Economic impact of increased aid flows for HIV/AIDS in developing countries


P. Compernolle

“For example, when I hear that countries are choosing to comply with medium-term expenditure ceilings at the expense of adequate funding of AIDS programs, it strikes me that someone isn’t looking hard enough for sound alternatives. And I recognize that such principles of fiscal discipline are in place for good reason, but surely there must be means of accommodating vast new inflows without stirring economic demons.“
Peter Piot

This quote clearly illustrates the perceived tension between the (economic) rational for increased investments, of human and financial resources, to tackle the impact of AIDS and the potential economic implications of such increased aid flows. 2 Though they are interrelated, this note distinguishes between the (i) macroeconomic, (ii) budgetary and (iii) sectoral implications of increased new aid flows for AIDS. The note concludes that the discussion about the potential negative effects of increased aid flows for AIDS is more relevant with regards to the credibility and predictability of donor
financing, than to the macroeconomic problems of absorbing new aid flows. The way in which existing and new donors deal with the national budgetary process is crucial to ensure effective funding with limited distortion of the economy