Hilary Benn, the UK’s International Development Secretary, has anounced that the UK will be suspending all its direct budgetary aid to the Government of Ethiopia.
I confess that I have been proven completely wrong about Ethiopia’s Prime Minister, Meles Zenawi. A few years ago, I believed he would be one of Africa’s great leaders. He is a former freedom fighter turned democrat. He was a former communist (a follower of Enver Hoxa no less) turned free market liberal. I was impressed by the peaceful secession of Eritrea (which entailed Ethiopia giving up its access to the sea); and his decision not to invade Eritrea when Ethiopia defeated its neighbour in June 2000. Under Meles Zenawi, Ethiopia has moved to greater democracy, federal decentralisation, and economic liberalisation. Aid flows increased, in recognition of the fact that Ethiopia is one of the poorest large nations on the planet.
Over the last year, Ethiopia has suffered an ugly period of repression. In the elections in May last year the opposition won over a hundred seats in Parliament. But the opposition parties believe that the election was rigged, and that they should have been won. There were violent clashes in Addis Ababa in November, which spread to other towns. About 40 people were killed and many others
injured. Opposition leaders, civil society leaders and journalists have also been arrested. Many thousands of young people were detained.
Britain currently gives about £90 million a year in aid to Ethiopia. Under the terms of the ten year agreement with the Government,
in exceptional cases where it has not been possible to resolve differences of view, and which are deemed by the UK seriously to undermine progress on poverty reduction, the UK reserves the right to suspend disbursements of development assistance
If I am correctly interpreting the UK announcement, we will continue to provide aid, but in a different form. The money will be used instead to support non-governmental
organisations and to tackle the major food crisis that is now emerging
in East Africa.
This is a very interesting announcement.
- This demonstrates a welcome determination not to use aid to support undemocratic and repressive regimes. Critics of aid often claim that aid is given without regard to the quality of government. This shows that they are wrong.
- We should not ignore the very signficant costs to withdrawing budget support. Aid pays for more than a third of government spending in Ethiopia. Any government reform with long term expenditure consequences – such as public sector pay reform, tariff liberalisation or increased commercial freedom and competiton for state enterprises – can only be implemented if the government (and the IMF) have confidence that aid will continue to flow to the government not just this year and next, but for for the three or five years needed to see them through. (That is why we have a ten year agreement). If aid to government is switched on and off, then those long term reforms can not be started. The effect of lack of predictability of government aid is therefore that aid will not be used for long term reforms, and has to be used instead to cope with the consequences of weak institutions and unreformed policies. Using aid this way is significantly less productive than supporting long term reforms, so the effect of lack of predictability is a significant reduction in the effectiveness of aid. We are rightly very reluctant to use this kind of threat.
- I doubt if this will have a noticeable impact on the Government of Ethiopia. My guess is that Meles Zenawi feels genuinely threatened by the opposition movement, and is perhaps alarmed at the prospect of significant internal conflict within Ethiopia. He is not going to change his mind because aid is no longer flowing through the budget. So we should recognise that will probably be a gesture which will have little effect on political developments in Ethiopia.
- It is surprising that this decision has not been made and announced as part of the group of budget support donors in Ethiopia. I hope this does not reflect a decline in the effective coordination between donors, who are more powerful and effective when they act together.
- It is characteristic of the decency, openness and courtesy of Hilary Benn that he flew to Addis Ababa and met Prime Minister Meles Zenawi to inform him of the decision and explain the reasons for it. Less honourable Ministers would have issued a press release from the comfort of their offices in London.
Update: Check out the thread at Meskel Square on this.