UNIVERSITY OF PENNSYLVANIA - AFRICAN STUDIES CENTER
Africa: Aid Still Going Down
Date distributed (ymd): 980719
Document reposted by APIC
Issue Areas: +economy/development+ +US policy focus+
This posting contains a June news release from the OECD Development Assistance Committee with the latest statistics on trends in Official Development Assistance (ODA) and private capital flows, a table of selected data from the DAC on-line database, and an introductory note on the prospect for additional drastic cuts by Congress in US development assistance.
1997 figures released by the Organization of Economic Cooperation and Development (OECD) show that U.S. aid to developing countries reached at 50-year low (see below).As a proportion of GNP, U.S. aid is the lowest of all Development Assistance Committee (DAC) members -- 0.08% (eight hundredths of one percent), less than one-quarter the averagepercentage among DAC members. In a budget-surplus year, moreover, the U.S. Congress may further widen the U.S. lead in the race to the bottom as a contributor to international public investment in sustainable development.
In the first stage of legislative action on the Fiscal Year 1999 budget, the U.S. House of Representatives Foreign Operations Subcommittee of the Appropriations Committee has voted to cut the administration's foreign aid request from $13.5 billion to $12.5 billion, including reduction of $91 million in development assistance, from $1.265 billion to $$1.174 billion.
Neither the administration's request nor the sub-committee action included funds specifically designated for the Development Fund for Africa. Africa's share as a percentage of overall bilateral economic assistance decreased from 17.4 percent in FY 1994 to 13.4 percent in FY 1998, and without specific designation the decline is likely to continue.
The legislation must also be considered by the Senate, have House and Senate versions reconciled, and be approved by the President.While quick action is possible, it is more likely that the debate will continue in the fall, after Congress returns from its August recess.
A letter initiated by the InterAction coalition, and signed by more than 60 US-based voluntary organizations, urged Senators "to oppose any significant cuts to humanitarian and development assistance in the FY 99 foreign aid budgets particularly in a time of budget surplus."For the full text of the letter, see http://www.interaction.org/advocacy/fy99.htm, or contact Ian Houston at InterAction at 202-667-8227, ext. 113.Additional background articles from InterAction's biweekly Monday Developments are also available on the InterAction web site (http://www.interaction.org).
Earlier this year, the coalition Faith Action for People-Centered Development Policy presented testimony to the Foreign Operations Subcommittee of the House Appropriations Committee, entitled "Foreign Aid for a Common Future: A Just and Popular Choice."The testimony pointed out that, despite conventional wisdom in favor of cutting "foreign aid," polls show that a majority of the American public--when informed of how little the U.S. provides--actually support levels greater than the existing figures (see The Foreign Policy Gap -- http://www.pipa.org/exec-sum.htm).
The Faith Action statement is availble on the web site
of the Washington Office of the Presbyterian Church
Organization for Economic Cooperation and Development (http://www.oecd.org)
OECD News Release Paris, 18 June 1998
[OECD 29 Member Countries: Australia*, Austria*, Belgium*, Canada*, Czech Republic, Denmark*, Finland*, France*, Germany*, Greece, Hungary, Iceland, Ireland*, Italy*, Japan*, Korea, Luxembourg*, Mexico, Netherlands*, New Zealand*, Norway*, Poland, Portugal*, Spain*, Sweden*, Switzerland*, Turkey, UK*, US*. * indicates member of Development Assistance Committee.The Commission of the European Communities is also a member of the DAC.
Tables and charts referred to in the press release can be found on the OECD web site, under http://www.oecd.org/dac]
Aid and Private Flows Fell in 1997
In a turbulent year for developing and transitional countries, both aid and other financial flows fell in 1997. Total financial flows to all aid recipients fell from $368 billion in 1996 to $272 billion in 1997 (see Chart 2).
* The disturbing trend of reduced aid flows over recent years is yet to be reversed, especially in the largest OECD countries. With declines from most G7 countries in 1997, their assistance, as a group, now represents only 0.19 per cent of their collective GNP, compared to an average of 0.45 per cent for other DAC Members.
