MACROECONOMIC EVALUATION OF PROGRAM AID - A CONCEPTUAL-FRAMEWORK

The author examines aggregate and categorical fungibility for the reci pient of untied foreign exchange. Aggregate fungibility considers the impact of the funds received on either external account aggregates suc h as imports or exports, or the overall level of revenue, expenditure and government borrowing. Analysis of categorical fungibility looks in side the item of most interest to the donor (import composition in the case of import support and sectoral expenditure for counterpart funds and budget aid). These questions are best answered by macroeconomic m odelling, but the data are rarely available. Hence a more ad hoc appro ach must be used. Aggregate fungibility may be analysed through the co nstruction of a counterfactual balance of payments and government budg et, where behavioural reactions are judged by the evaluator on the bas is of own analysis, existing studies and guestimates. Categorical fung ibility may be analysed using the budget constraint approach in conjun ction with a counterfactual government budget.