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OECD DAC Chair Richard Manning looks at aid pledges post G8, as world leaders at the UN Summit prepare to re-commit themselves to the fight against extreme poverty.
Development is one of the main themes of the United Nations Summit this week. As this issue of DACNews is published, the Draft Outcome Document for the Summit states that UN member countries remain concerned at the slow progress towards reaching the Millennium Development Goals (see MDG Report 2005).
But it welcomes 2005 increases in aid and recent efforts to improve the quality of aid with the signing of the Paris Declaration on Aid Effectiveness earlier this year. It calls for all member countries to make the fight against corruption a priority; for urgent investment in the world’s poorest countries now; fair trade rules to benefit developing countries; and continued action to meet the special needs of Africa – the only continent not on track to meet any of the Millennium Development Goals.
Aid is just one element in tackling global poverty, but it is an important one. So what can one say about the real implications of the many announcements about increased aid that have been made this year?
On the assumption that the major OECD donors deliver on their public statements, the latest simulation by the DAC Secretariat indicates that Official Development Assistance from the main OECD donors will increase by USD dollars 50 billion in round numbers.
This would take ODA from a little under USD 80 billion in 2004 to approaching USD 130 billion in 2010.
The sharpest percentage increase is likely to be in Africa, to the tune of an additional USD 25 billion, taking the level of aid to that continent alone to around USD 50 billion in 2010. Already, several OECD countries have announced that they will double their own aid to Africa over the next few years.
In other words we can expect to see the largest expansion in ODA as measured by the OECD DAC since the committee was formed in 1960, even though as a proportion of Gross National Income, the level in 2010 (0.36% for OECD DAC members as a whole) remains well below the level of over 0.50% achieved in the early years of the Committee’s existence.
These figures are impressive, but they do need to be treated with some caution. In the first place for many donors they imply that aid will be perhaps the most rapidly rising element of public spending year after year. Given the pressures on public budgets in many OECD countries, delivering such increases will be a stiff challenge.
In the second place there will be increasing interest in the make-up of the additional aid. For example, while the last three years have seen a real and welcome increase in aid, much of it has been in the form of emergency aid, debt relief and technical assistance that, important as they are, do not necessarily mean new money for developing countries. If for example debt repayments were not being made anyway, then the debt relief may regularize the situation, but it won’t necessarily deliver additional cash to build and improve welfare.
We forecast that there will be a rapid rate of increase in Official Development Assistance in 2005 and 2006, though for reasons not foreseen when many OECD countries announced medium-term commitments at Monterrey in 2002. Donors have pledged around USD 7 billion over the next few years for Tsunami relief and reconstruction, USD 5 billion of which is from government budgets, the rest from private funds. And two major Paris Club agreements on debt write off, for Iraq and as seems likely Nigeria,will produce very large increases in reported aid, because when commercial debt is written off, the face value can be claimed as Official Development Assistance. For Iraq alone, as much as USD 15 billion could qualify as Official Development Assistance in 2005.
This links to a significant debate that has emerged recently in the media and amongst NGOs about how much Official Development Assistance is ‘real aid’ – that is, aid that actually reaches poor people or provides the conditions that can positively affect their lives. We see it as our job at the OECD to show transparently how increased aid is being allocated, so that the public can better understand the real effects of aid.
My view is that we will indeed see a very significant increase in genuine aid to Africa and other developing regions over the next five years, though in the early years the rate of increase will be ‘flattered’ by some of the special features listed above. Continued scrutiny of how far aid is being allocated in ways that provide additional resources to the neediest countries will therefore be necessary.
So the donor community has been handed both its biggest opportunity and its biggest challenge: can the additional aid be used effectively and deliver positive results for poor people?
My belief is that additional aid can be used effectively, but not without major changes in how developing countries and donors work together. Over-dependence on aid is something to avoid, but at present aid per head is well below the levels of fifteen years ago for least-developed countries or for Sub-Saharan Africa. With the right investment in capacity-building and better rates of economic growth, these countries should be able to absorb a good deal more aid productively.
But donors and recipients are going to have to get much smarter at working together to transfer and absorb aid without burying poor countries under donor red tape and consultants’ reports.
There are many examples of good practice, but it is also clear from our surveys that good practice in aid delivery is far from general practice. It is therefore encouraging that just four months ago, donor and developing countries met in Paris and agreed to improve the way aid is delivered. Most importantly they agreed to have their efforts measured against a series of new targets.
The G8 confirmed at Gleneagles their willingness to implement and be monitored by this Declaration on Aid Effectiveness. The UN Summit also looks set to welcome the Paris Declaration in a few days. This support for greater effectiveness in delivering aid is most welcome. And crucially, the international community will be putting in place a system to monitor how far the new directions agreed in Paris are being turned into reality on the ground.
See also:
1. The Ministerial Council Meeting Statement to the United Nation Summit at http://www.oecd.org/document/46/0,2340,en_21571361_34628784_34838958_1_1_1_1,00.html
2. OECD Observer articles on the Millennium Goals at www.oecdobserver.org/millennium
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