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There's an interesting distinction here between the way in which the OECD DAC and China treat concessional loans as ODA. As you've said, the DAC measures the total loan amount, and then subtracts future repayments from future ODA figures. The Chinese Govt measures only the grant element of a concessional loan, so for a $100m concessional loan with a grant element of 30% (as has typically been the case for Eximbank loans in the Pacific), only $30m would be be calculated as ODA. The Chinese method seems to me to be far clearer.

ODA increased?? Or did it really increase? Since 1958 (the origin of ODA), it's interesting to see how the definition and what counts as ODA also changed. The problem with ODA is that the discussion is mostly focused on the total rather than rethinking the model... and this is what academics really like to write about...good old ODA. Not that ODA doesn't count but the world has changed and the need for collective approach is more crucial than ever.

Hi Matt, This is a very good question. I think that discussion on appropriate means of targeting water supply subsidies for low income households deserves an entire blog entry of its own. I agree that a tariff with a lifeline block, if metering was introduced, may not be that effective in South Tarawa because low-income households tend to be large, so may consume greater quantities of drinking water compared with smaller better-off households. Some simple targeting options that have been used in other countries are based on providing differential service options such as communal taps and water kiosks, which allow households to self-select, since better-off households are often unwilling to sacrifice the convenience of a private tap to buy drinking water at a subsidized price.

You are absolutely right that these two reports come to very different conclusions concerning the cost-effectiveness of this PPIP in Lesotho and its broader impact on the efficiency and equity of the overall health system. However your inference that one report is well-researched and impartial whilst the other is a hatchet job, is completely wide of the mark. I know for a fact that the Oxfam report was extremely well researched by university academics and unlike the LeBoHA report it was not funded by one of the major partners in the project. Anyway putting aside issues of impartiality for the time being and agreeing that services at the new hospital are better than the old QEII hospital, the big issue is whether there has been a significant cost-escalation with these new arrangements. The LeBoHA report acknowledges that, contrary to the original promise that the project would be cost-neutral, costs have risen and that the PPIP is now consuming 41.2% of the MoH budget. The Oxfam report though argues that costs have risen much more rapidly to the extent that they are now an unsustainable 51% of the budget and that this is distorting health expenditure away from district-level PHC services. Without access to the actual figures it is difficult for external observers to assess which figures are closest to the truth. However in saying this some of the quotes in the Oxfam report are very telling. In particular this one on page 6: The PPP is ‘eating more than half of the health budget. It is hitting the government hard’. Minister, Government of Lesotho and on page 11: ‘The PPP hospital has had a bad impact on how we’ve allocated resources over the last two years. There are less and less resources for primary health care and district services.’ Senior official from the Lesotho Ministry of Health Also readers may wish to refer to <a href="http://www.theguardian.com/world/2014/apr/07/lesotho-health-budget-private-consortium-hospital" rel="nofollow">this article</a> on the Lesotho PPIP by a journalist from the Guardian Newspaper and also watch the embedded video which contains interviews with stakeholders in Lesotho. As you point out, given these discrepancies, there are clearly major questions to be answered about this project – particularly in terms of whether it has represented good value for money for the limited government health budget. Therefore, as a top priority an extensive, independent evaluation should be conducted of this project, looking at efficiency and equity issues which should include an assessment of the impact on the health system as a whole. Only then will countries like PNG be able to assess whether initiatives like this represent a good investment for the health of their people and their economic development. Rob Yates: www.twitter.com/yates_rob

Hi Allison, I understand, and in general terms, agree with your argument - subsidising all consumers is wasteful and does not benefit those that have no access to an infrastructure service (in this case, water). I've argued the same for electricity in the past. The question I have is: how can low income households be targeted for purposes of subsidisation? It is not simple in countries where there is no social welfare system. In the power sector, lifeline tariffs are used as an approximate targeting mechanism - high income households (with fridges etc) consume more power than low income households, so the utility charges less for consumption below a certain level. But does the same apply for water? I don't imagine that high income households consume a great deal more water than low income households. The lack of meters in Kiribati is obviously another challenge (and presumably would be costly to install). Are you aware of any examples from countries similar to Kiribati where water consumption among low income households has been successfully subsidised (in the absence of social welfare systems, etc)? Matt

