Donors not giving promised aid; financial crisis will make things worse

Last month the OECD published aid data from donors for the period up to and including 2007.  With my colleagues at Development Initiatives, we have done an analysis of the figures for the House of Commons International Development Committee. The full memorandum (as .pdf) is here.

Graph of actual aid and the target

Here are some key points:

  • Donors promised to increase aid by 2010.  Half way to that target, if donors had been increasing aid at a constant rate to meet their commitments:
    – Global aid in 2007 would have been $18.4 billion higher
    – Over the last three years donors would have spent an additional $29.5 billion
    – This would have lifted approximately an extra 15 million people permanently out of poverty.
  • The G7 also promised in 2005 to double aid to Africa. Half way to that target:
    – G7 aid to Africa has increased by only $3.3 billion, less than a sixth of the promised increase.
    – If aid had been increased at a constant rate towards the target, aid to Africa would have been more than $6 billion higher in 2007.
  • It is becoming clear that Italy, Germany, Portugal, Greece and France are not going to meet their promises
  • The financial crisis is a potential “quadruple whammy” for developing countries. The value of the existing aid commitments has fallen (because they are expressed as a share of GDP), donors are increasingly unikely to meet those commitments, the financing needs of developing countries have been increased by the downturn, and there will be be substantial declines in non-aid flows to developing countries such as foreign direct investment, remittances, and equity investment.

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.

3 thoughts on “Donors not giving promised aid; financial crisis will make things worse”

  1. 2009 will be a bad year for international aid. Not only the financial crisis will eat into the kitty, but many donors have given extra in 2008, due to the global food crisis chasing prices up.

    The fear is that they have donated in 2008 against 2009 budgets. With the economic crisis, there is a reason (or excuse) for them to cut back.

    I am pessimistic. Past figures have proven that in similar crisis ODA-based funding dropped 30% in the year during and the year after similar crisis.

    Peter

  2. Pingback: Twitter Tweets about financial crisis as of January 12, 2009 | Bay Area REO

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