Much of the recent thinking on aid effectiveness and on economic growth has given priority to the role of the policy environment in the aided countries. But stress on policy has not crowded off centre stage the other basic determinant of aid effectiveness and growth, namely the administrative or institutional environment. Foreign aid cannot make much of a contribution to equitable growth when public sector management of national resources is ineffective and wasteful, when public services are too few and badly delivered, budgeting disorderly, investment priorities dubious, civil services in deep disarray, policy formulation unsystematic, and, often, corruption endemic.