House of Commons - International Development

Select Committee on International Development Fifth Report

FUNDING

61. A further controversy that arose in the course of events in February and March and which has recently re-arisen was the funding of the relief operation in Mozambique. DFID has been criticised for cutting long term development assistance (both to Mozambique, and elsewhere) at the expense of humanitarian relief. A recent article in The Observer, for example, criticised the reduction of expenditure on Mozambique which it attributed to the Department's increased expenditure on humanitarian relief in Mozambique and elsewhere.[99] Similarly, Christian Aid, in its memorandum to the Committee, stated that "the UK's planned development assistance expenditure for Mozambique of £37.5 million for 1999-2000 and £38.7 million for 2000-2001 should not be utilised for emergency funding and that emergency and rehabilitation funding must be additional to planned programme funding".[100] In fact, in the latest DFID Departmental Report, estimated outturn for 1999-2000 for Mozambique is £21.4 million — a considerable reduction on the £37.5 million that was planned in the 1999 Departmental Report. Similarly, planned expenditure for 2000-2001 has been revised down from £38.5 million to £31 million.

62. The country specific planning figures of DFID are now published as a result of a recommendation from this Committee. The Department emphasised that they are indicative only and that plans change according to a number of circumstances. Whilst understanding this, we consider transparency to be an important aspect of DFID's accountability to Parliament and the taxpayer, and commend the inclusion of country-specific planning figures in the Departmental Report. In this instance, we have a good example of how DFID adjusts its country plans over time. DFID has reduced its planned expenditure on long-term development aid in Mozambique, but the Secretary of State assured the Committee that the expenditure could be increased again if "we can spend more effectively".[101]

63. The reasons given for the reduction in planned expenditure were: difficulties for Mozambique to spend all the aid given; the high level of official development assistance (ODA) also provided by other donors; debt relief; and healthy reserves. The explanation provided in the supplementary memorandum from DFID merits quotation at length, "Over the last few years [Mozambique] has built up a net stock of deposits ("savings") with the domestic banking system that in early 1999 amounted to US$500 million. In previous years donors' budgetary support exceeded the amount needed to cover the GoM budget deficit. GoM capacity to spend a larger budget effectively is small but growing. Until 1999 the World Bank required GoM to sterilise its structural adjustment loans rather than spend them. The deposits have not themselves been idle; they allow higher bank lending to the private sector to fund the investment necessary for future growth. They also cushion against fluctuations in donor flows. The size of these net domestic deposits came to DFID's attention in mid-1999 when a presentational change in the IMF financial tables made their size explicit. DFID asked the IMF to consider the extent and rate at which the GoM should draw down its deposit without undermining macro-economic stabilisation, as a basis for planing donor budgetary support over the coming years. Meanwhile DFID scaled back the level of its budgetary support for 1999/2000. In fact as a result of slower than expected disbursement of other donors' commitments GoM has drawn on its deposits in the recent months and the IMF is currently advising that they should not be drawn any faster than at the present time".[102]

64. These funding decisions were taken before the floods hit Mozambique earlier this year. It appears that the initial planning figures were decided upon by DFID in ignorance of the extent of Mozambique's domestic reserves. As DFID's memorandum makes clear, any readjustment of expenditure should, however, take account of the fact that other donors do not always disburse funding commitments as efficiently as DFID. We note the advice to the Government of Mozambique from the IMF that they control the draw down of their deposits. There is also the question of whether the recent crisis should cause DFID to reassess its plans for development expenditure in Mozambique. The World Bank has been analysing the likely economic impact of the floods on Mozambique and a conference on Mozambique's reconstruction is to take place in Rome in late April (and will already have taken place by the time of the publication of this Report).[103]

65. DFID should of course take account of domestic deposits, the commitments of other donors, and capacity of the Government of Mozambique to spend in its consideration of its own expenditure. We welcome, however, the Secretary of State's willingness to consider increases to current expenditure plans in Mozambique and recommend that DFID reassess these plans, and inform the Committee of its conclusions, having taken into account the advice of the IMF on the use of Government of Mozambique deposits, the analysis from the World Bank of the economic impact of the floods, and the discussions at the donors' meeting in Rome. Given recent events, it would be useful for DFID to bring forward its review of the Mozambique Country Strategy Paper, currently scheduled for October 2001.

