This event revealed just how fragmented conditionality polices are among major aid donors and it also explored the implications of a new "outcome-based" approach to conditionality. Transatlantic and global cooperation on conditionality has so far lead to perceptions that donors are ganging up on aid recipients. Yet, many argue that cooperation is ultimately needed to reduce duplication and costs in the aid system.

Ms. Molina-Gallart opened with an assessment of current critiques on aid conditionality, namely policy requirements that are necessary to gain access to loans and grants from donors. For example, the Africa Commission stated in 2005 that conditionality was an infringement on sovereignty and an ineffective policy tool. This study shows that conditionality is not a straightforward concept. "It means different things to different people," according to an official at the International Monetary Fund (IMF). The World Bank, the Commission, IMF and others use different definitions of conditionality. There are no international norms.

The World Bank claims that it has moved away from the heavy policy prescriptions of the past and now focuses on "alignment" or policies consistent with the Poverty Reduction Strategy Papers (PRSPs), seen as the country's national strategy. However, the report reveals that the World Bank has not fully moved away from policy requirements toward outcome-based conditionality (targeting the end results - like growth - rather than prescribed policies to achieve those outcomes). The World Bank still requires policy actions, such as privatization and liberalization, as conditions for receiving aid.

On the other hand, EU's European Development Fund (EDF) programs focus on outcomes. These outcome-based conditions are performance indicators like human development and poverty reduction. The fund does not require concrete policy measures that are seen as having been ineffective in the past. Through this approach, EDF seeks to increase focus on end results, generate policy space, and promote domestic accountability.

However, outcome indicators have offered mixed results. Attribution or causality remains a problem — proving that the aid results in certain outcomes like growth or poverty reduction. Political challenges lie with control over the projects and ensuring accountability to taxpayers in the donor countries. The question that remains is how far policy space can be opened. There are problems with creating the right incentives and the willingness and ability of governments to take ownership of policy.

A variety of options was discussed to address these problems. The process of choosing outcome indicators should be more inclusive and led by the recipient countries. Indicators should also try to grasp not just the quantitative aspects of aid, but also the qualitative ones. The data should be collected and made transparent to strengthen downwards accountability. Assessments with financial implications should take place on a multi-year basis and consider lags in impact. A less mechanistic link between targets and disbursements should be pursued given the complexity of economic growth.

Ms. Ferro responded by stating that this debate is ultimately about budget support. Untied financing and budget support by the World Bank is placed in the context of the policy framework - the PRSPs. However, this aid tends to be mostly focused on middle income countries. There are problems with this approach in post-conflict and fragile countries, which have very unique conditions where outcomes are not likely to materialize in a predictable manner. These are longer-term development situations, requiring a very strong and in-depth understanding of local conditions to better gauge outcomes. Some donors are getting together and collaborating - jointly working on conditionality - but this has lead to a situation where donors are seen as ganging up on the host country. The question remains as to which country chooses the results.

Mr. Maggi followed by focusing on how results should involve accountability on two sides: donors and recipients. The challenge is to ensure ownership of the policy because with ownership comes responsibility and accountability. There are political reasons for recipient countries resisting ownership so they can point to donors for failure and avoid responsibility. There are reasons for donors wishing to remain in control of the policy, such as accountability to taxpayers. In regard to indicators for disbursements, there is a problem of establishing these commitments beforehand when conditions change. The economy may suffer from external, unforeseen shocks. Donors need to be more flexible when it comes to mechanics (i.e. the links between indicators and disbursements).

These responses were followed by questions from the audience, as well as a discussion on the rigidity and mechanics of conditionality, using the word conditionality versus the quality of aid, focusing on what aid recipients want versus donor coordination, engaging civil society in formulating conditions on aid, and the benefits from budget support, such as spurring additional public sector investments.