Redesigning the Aid Contract: Donors' Use of Performance Indicators in Uganda

The perceived failure of traditional (ex ante) conditionality has led to proposals for using performance indicators as a basis for aid allocations (ex post conditionality). In this article we assess the role of performance indicators and their impact on the aid contract between donors and the government of Uganda. In Uganda the use of performance indicators has radically changed donor-recipient relations, by improving both program monitoring and donor coordination. It has, however, not yet fundamentally changed the incentive structure in the aid "contract·: To improve the incentive structure we propose a distinction between indicators used for monitoring and those designed to guide aid allocations. © 2002 Elsevier Science Ltd. All rights reserved.