66. The other question to be addressed is whether DFID acted appropriately in its sourcing of the extra humanitarian assistance provided to Mozambique. In the course of our inquiry into the humanitarian crisis in Kosovo, the Committee recommended that the additional expenditure incurred as a result of the UK's response to the crisis in Kosovo and the consequent depletion of the Department's contingency reserves should not be at the expense of the poor in other parts of the world, nor detract from DFID's goals of eliminating world poverty and meeting the international development targets.[104] In our inquiry into the 1999 Departmental Annual Report, the Committee received an assurance from the Permanent Secretary of DFID, Sir John Vereker, that "in the event of other humanitarian crises arising of a significant scale, say more than one million or so, the Treasury will provide additional resources".[105] However, the Secretary of State told us that she had not called on Treasury reserves to meet the needs of Mozambique, "we have got to deploy our budget as effectively as possible, and have that relationship of trust with the Treasury so that when we really do need extra money and go to them it is a genuine call".[106] Instead, DFID met the emergency needs from its own resources. Of the £20 million in direct humanitarian assistance, some came from the CHAD budget and some from underspends ("slippage") from elsewhere in DFID's budget. Two such underspends in particular were mentioned. One was an underspend in Mozambique's development programme[107] and the other was an underspend in the draw-down of EC development expenditure[108] (an annual occurrence) of £105.9 million.[109]

67. We will, in the context of the Committee's forthcoming inquiry into DFID's Departmental Report for 2000, consider more generally departmental spending on humanitarian assistance and how such expenditure relates to its long-term development work. We do not see anything to criticise in the use of underspends to relieve distress, particularly when this involves keeping in Mozambique money previously allocated to its longer term development programme. A more general question must, however, be addressed in the light of events over the last year — whether the amount of money DFID allocates to humanitarian and emergency work is adequate to meet the seemingly increasing incidence of both conflict and natural disasters. The Treasury offer of further support over the last year was no doubt welcome but, as Clare Short told us, there is clearly an expectation that such assistance is a last resort in the absence of resources from elsewhere in DFID's budget. We have in the past commended the Government for its increases in development expenditure. Whilst humanitarian assistance is a moral imperative, it is long term development work which makes a sustainable difference to the poor of the world. Whether through planned budgeting or through the reallocation of underspends, we would be concerned if a necessary increase in humanitarian spending was at the expense of DFID's overall expenditure on long term development. Additional funds for DFID's emergency work and for DFID contingency reserves should be included in future planning figures and such increases met by additional Treasury funds to those initially announced.

The Response of ECHO

68. The Committee has an interest in monitoring the performance of the EU's aid efforts, given that the UK provides 17 per cent of all official development assistance committed by the European Commission — money that is attributed to the budget of DFID. The body responsible for distributing EU humanitarian assistance is the European Community Humanitarian Office (ECHO). ECHO is not an 'operational' organisation. The bulk of its assistance is distributed and implemented by its partners. Accordingly, ECHO has put in place 'Framework Partnership Agreements' with some 180 NGOs which set out jointly agreed objectives, principles, values and criteria for humanitarian aid. ECHO's mandate is to "provide emergency assistance and relief to the victims of natural disasters or armed conflict outside the European Union".[110] ECHO's website states that "whether the need is for short term relief, rehabilitation after a disaster, or a spur to self-sufficient development in the long term, human and material resources have to be mobilised rapidly to end the victims' suffering and prevent future crises".[111] It goes on to state that ECHO's task is to ensure goods and services get to crisis zones fast. The website describes how funds should be available within four days from the date a disaster strikes.[112]

