Thursday, April 05, 2012

Aid: Concern Over Historic Drop in Development Aid

oberseas aid children
By R. Nastranis
Courtesy IDN-InDepth NewsReport

PARIS (IDN) - Imagine a physician telling you to get a haircut to reduce your weight. This sort of a spurious argument has been apparently used by some of the major givers of official development assistance (ODA) which fell by nearly 3 percent in 2011 for the first time in 14 years.

Disregarding years of exceptional debt relief this was the first drop since 1997, and experts expect continuing tight budgets in OECD countries to put pressure on aid levels in coming years.

In 2011, members of the Development Assistance Committee (DAC) of the OECD provided USD 133.5 billion of net ODA, representing 0.31 per cent of their combined gross national income (GNI). This was a 2.7 % drop in real terms compared to 2010, the year it reached its peak. This decrease reflects the pursuance of a hair-cut-formula in several DAC countries to handle fiscal constraints by reducing their ODA budgets

OECD Secretary-General Angel Gurría and Oxfam, an international development and humanitarian organisation, have rightly expressed grave concern about the ODA decline.

"Around 600 million children in developing countries will not be vaccinated against deadly diseases and 500 million mosquito bed nets that protect against malaria will not be handed out to poor people because of Europe's widespread cuts in overseas aid," Oxfam warned April 4 reacting to the latest figures released by the OECD.

Gurría – a Mexican national – encouraged rich nations to meet their commitments: "The fall of ODA (official development assistance) is a source of great concern, coming at a time when developing countries have been hit by the knock-on effect of the crisis and need it most. Aid is only a fraction of total flows to low income countries, but these hard economic times also mean lower investment and lower exports. I commend the countries that are keeping their commitments in spite of tough fiscal consolidation plans. They show that the crisis should not be used as an excuse to reduce development cooperation contributions."

J. Brian Atwood, Chair of the OECD's Development Assistance Committee shared the concern: "While I am disappointed that some countries have failed to maintain their commitments, the overall level reflects the growing awareness that global challenges – from disease to security threats to climate change – cannot be resolved without development progress."

The quality of the aid is also important – making it more effective through stronger partnerships with developed and developing countries is crucial. The new Global Partnership forged in Busan and the OECD's new Development Strategy, to be released in May, set a new path to future development.

Within total net ODA, aid for core bilateral projects and programmes (i.e. excluding debt relief grants and humanitarian aid) fell by 4.5% in real terms.

In 2011, the largest donors were the United States, Germany, Britain, France and Japan. Denmark, Luxembourg, the Netherlands, Norway and Sweden continued to exceed the United Nations' ODA target of 0.7% of GNI. In real terms, the largest rises in ODA were registered in Italy, New Zealand, Sweden and Switzerland. By contrast ODA fell in sixteen DAC countries, with the largest cuts recorded in Austria, Belgium, Greece, Japan and Spain. G7 countries provided 69% of DAC ODA; EU countries, 54% of DAC ODA.

The United States continued to be the largest donor by volume with net ODA flows amounting to USD 30.7 billion, representing a fall of 0.9% in real terms from 2010. As a share of GNI, ODA was 0.20%, a decrease from the 2010 level of 0.21%. US bilateral ODA for Africa rose to a record level of USD 9.3 billion (+17.4%), and its aid to LDCs amounted to USD 10.0 billion (+6.9%).

Oxfam Analysis

Analysis by Oxfam at a global level shows that 2011 at current rates of progress, donors will not hit the 0.7 target for 50 years. Western European countries did slightly better than the global trend, but in 2011 Europe's aid stands at 0.45% of national income as overseas aid, meaning European donors have still not reached their own 2010 target of providing 0.51%. This represents a European shortfall of €7.7 billion on their 2010 target.

In Europe, the biggest cuts were made by Greece (-39.3%) and Spain (-32.7%), with Austria and Belgium also slashing aid budgets substantially. And the picture is even bleaker than shown by these figures with Spain having already announced further drastic aid cuts and with the Netherlands, which currently meets the 0.7 per cent target, also debating further cuts.

By contrast, Norway, Denmark and Luxemburg continue to meet their pledge to give more than 0.7 per cent of national income in aid, Britain remains committed to meeting the target by 2013 and Germany and Sweden have increased their aid budgets. Italy’s figures are also higher than last year's but this is due to an injection of inflated aid, mainly debt relief and refugee costs.

Oxfam said the ability of some countries to meet their commitments and increase aid showed that cutting aid was usually a political choice rather than an economic necessity. It called on European countries to act urgently to reverse cuts and deliver on their promises to the world's poorest.

Oxfam’s EU development expert Catherine Olier said: "The sweeping cuts to European development aid are inexcusable. This means the world's poorest people are being made to pay the price of austerity whilst the bank bailouts continue.

"Cutting aid is no way to balance the books. Even small cuts in aid cost lives as people are denied life-saving medicines and clean water. Aid is such a tiny part of European budgets that cutting it has no discernible impact on deficits – it is like cutting your hair to lose weight.

"Countries such as Spain and the Netherlands which are making savage cuts in their aid need to consider the human cost and immediately reverse their decisions.

"If future aid cuts are to be averted we also need countries like Italy and Austria who currently give only a tiny proportion of their incomes, to do more to help the poorest."

The World Bank has said that tens of millions of people have been pushed into extreme poverty by the economic crisis. Oxfam is calling for a financial transaction tax (FTT) to help poor people hit by the economic crisis. The European Commission has proposed a Europe-wide FTT that would raise Euro 57bn every year.

Olier said: "EU leaders have shown that they can find large sums of money to bail out banks but with notable exceptions – Denmark, Norway and the UK – most are failing dismally to find much smaller sums for the world’s poorest people.

"European governments should meet their aid commitments and also make the financial sector to pay to repair the damage done in poor countries. An FTT offers a real opportunity to raise additional revenue which is needed more than ever." [IDN-InDepthNews – April 04, 2012]

2012 IDN-InDepthNews | Analysis That Matters

Picture: IFAD