Further, a large part of the actual increase has been directed not to financing the incremental cost of Millennium Development Goals (MDGs) but enlarging the scope of debt forgiveness or aiding the war on terror, thus crowding out development aid. Net official flows to developing countries have in fact declined.
There is also no clear picture emerging that donors have moved towards targeting aid better for countries with better policies and institutions, and away from imposing excessive transaction costs on recipients, thereby impairing efficiency. The efforts put by the IMF together with the World Bank towards poverty reduction, debt sustainability and achieving Millennium Development Goals (MDGs) are commendable.