The Trojan-Horse Principle in Development Assistance: A Reading of Uganda's Experience with Aid

The World Bank recommends “ideas, not money” as a guiding principle to donors for dealing with badly governed countries. This paper challenges that principle on the basis of a study of the evolution in Uganda of pro‐growth policies in the early to mid 1990s and pro‐poor policies in the late 1990s. The analysis of Uganda’s experience with aid is accommodated within the theoretical framework of a principal–agent conditionality game, in which policy objectives of the recipient (the agent) evolve over time. The key finding of the paper is that the apparent conditionality failure of the period 1987–91 has paved the way for later reform. Financial aid given during this period suspended the necessity of reforms and bought donor proximity to recipient policy deliberations, as a result of both of which the policy learning could take place that led to later successful reform measures.