Long-term commitments to make output-based payments for infrastructure can encourage private investors to provide socially valuable services. Making good decisions about such commitments is difficult, however, unless the government understands the fiscal costs and risks of possible commitments. Considering voucher schemes, shadow tolls, availability payments, and access, connection, and consumption subsidies, this paper considers measures of the fiscal risks of such commitments, including the excess-payment probability and cash-flow-at-risk.

A key measure of the effectiveness of public spending on infrastructure is the extent to which it benefits poor people. In recent years policymakers and development practitioners have increasingly sought to understand why earlier approaches to infrastructure development often bypassed the poor or proved unsustainable. That work has led to revisions in policies, programs, and processes within the World Bank Group and in the countries it serves, aimed at doing more to extend the reach of infrastructure services to poor households and small enterprises.

Output-based aid (OBA) approaches to improving water and sanitation service can work in a variety of circumstances. Such OBA schemes require an understanding of the impact of existing regulatory arrangements have on water services to poor customers. The design of OBA schemes should therefore include an evaluation of the existing regulatory arrangement in order to identify what changes could potentially bemade in order to get better services to poor people.

GPOBA's first Annual Report, published in August 2007, gives an overview of the program's activities and objectives since its creation in 2003.
 

Output-based aid (OBA) can increase access to basic services for the poor in developing countries and improve the delivery of services that exhibit positive externalities, such as reductions in CO2 and improvements in health, says GPOBA’s Annual Report 2008.

Increasing access to basic infrastructure and social services is critical to reducing poverty and achieving the Millennium Development Goals. However, this is a challenge because of the gap between what it costs to deliver a desired level of service and what can be funded through user charges. Subsidies have often played a role in funding this gap because of, for example, limited ability to pay by the poor.

A number of approaches have been tried to improve school attendance and educational attainment, including the use of Output-Based Aid (OBA).

The challenge of introducing OBA in education has often been finding an appropriate definition of “output” that balances achievement of results with reasonable transfer of performance risk.

Development practitioners are acutely aware of the need to find more effective ways to improve basic living conditions for the poor, as traditional approaches of delivering public support have not always led to the results intended.