HIPC countries were required to formulate and implement national development strategies and achieve macroeconomic stability. Some of these national strategies - including those for Mozambique, Tanzania and Uganda - express an explicit preference for budget support (Williamson and Agha, 2008). Debt relief funds are excluded from the SMPD, but the same strategies and reforms that justified provision of debt relief can also justify increased use of country systems, including budget support. Also, the HIPC Initiative’s success demonstrates that for this set of aid recipients, donors have managed to act collectively to overcome the usual parochial interests limiting aid’s developmental impact. Donors’ experience with HIPC can be expected to have some residual influence over their aid management decisions in HIPC countries for at least several years following implementation of debt forgiveness. Our _HIPC completion_ dummy variable is coded 1 for the twenty countries in the SMPD sample that had completed the process by 2007, the year for which the survey measures use of country systems.

Budget support is sometimes used as a means of disbursing aid more quickly where aid levels are high (de Renzio, 2005). Budget support is typically accompanied by a policy dialogue between donor agencies and recipient governments: donors are more confident that nonearmarked aid will be used productively if they have had some input into development policy choices. Where aid levels are lower, however, donors have less leverage to engage government on policies, and may in any event choose not to incur the costs of achieving policy consensus (Foster and Leavy, 2001). Aid thus tends to take the form of projects, where aid is relatively low. Accordingly, our _DBS_ and _PBA_ regressions control for the _aid share of GDP_ for recipients, with the expectation of positive coefficients.<sup>19</sup> The _aid share of GDP_ in the sample averages 10.8%, with a low of 0.2% for the Dominican Republic and a high of 56.3% for Liberia.

Donor characteristics comprise a third set of determinants of trust in country systems. A first-level distinction, between multilateral and bilateral (i.e. national) donors, reflects their differing mandates. Multilateral aid agencies were established in part to resolve collective action problems plaguing bilateral donors. They are better insulated from political pressures to demonstrate short-term visible results to elected officials and taxpayers. Multilaterals “are cases of joint delegation from multiple principals” that may “enable the agency to commit itself to procedures that would not be easy to implement for a bilateral donor, such as transparent and competitive procedures for tendering and procurement” (Martens et al., 2002: 21). They also have a comparative advantage in aid activities that “involve spillover effects” which bilaterals

> 19 Aid levels may not be entirely exogenous to the existence of a policy dialogue, and ideally we would be able to measure the existence and strength of policy dialogues more directly.  Also note that policy dialogues on particular issues typically involve multiple donors, so we use total aid/GDP to a recipient from all donors, and not each donor’s aid as a share of recipient GDP.

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