Do donors target aid in line with the Millennium Development Goals? A sector perspective of aid allocation

We analyze the aid portfolio of various bilateral and multilateral donors, testing whether they have prioritized aid in line with the Millennium Development Goals (MDGs). Employing Tobit models that combine sectorally disaggregated aid data with various indicators reflecting the situation of recipient countries regarding the MDGs, we show that donors differ in the extent to which their sectoral aid allocation is conducive to achieving major MDGs. Some MDGs, notably the fight against HIV/AIDS, have shaped the allocation of aid. However, with respect to other MDGs such as primary education, there is a considerable gap between donor rhetoric and actual aid allocation. This invites the conclusion that the current focus on substantially increasing aid is unlikely to have the desired effects unless the targeting of aid is improved.