The World Bank, together with a wide range of development partners, has been providing extensive support to Ukraine, which is well into its second year of responding to the fallout from Russia’s invasion. Much of the support so far has been used to perform emergency repairs and keep the government running by providing wages to hospital workers and school employees, paying pensions to older adults, and financing social programs for vulnerable people. We all look forward to the day reconstruction efforts can begin in earnest. There is much that development partners should consider as part of early planning and coordination.
Assessing the impacts of development aid—both expected and unexpected, positive and negative—is fundamental to the Independent Evaluation Group (IEG). To learn more about assessing the unexpected and negative effects, we recently hosted a discussion of a new open access book, Foreign Aid and its Unintended Consequences by Professor Dirk-Jan Koch, Chief Science Officer of the Netherlands Ministry of Foreign Affairs and Special Professor of International Trade and Development Cooperation at Radboud University in the Netherlands. The basic premise of the book—that external assistance can have unintended consequences—is well known. Sometimes, these unintended consequences are positive (for example, demonstration effects or multiplier effects), but even the most well-meaning support can have unanticipated negative effects that erode or even outweigh the positive intent of the assistance. Drawing on a wealth of evaluative and historical evidence, Koch presents a detailed taxonomy of types of unintended effects in the hope that this will encourage awareness of unintended impacts at an early stage so they can either be avoided completely or mitigated, particularly when they affect vulnerable populations.
Several types of unintended consequences described in the book are relevant to the Ukraine context and will be familiar to development practitioners and evaluators acquainted with other experiences with the rapid scaling up of development assistance. These include backlash effects, price effects, and governance effects.
Backlash effects occur when the providers of external support are suspected of ulterior motives. This suspicion—which can have historical roots—can be fueled by vested interests (including populists) that seek to bolster their own positions within a country. The potential for backlash is enhanced when ordinary citizens do not see themselves benefiting directly from the support provided. This occurred to some degree after Ukraine’s 2014 Revolution of Dignity (Euromaidan) as discussed in IEG’s 2022 Country Program Evaluation (CPE), The World Bank Group in Ukraine, 2012–20. The CPE concluded that there was a need to ensure that reforms involving painful adjustments for households, such as tariff increases, should be accompanied by improvements in service quality that are, in turn, visible to ordinary citizens so that support for reform could be sustained.
Koch also highlights the potential for price effects, particularly when there is a foreign assistance–driven surge in demand for goods and services with limitations on supply. Price effects can work in both directions. Prices can be driven down when there is an influx of externally provided or subsidized in-kind aid that undermines local production, or prices can be driven up when a large inflow of aid workers and contractors rapidly expands demand for everything from accommodations to gasoline to food.
The potential for upward price movements to occur in Ukraine during reconstruction is worth considering, given the expected size of international support. For example, unless well-conceived and coordinated mitigation measures are taken, Ukrainian citizens could find themselves competing with foreign aid workers, contractors, and consultants for scarce accommodations amid a diminished housing stock that will have been significantly damaged during the war. This could push up rents and property prices. Many locals may try to capitalize on the influx by turning portions or even the entirety of their homes into temporary rentals through sites like Airbnb, further reducing the available long-term rental stock and its affordability to Ukrainians. If not mitigated, this type of situation can have a direct and visibly negative impact on local populations, contributing to backlash against external providers of assistance.
Koch also identifies governance effects that occur when external interventions unintentionally affect the quality and reach of institutions in the recipient country. In assessing the potential for negative governance impacts, it is important to be clear about the context in which aid is provided. The quality of governance under the leadership of Ukrainian President Volodymyr Zelensky has improved markedly. But Ukraine has a history of governance shortcomings—including corruption and elite capture by oligarchs—that no single person can completely transform in a short time span. This means that the potential for elites to capture a disproportionate share of the benefits of reconstruction is significant. If ordinary Ukrainians see the already privileged becoming the primary beneficiaries of the resources allocated for reconstruction, they may lose confidence in the vision of a free and fair Ukraine.
Here, again, IEG’s CPE for Ukraine provides important insights into what warrants attention to minimize the potential for such unintended (and undesirable) consequences. The CPE found that a dysfunctional justice sector was the weak link in the results chain underpinning several reforms, including efforts to combat widespread corruption and address weaknesses in the financial sector. The CPE was completed shortly before Russia’s invasion of Ukraine, but its lessons were subsequently adapted to the new reality. It urged the World Bank to deepen its understanding of the links between weaknesses in the judicial system and Ukraine’s ability to make progress on other development goals, which will include, of necessity, postwar reconstruction.
These are just a few of the types of unintended impacts that are discussed in Foreign Aid and its Unintended Consequences, which, along with similar works in the literature, should be required reading for those tasked with preparing for reconstruction. On the positive side, there is much evaluative evidence to bridge gaps between theory and reality and an abundance of evidence in the development literature that describes what happens when these risks are not taken into account at the planning stage. For example, the Ukraine public sector will likely face capacity constraints as procurement activity surges. In other countries, this has often been managed through the proliferation of project implementation units that operate outside of, or in parallel with, country systems. Given the importance of ensuring that Ukrainians are empowered in the reconstruction process, efforts should already be underway to develop and provide training to the public sector to ramp up capacity in this area.
Often, unintended consequences of development assistance cannot be easily anticipated. However, to a significant degree, the effects described here can be foreseen. Given the importance of avoiding further problems for an already challenged population, every effort should be made to integrate the consideration of unintended consequences into planning for postwar reconstruction.