* Total private flows peaked in the first half of the year, and then fell significantly in the wake of the financial crisis in East Asia. Most of the decline was due to reduced bank lending, although this remained robust to Latin America. Foreign direct investment is estimated to have increased slightly.
Sources and volumes of development finance in each region vary widely. For example, sub-Saharan Africa received in 1997 an average of some $27 per capita of aid and $3 per capita of foreign direct investment. By contrast, Latin America and the Caribbean received $13 per capita of aid and $62 per capita of foreign direct investment. Recent initiatives to spur development progress in Africa aim to respond to these disparities.
Continued decline in Official Development Assistance (ODA) and Official Aid (OA)
Preliminary reporting for 1997 by Members of the OECD's Development Assistance Committee (DAC) shows that as a percentage of their combined gross national product, ODA has fallen for five consecutive years, from 0.33 per cent in 1992 to 0.22 per cent in 1997, its lowest level ever. In monetary terms:
* total flows of ODA to developing countries declined from $55.4 billion in 1996 to $47.6 billion in 1997 (see Table 1 and Chart 1), a fall of 14.2 per cent;
* roughly half of this drop is accounted for by falls in the exchange rates of other national currencies against the United States dollar. At constant prices and exchange rates, the fall was 7.1 per cent;
* changes in the list of ODA recipients-- notably the progression of Israel from "developing country"status -- have also depressed the 1997 figures. After allowing for these changes the fall in ODA was 3.2 per cent.
DAC Members' contributions of official aid (OA) to countries in transition (Part II of the DAC List) peaked at $9 billion in 1995, particularly reflecting a major debt relief operation for Poland. OA fell to $5.6 billion in 1996. Data for 1997 are not yet complete, but reporting to date suggests at most a small increase, even though a major aid recipient, Israel, transferred to Part II of the List in 1997.
Details of DAC Members' aid performance in 1997
Cuts in the aid budgets of the G7 countries account for almost all of the recent fall in ODA (see Charts 3, 4 and 5). The share of GNP devoted to official development assistance by G7 countries in 1997 ranged between a high of 0.45% for France and a low of 0.08% for the United States (see Table 1 and Chart 5). Of the G7 countries, only Canada and Japan increased their ODA in real terms. In both of these countries, bilateral aid actually fell, but overall ODA rose as they caught up on payments to multilateral agencies, which had dipped in 1996. United States' ODA fell by $3.2 billion, although it should be noted that its 1996 data had included $2.2 billion to Israel, which was no longer on the list of ODA recipients in 1997. ODA from France, Germany and the United Kingdom fell by between 2 and 11 per cent in real terms. Italy reported a fall of 45 percent, reflecting cuts in grants, net loans and especially multilateral contributions, which had been exceptionally high in 1996.
In contrast, aid from the non-G7 countries has remained broadly stable since 1992 and as a group they now provide 28 per cent of total ODA from DAC Members, compared to their 14 per cent share of DAC GNP. Real ODA rose in 11 of the 14 non-G7 DAC donors in 1997. Four non-G7 countries -- Denmark, Norway, Sweden and the Netherlands -- were the only donors to maintain their ODA above the United Nations target of 0.7 per cent of GNP. Aid from the smallest DAC Members -- Ireland, Luxembourg, New Zealand and Portugal -- grew strongly. Australia, Austria, Finland and Spain also reported increases, while ODA from Belgium, Sweden and Switzerland declined slightly.
Of the major providers of official aid (OA) - flows to non-ODA recipients - only the United States has reported an increase in 1997: this is due to the fact that Israel transferred from the ODA to the OA part of the DAC List in 1997. The second largest provider of OA, Germany, has reported a substantial fall, and smaller decreases are reported by Austria, Canada, Italy, Sweden and the United Kingdom.
Goals, means and aid performance
As fiscal restraint programmes in the OECD countries have succeeded in reducing public deficits from 4.3 per cent of combined GDP in 1993 to 1.3 per cent in 199, development co-operation budgets have borne a disproportionate share of expenditure reduction in most countries. The continuing decline in ODA now runs counter not only to the widespread improvements in the economic and budgetary situations of Development Assistance Committee Member countries, but also to the clear policy goals that they have adopted.
