“Two big issues seriously affect poor countries’ chances of beating poverty. One is the amount of aid they get. The other is the amount of debt they repay.”
What is the role of aid in development?
- Contrary to common belief, the positive value and effectiveness of official aid is debatable
- Although a large amount of development assistance is translated directly into health care services, humanitarian relief, classrooms and water schemes, much is not.
- There are many problems associated with aid which need to be addressed and which have a bearing on global economic governance.
- Aid is only needed because the global economic system is skewed against developing countries, and aid can never fully off-set this profound underlying inequity.
What are some of the problems with aid?
- Aid distracts public attention from the fundamental reforms of global economic governance that are required to support equitable development and poverty eradication.
- Aid is seriously inadequate: donor countries as a whole provide only 0.2-0.4% of GDP, rather than the 0.7% to which they have been committed since 1970.
- Some 40% of aid budgets do not leave donor countries, but are spent on administration and consultants.
- Much aid is tied to specific purposes reflecting donor priorities, or to purchases from donor countries.
- Most aid is directly or indirectly conditional on economic and other policies that are ideologically based and/or serve the interests of donors.
- Aid is often short-term, unreliable and unpredictable, undermining recipient countries’ efforts to develop stable and long-term economic plans.
- Aid is often poorly coordinated amongst donors leading to multiple and fragmented development initiatives and heavy administrative burdens on critically weak administrations, with predictably inefficient, unsustainable results.
- Aid to the health sector often promotes vertical disease-specific programmes which can undermine overall health services.
- Aid is inadequately monitored and evaluated.
A useful source of information about the problems associated with aid is the Reality of Aid Network – a major north/south international initiative focusing on analysis and lobbying for poverty eradication policies and practices in the international aid regime.
What needs to change?
- Aid needs to be channeled through democratic and accountable multilateral agencies, to de-link it from the economic and political interests of donor countries, and reduce fragmentation amongst donors.
- Monitoring and evaluation of aid needs to be improved to increase the accountability of both donors and recipients to the intended beneficiaries of aid.
- The delivery of aid should be linked to mutually agreed human development goals rather than specific policies. These outcomes can then be used to assess aid performance.
- Aid should provide long term, reliable and sustainable financial support. Long term assurance of aid can give developing countries budget support which they can rely on in order to develop services such as healthcare and tackle poverty.
The ultimate goal should be to establish a just global economic system which eliminates the need for aid.