The end of an era...

15 April 2011

By Annmaree O'Keefe, Lowy Institute Fellow and Editorial team, Interpreting the aid review 

As Todd Moss from the Center for Global Development noted during his recent presentations to audiences in Canada and Australia, the “doubling aid” era is probably finished. The race to the top of the donors list which characterised much of the last decade is over, as many of the contestants deal with the continuing fallout of the financial crisis. But there are some exceptions and Australia is among the shrunken list of donors that are sticking by their commitments.

Looking back over the 50-plus years of international development assistance, this retreat by donors is not unique. Global commitment to official aid and the reduction of poverty has a chequered history.

The international commitment to aid started well enough in the early 1960s when together State donors provided between 0.51 and 0.55 per cent of their country’s income to the developing world. After that, the decline set in and despite occasional blips and international promises to meet the overseas development assistance (ODA) goal of 0.7% of gross national income, the trend has continued downwards. From 1964 to 1973, the percentage dropped by half to 0.27%; from 1974 to 1992, it made a modest recovery to the low 0.30 percentage points but then with the collapse of the Berlin Wall, the end of the Cold War and the global recession of the early 90s, it plummeted to the low 0.20s. The early 2000s saw another recovery in the wake of 9/11 combined with a turn of the millennium surge in support for aid which saw it climb back to .32% in 2005.

But the commitments made in 2005 at the Gleneagles G8 and later that year at the UN MDG Leaders Summit have not eventuated in the wake of the global financial crisis with the same enthusiasm as they were made. The average ODA/GNI ratio dropped again to 0.27% in 2007 although it has subsequently climbed back to 0.31%. The OECD’s projections for 2010 are 0.32% of ODA/GNI or US$108b. But this in itself is a disappointing 16 per cent less than the 2005 commitments which promised a global aid pool of $126 billion by 2010.

Those same OECD projections show that only two of the 11 EU members that committed to reach 0.7% by 2015 are on target. Exceptional in this crowd is the UK which is standing by its commitment and which this year will reach 0.6% on its way to the 0.7% target by 2013 – despite the government’s cuts to other parts of the national budget. In part, this steadfastness is linked directly to domestic considerations. As noted by the UK Foreign Secretary, William Hague, during his talk at the Lowy Institute in January (blogged on by Danielle here), there is a strong relationship between a foreign aid program and wider foreign policy and global interests such as national security.  

The US aid budget appears to be faring less well as Congress battles behind party lines on how to reduce the federal budget deficit. The fate of the aid budget has not been helped by a recent Bloomberg National Poll which found that 7 out of every 10 Americans think that Congress could find major savings by slashing the aid budget.

What do these trends mean for Australia’s future aid program?

It contains the lesson that aid programs remain hostage to external events and pressures – domestic and international. This was reinforced when in the wake of Queensland’s floods earlier this year, the Opposition Leader, Tony Abbott, identified savings in the foreign aid budget to offset the costs of what is basically the domestic aid budget.

At the moment, there are international and domestic political imperatives which will probably protect Australia’s aid budget and 0.5% ODA/GNI commitment in the short term. But as a discretionary item in the Federal Budget, its future bounty is likely to remain tightly linked to its continued direct relevance to core national interests. Fortunately for the world’s poor, that relevance is still clear.

Image by Flickr user damaradeaella.