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International Finance: Aid and middle-income countries

International Finance: Aid and middle-income countries
36 pages

Fenton, Nina

Publication date
14 Jun 2008

Oxfam International

From Poverty to Power

Discussion paper

Middle-income countries (MICs) continue to receive significant flows of international aid, despite widespread donor commitment to prioritising aid to low-income countries (LICs). This paper considers the case for continued aid to MICs. Despite their income status, many MICs are characterised by widespread poverty and profound inequalities, and may be politically or technically constrained in their ability to address these. Moreover, MICs are vulnerable to economic and political shocks, which have a knock-on effect on poorer neighbouring countries. Where aid can be targeted to address these problems, it may be beneficial. However, ensuring the effectiveness and attractiveness of aid to MICs requires that donors develop tailored strategies. MICs increasingly refuse to be passive aid recipients, and demand an active role in defining appropriate aid instruments and terms. Moreover, aid from MICs to other developing countries is growing. Although this often reflects strategic interests, it also creates platforms for South-South development co-operation and learning.