House of Commons - International Development Committee

Aid Under Pressure: Support for Development Assistance in a Global Economic Downturn - International Development Committee Contents

Written evidence submitted by Development Initiatives

Are donors on track to meet their commitments to increase aid?

1. This memorandum examines the data on official development assistance (ODA) for 2007, published on 5 December 2008, and the implications for the achievement of the targets for increases in aid that were agreed in 2005.[30]

2. The headline figure for total aid from DAC donors in 2007 was $103 billion, down slightly from $104 billion in 2006. The trend is easier to identify when net debt relief is excluded. On this basis, total ODA from DAC donors in 2007 was $94 billion, a real increase of 2.5% compared to 2006.[31]

3. In 2005, members of the G7 and of the European Union made commitments to increase aid spending by 2010 and by 2015. The details of these commitments, and of the calculations that follow, are on the Development Initiatives website.[32] There are no collective intermediate targets before 2010, so donors cannot formally be "off track". Nonetheless, it is important to monitor progress towards the 2010 and 2015 targets to see whether donors are taking the steps necessary to meet their commitments.

4. Global aid in 2007 was $18.4 billion a year less than it would have been if donors had been increasing aid at a constant rate to meet their 2010 commitments.[33] Over the three years 2005-07, donors would have spent an additional $29.5 billion, enough to lift approximately 15 million people permanently out of poverty.[34]

5. In addition, donors made specific commitments to double aid to Africa by 2010. The annual monitoring provided in the DATA report[35] has shown that, half way to the 2010 target, G8 aid to Africa has increased by only $3.3 billion since 2004, less than a sixth of the increase that they have pledged to deliver by 2010.[36] If donors had increased aid at a constant rate to meet the 2010 target, aid to Africa would have been more than $6 billion higher in 2007.

6. Although the commitments made in 2005 have been consistently reaffirmed (most recently, by G20 finance ministers[37]) it is becoming clear that a number of donors (Italy, Germany, Portugal, Greece and France) will not reach their 2010 targets, nor will the EU collectively. The practice of making international commitments and then failing to take the necessary steps to meet them both undermines the integrity of international diplomacy and contradicts the spirit of the Monterrey compact. The international community should consider a code of practice to protect the integrity of aid promises.

7. The financial crisis is a potential "quadruple whammy" for financing for developing countries.

The value of the existing aid commitments has fallen

The value to developing countries of the EU target of 0.56% GNI in 2010 has fallen by nearly $12 billion a year since 2007 as a result in downward revisions to estimates of national income following the financial crisis.[38]

Donors may be less likely to meet their commitments.

Analysis by the Center for Global Development in Washington DC shows that after each previous financial crisis in a donor country since 1970, the country's aid has declined.[39] For example, Japanese aid fell by 44% in the six years after the financial bubble burst in 1990; and Japan's aid has never returned to its pre-crisis level. In this context the UK cross-party consensus on increasing aid to 0.7% of GNI is to be applauded and needs to be sustained.

The financing needs of developing countries are increased.

For example as a result of rising food and oil prices and slower growth in exports, investment and employment. The food and fuel price increases alone are expected to push an additional 100 million people into deeper poverty.[40] As a very approximate ready-reckoner, additional aid of approximately $200 billion would be needed to lift an additional 100 million people permanently out of poverty.

There may be substantial declines in non-aid flows to developing countries

8. In industrialised countries the fiscal "automatic stabilisers" tend to increase spending in recession, which both dampens the macroeconomic effects of the downturn and channels additional funding to services that face additional costs. By contrast the institutional arrangements for providing finance to developing countries tend to mean that finance is reduced just as needs are increasing, which amplifies the economic downturn, increases economic instability and jeopardises poverty reduction and service delivery.

9. A further threat to levels of development financing needed to meet the Millennium Development Goals is the prospect of diversion of development assistance to meeting the costs of climate change adaptation and mitigation. While these costs should count as ODA if they fall within the internationally-agreed definition, we submit that they should not count towards the targets for aid set in 2005. For example, in September 2008, a group of ten donors committed more than $6 billion in current prices to the World Bank Climate Investment funds.[42] While it is welcome that industrialised countries should bear the costs of climate change adaptation and mitigation, the costs of doing so should not be taken from the resources needed to promote poverty reduction and economic growth in developing countries. We therefore recommend that the 2010 and 2015 targets should be explicitly defined net of any funding for climate change adaptation and mitigation, and that donors should publish information about aid that enables progress towards the targets to be tracked on this basis.

10. There is a long and unnecessary delay in the publication of aid data. This analysis of spending in 2007 uses data that were published in December 2008. That means we will not be able to confirm whether the 2010 targets have been met until December 2011 or January 2012. There is a danger that the impact of the financial crisis on aid levels will not be known until after it is too late to respond. We recommend that donors should increase the resources they invest in collecting, verifying and publishing timely data about financial flows to developing countries. We welcome the International Aid Transparency Initiative initiated by the governments of the United Kingdom and the Netherlands. With modest additional effort on aid statistics, significant improvements in effectiveness, transparency and accountability of aid can be achieved.

ABOUT DEVELOPMENT INITIATIVES

11. Development Initiatives (DI) is an independent UK-based organisation that undertakes research and advocacy work on aid and poverty reduction. DI provides statistical and policy analysis to a range of bilateral and non-governmental agencies, including support for the annual DATA report. DI manages a research programme on Global Humanitarian Assistance and the aidinfo programme on transparency of aid. DI co-founded the Reality of Aid programme and managed the report for the first ten years.

Development Initiatives

5 January 2009