They should streamline their systems for the flow of imports, exports and finance. They also have to do their best to minimise volatility by maintaining consistent fiscal and monetary policies that broadly support pro-poor growth. Much comes from investment by people and much from investment by government. Money must be spent wisely on projects with long-term development prospects and on basic services for the poor, not on subsidised services for the rich, such as lavish hospitals in town centres. Being able to rely on predictable resources, like tax and customs revenues through a working tax collection system and indeed aid flows, and having the capacity to deliver public services efficiently will mean a better return on development spending.
Some regions rely almost entirely on aid for their external finance.
Private capital flows can add much to what countries put into their development efforts. But these flows are concentrated in fewer than 20 developing countries, and some types of these flows, such as bonds and bank lending, can be volatile, as witness the Asian crisis of the late 1990s. Countries need to create the conditions that attract longer-term investments from overseas as well as locally. Countries like Mozambique and Uganda are beginning to do just that, by providing a stable political and economic environment and a welcoming and transparent regulatory environment. External aid plays an important part in supporting development, especially in poor countries.