Increasing access to basic infrastructure, and social services is critical to reducing poverty, and achieving the Millennium Development Goals (MDGs). However, increasing access 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, for a variety of socio-economic reasons. However, given the political commitment by a number of countries to increase aid flows, but at the same time the mounting concerns of aid effectiveness, it is critical that subsidies be linked to the actual delivery of services, or "outputs." One way to do this is through Output-Based aid (OBA), a strategy for using explicit performance-based subsidies to deliver basic services-such as water, sanitation, electricity, transport, telecommunications, education, and health care-where policy concerns would justify public funding to complement, or replace user fees. OBA can help improve aid effectiveness by: increasing accountability
improving transparency
increasing value for money
and, reducing economic distortions.