69. To date, ECHO has announced a total of _25 million (£15 million) towards the crisis in Mozambique. Additionally, the EU is committed to increasing its development assistance to _150 million this year[113] and _300m (£180m) in total for 2000-2001[114]. However, the Committee was concerned to discover that it was only after the second, most severe round of flooding (we presume after 25 February) that ECHO deployed additional personnel to support their existing staff in Maputo and that as of 10 March no funds had been disbursed to implementing partners as "the conclusion of contracts for the funds ear-marked for Mozambique was still underway".[115] ECHO was therefore relying on NGO pre-financing arrangements to ensure the quick start-up of activities. Rob Holden told the Committee "[ECHO] are known for being relatively slow in responding to disasters and getting resources out to the agencies that they fund - usually the NGO sector. I do not have the details but I do not think they would be much faster in this particular case".[116] This is a sentiment which reflects the Committee's experience of ECHO in response to disasters elsewhere, including Kosovo. In the Committee's Report. On Kosovo: The Humanitarian Crisis, we criticised delays in the disbursement of EC funds and recommended that "The EU should have a procedure for the speedy disbursement of funds in humanitarian crises".[117]

70. A recent assessment of EC humanitarian activities[118] reached similar conclusions, namely that "rapid response by ECHO to funding applications, while possible, became increasingly exceptional, even in emergency cases". The European Scrutiny Committee, in examining the report, concluded that the slow pace of funding presented a problem to NGOs who "typically do not have sufficient resources to bridge the gap while waiting for funds expended to be reimbursed by the Commission ... What is being done, and is it enough, to ensure that bureaucratic administrative requirements do not inhibit ECHO from performing effectively?".[119] The Commission, in its response, drew attention to the extremely complex environment in which ECHO operated and the administrative constraints imposed on ECHO which were "ill adapted to deal with emergency aid and the ensuing need for rapid response".[120]

71. Events in Mozambique have, once again, called into question the ability of ECHO to react quickly and effectively to emergency situations. The fact that, two months after the first floods in Mozambique and two weeks after the serious flooding on 25 February, ECHO had failed to disburse a single penny to implementing partners sadly reflects the Committee's experience of ECHO in previous humanitarian disasters. Whilst we acknowledge the administrative constraints imposed on ECHO, we reiterate our concern that the EU should have a procedure for the speedy disbursement of funds. A key responsibility of any humanitarian organisation is the ability to react rapidly to a crisis — a responsibility that, it appears to us, ECHO continually fails to meet. The conclusions of a recent assessment of EC humanitarian activities are due to be discussed at the forthcoming Development Council in May. We recommend that this would be a suitable opportunity to review the activities, role and objectives of ECHO in response to humanitarian disasters, including means by which the disbursement of funds could be streamlined.

The Regional Response

72. In such a natural disaster speed and flexibility of response are extremely important. This means that the regional response can be crucial in the immediate saving of lives and coping with the disaster. We have already commended Malawi for their provision of helicopters on 25 February and would also mention again the crew of the South African helicopters engaged in search and rescue. Gilbert Greenall said, "It was an extraordinary performance and very courageous by the South Africans [who demonstrated] remarkable flying skills".[121] We commend the efforts of the crews manning the South African helicopters and the South African Government for making the helicopters available.

73. We have also commented on the need to ensure an effective regional system for the sharing of weather and river level information. In these matters neighbouring countries are interdependent and information-sharing capacity and procedures must be established in all disaster-prone areas. Ross Mountain noted that, at the meeting of heads of state in Maputo, governments looked towards better regional cooperation in dealing with disasters such as this.[122] During the Mozambique crisis some countries in the region have been noticeable by their absence. This is a matter for concern and regret.

99 The Observer, 9 April, p.28 Back

100 Ev.p.64 Back

101 Q.69 Back

102 Ev.p.23 Back

103 Ev.p.23 Back

104 Third Report from the International Development Committee, Session 1998-99, 11 May 1999, HC422, para.74 Back

105 Fifth Report of the International Development Committee, Session 1998-99, Department for International Development: 1999 Departmental Report, HC 567, para.54 Back

106 Q.71 Back

107 Q.69 Back

108 Q.71 Back

109 Supply Estimates 1999-2000, Spring Supplementary Estimates ,HM Treasury, February 2000, p.99 Back

110 http://www.europa.eu.int/comm/echo/en/present/manda_en.html Back