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The Impact of Foreign Aid Allocation on Access to Social Services in sub-Saharan Africa: The Case of Water and Sanitation

The Millennium Development target of halving the share of the population without access to clean water and sanitation is a cross-cutting target that has implications for the achievement of the other MDGs. However, achieving this target remains a major challenge for sub-Saharan Africa, while the ability of governments to expand access is constrained by limited financial resources. This paper investigates whether targeting foreign aid to the water and sanitation sector can help achieve the goal of expanding access to water and sanitation services in the region. We specifically examine whether sectoral allocation of aid has an impact on access to water and sanitation. The analysis is based on panel data estimation techniques controlling for country specific effects and potential endogeneity of regressors.  The econometric results suggest that increased aid targeted to the supply of water and sanitation is associated with increased access to these services, although the relationship is non-linear. The evidence in this study makes an important contribution to the scholarly debate on aid effectiveness. It also has important practical implications for aid policy: specifically, it suggests that in addition to scaling up aid disbursements to sub-Saharan African countries, donors also need to increase aid allocation to water and sanitation as well as other areas where the region lags behind.  There is also a need to identify structural constraints that may limit access to water and sanitation, and structure foreign aid so as to alleviate these constraints.

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