David Loyn, the BBC Developing World Correspondent (is there really only one?) is extremely sensible and balanced writing about the politics of aid in Ethiopia today on the BBC News site:

Aid thinking moves in policy cycles, and the dogma for now, at least for the big European donors, is to give aid directly to governments. Army in Addis Ababa Violence during last year’s elections set back the aid process.

It is not given completely blindly, of course, and developing countries have to put in place poverty reduction strategies that add up. But once they do, they are likely to get direct budget support to allocate funds as they see fit. The idea has many advantages – ticking a lot of the necessary policy boxes. …

Ethiopia was to be a test case for democracy, but instead has turned into a test of how to manage the relationship when things go wrong.

I wrote about the policy of giving aid to government budgets here. In short, an independent evaluation found that it can be a more effective way to give aid than projects.