Most recently, the G8 Summit leaders meeting in Birmingham in May 1998 re-confirmed their commitment "to a real and effective partnership ... to reach the internationally agreed goals for economic and social development, as set out in the OECD's 21st Century Strategy" and to "mobilise resources for development ... in a spirit of burden-sharing". The global goals embraced in that Strategy - of poverty reduction; improved education, health and gender equality; environmental sustainability; and human rights and good governance - are clearly crucial to the security and well-being of all who will inhabit the earth in the next century.
The 1998 Development Co-operation Report, to be published early in 1999, will report on the extent to which DAC Members are adjusting their aid programmes to meet the challenges outlined in the development partnerships strategy. However, without a renewed commitment to invest adequate and well targeted resources, progress cannot be expected and achievement of the internationally agreed goals will be jeopardised.
Private flows to developing and transition countries
After an all-time high of $286 billion in 1996, net private flows fell back in 1997 to an estimated $206 billion, mainly because of the Asian financial crisis in the second half of the year (see Table 2, which gives details of the data in Chart 2). The initial impact of the crisis was on bank lending to developing countries which fell after the large increases in 1995 and 1996. A reduction in net bank flows to Asia was greater than a parallel rise to Latin America. The Part II countries showed a steady increase in net new bank lending, which reached $12 billion in 1997.
The aggregate of foreign direct investment flowing to developing and transitional countries remained high for the year, while bond lending levelled off at $83 billion, after reaching $97 billion in 1996. It is expected that both these items will be affected in the medium term by the crisis, since Asia was a major recipient of these flows.
The main destinations of all types of private flows are the more dynamic economies in Asia, Europe and Central and South America. Low income countries as a group received a total of $22 billion of private flows, heavily concentrated in China and India. Countries in sub-Saharan Africa, including South Africa, received only $2 billion in foreign direct investment and roughly the same amount in bank flows. They have not been able to issue bonds. The difficulties that the poorest countries are experiencing in attracting resources for development point to a continuing need for aid to help establish conditions that will favour market investment, self-sustaining growth, and attainment of internationally agreed development goals.
Official Development Assistance to Africa, 1990 and 1996 disbursements from OECD members, including grants and net loans, in millions of US dollars
Data from OECD Development Assistance Committee On-Line Database (http://www.oecd.org/dac)
Note: The geographical break-down of 1997 figures is not yet available on-line.
ALL OECD DAC MEMBERS
1990 $15,958 1996 $12,827 Percent change: -19%
Africa South of the Sahara
1990 $11,454 1996 $ 8,707 Percent change: -24%
1990 $499 1996 $417 Percent change: -16%
Africa South of the Sahara
1990 $427 1996 $271 Percent change: -37%
1990 $10,109 1996 $8,707 Percent change: -14%
Africa South of the Sahara
1990 $8,528 1996 $7,046 Percent change: -17%
1990 $1,069 1996 $1,331 Percent change: +25%
Africa South of the Sahara
1990 $830 1996 $1,084 Percent change: +31%
1990 $3,529 1996 $1,647 Percent change: -53%
Africa South of the Sahara
1990 $1,002 1996 $635 Percent change: -37%
Official Development Assistance world-wide, 1990 and 1997 disbursements from OECD members, including grants and net loans, in millions of US dollars
All OECD DAC Members
1990 $54,490 1997 $47,641 Percent change: -13%
1990 $2,470 1997 $2,146 Percent change: -13%
1990 $28,552 1997 $26,602 Percent change: -7%
1990 $9,069 1997 $9,358 Percent change: +3%
1990 $11,394 1997 $6,168 Percent change: -46%
From: email@example.com Message-Id: <199807192033.NAA06337@igc3.igc.apc.org> Date: Sun, 19 Jul 1998 16:32:41 -0500 Subject: Africa: Aid Still Going Down
Editor: Ali B. Ali-Dinar
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