program design and monitoring, and risk management; while common ex post methods consist of outcome and impact evaluation, cost-benefit analysis, performance audit, and accountability and transparency mechanisms.

5 The lessons learned

Evaluating international financial assistance during crises can provide valuable insights and lessons for both the recipients and the providers of the assistance. These lessons can help to improve the design, delivery, and effectiveness of the assistance, as well as avoiding or mitigating potential negative consequences or unintended effects. It is important to tailor the assistance to the specific circumstances and needs of each country, while also allowing for flexibility and adaptability to respond to changing conditions. Furthermore, ownership and participation of the recipient country can ensure legitimacy and credibility of the assistance. Additionally, conditionality and incentives can balance accountability and responsibility, while also promoting policy reforms and institutional changes. Finally, coordination and cooperation among providers of assistance can help avoid duplication, inconsistency, or conflict of interests.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?