How to take into account vulnerability in aid allocation criteria and lack of human capital as well: improving the performance based allocation

This paper considers why and how the PBA (performance based allocation) used in multilateral development banks and in particular at IDA, could be improved by taking the structural vulnerability of eligible countries into account. This improvement is needed for several reasons. The PBA relies on a debatable definition of performance. It does not meet the equity concern raised by the existence of structural handicaps to growth, in particular vulnerability and lack of human capital. It neglects the lessons of the aid effectiveness literature, in particular on the shock dampening effect of aid.