How Does Earmarked Foreign Aid Affect Recipient-Country Ownership?

This paper analyses how earmarked funding affects recipient country ownership, a key aspect of the Aid Effectiveness agenda. Despite formal commitments to ownership by donor governments and multilateral institutions represented in the Development Assistance Committee (DAC), earmarked funding may undermine ownership. By strengthening accountability of international organizations to donor governments, this funding weakens the ownership of recipient countries in formulating policy objectives, using country-led results frameworks, and implementing aid through country systems. We test this expectation using a mixed-methods approach. Using a novel dataset, we employ regression analysis to show that earmarked aid reduces recipient-country ownership. Further analysis of institutional and DAC donor discourses and policies uncovers limited reflection on how earmarked funding impacts ownership. Our findings suggest that DAC donors overlook the potential effects of earmarking on ownership, thereby inadvertently undermining the realisation of the principle in practice. Instead, their earmarking efforts are driven by desires to increase their influence in international development organizations and pursue national interests. ‘Old’ concerns surrounding both ‘aid effectiveness’ and ownership, thus, no longer prominently figure in their aid discourses nor their practices. Our findings therefore expose a particularly pernicious example of hypocrisy in development cooperation, with likely implications for aid effectiveness and aid allocation more generally.