The influence of China and emerging donors aid allocation: A recipient perspective

- Some non-DAC donors rely on budget support to channel their aid and increase directly public investment.
- China provides discrete infrastructures projects reducing the investment gap and targeting bottlenecks to growth in Africa;
- In comparison to DAC donors, China seems to reduce administrative costs related to aid management.
- The debt of African countries is increasing and tax exemptions on aid-funded goods and services reduce tax revenues.
- Finally, Countries receiving an increasing amount of emerging donors' aid have a better aid absorption rate.

From the perspective of recipients, the increasing influence of China and emerging donors in the aid landscape represents an opportunity to attract additional resources to finance development and improve their control over their development agenda. This paper investigates how African countries and other LMICs deal with this complex and changing aid landscape and explores how government fiscal behaviors and private agent anticipations regarding aid flows are affected.We used several measures of fiscal behaviors and we were not able to confirm empirically the fear of traditional donors about a macroeconomic disaster that would follow emerging donors aid allocation. Moreover, the results indicate that economies receiving additional aid flows from China enhance their fiscal response to aid through an increased domestic economy aid absorption rate.