This article is misleadingly titled. The high cost is not of 'cheap' water supply and sewerage services it is of 'underfunded' water supply and sewerage services. The problem is that the PUB has too little funding to properly build and maintain the needed services. With adequate funding it could reduce system losses to under 10% and supplement water supply with rain water collection and meet the needs of the community. Likewise it could provide a reticulated sewerage system. If donors were prepared to meet the recurrent costs of service provision rather than only contribute to capital projects South Tarawa could have a water supply and sewerage system to meet its needs and the annual cost would be well less than the estimated economic burden. It may well be that the few better off households in South Tarawa could be charged for the service provided, but that is a different matter than the fundamental problem which is that the PUB is not adequately funded to do its job well. Believing that it can (or even should) expect to meet full operating costs from user charges in South Tarawa is a recipe for failure because funding it that way will always leave it with inadequate income for its requirements.

Thanks for a good briefing. There's also a new briefing on Baobab about the newly released data, available at www.baobab.org.uk/global-aid-rises-again Our analysis suggests that the headline growth in global aid is driven by two key countries. UK aid is up by 28% in 2013, meeting the UK government's long standing commitment to hit 0.7% by 2013. Japanese aid is up even more - by 37% - but this is due to a number of special factors to do with debt and budget support, which may not be sustained. Amongst the others, it is a more mixed picture, but six of the top ten donors increased their aid in real terms in 2013. Incidentally, while UAE is not yet a DAC member but does report their aid data through DAC. They show a huge increase in their aid budgets in 2013 to $5.1 billion. If they are included, this pushes Australia out of the top ten donors.

Thanks for your comment Stephen, As an empirical puzzle whether aid improves opinions is not easy to answer. The challenge here is reverse causality. Thanks to the Gallup World Poll good data from around the developing world exist on publics' opinions of donor countries. And thanks to the OECD DAC's database and other donor publications we have good data on aid flows. But we learn little from regressing amounts of aid on public opinion looking for correlations. This is because, just as it is possible that aid is influencing people's opinion in recipient countries, it is equally plausible that opinions of donor countries influence how much aid is given in the first place. Maybe donors give more money to countries where they are unpopular to try and gain influence. Or maybe they give less, saving the money to reward allies. These possibilities make it much harder to answer questions about aid's impact on opinion. In the QJPS study we attempted to resolve the issue of reverse causality and shed at least some light on aid's impact in fostering favourable opinions of donors. Specifically focusing PEPFAR, afforded a neat piece of methodological leverage. It enabled us to use instrumental variables to overcome the problem of reverse causality. We were able to use HIV incidence as a tool to estimate the amount of PEPFAR funding which was given for reasons completely independent of existing public opinions of the United States. And these estimates were able to be used, in turn, to estimate PEPFAR's impact on opinion. We ran two stage least squared regressions with a suite of control variables to ensure results weren't being driven by other factors. And it's from the results of these which our findings came. With regards to your second question the paper linked to in the last para of the first blog post does this to an extent. Thanks again Terence

Thanks for this, it provide exact answers for all students.

Terence et al, Very interesting findings, but do you think you could briefly explain the study in a little more detail? In particular, how exactly did you show that the PEPFAR program has lead to improved perceptions of the US in recipient countries? Also, does you paper discuss how or to what extent fostering positive perceptions among foreign publics might lead to enhanced international standing?

Hi Jo, I don't have a precise definition, and would welcome your thoughts. I guess an organization's capacity is its ability to get things done, so if you are developing the capacity of an organization you are helping it to be able to get more things done. That could be achieved in many ways. I wouldn't define capacity development so that it excludes skills transfer which is what the evaluation does.Skills transfer must be the most obvious way volunteers can contribute to capacity development, so excluding it when you are trying to examine whether volunteers do contribute to capacity development seems very odd indeed.

Reading this article has given me some idea on the policy switch. Sir, can you please abridge on the reason for the policy switch and the impact on agriculture, industry and the service sector?