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Africa: Aid Still Going Down
Africa: Aid Still Going Down
Date distributed (ymd): 980719
Document reposted by APIC
+++++++++++++++++++++Document Profile+++++++++++++++++++++
Region: Continent-Wide
Issue Areas: +economy/development+ +US policy focus+
Summary Contents:
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.
+++++++++++++++++end profile++++++++++++++++++++++++++++++
Introductory Note:
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 average percentage 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.odc.org/programs/csf/pipa_brf.html).
The Faith Action statement is availble on the web site of the Washington
Office of the Presbyterian Church (http://www.pcusa.org/pcusa/nmd/wo/features/fa9804.htm).
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
Africa Continent-Wide
1990 $15,958 1996 $12,827 Percent change: -19%
Africa South of the Sahara
1990 $11,454 1996 $ 8,707 Percent change: -24%
CANADA
Africa Continent-Wide
1990 $499 1996 $417 Percent change: -16%
Africa South of the Sahara
1990 $427 1996 $271 Percent change: -37%
EUROPEAN UNION
Africa Continent-Wide
1990 $10,109 1996 $8,707 Percent change: -14%
Africa South of the Sahara
1990 $8,528 1996 $7,046 Percent change: -17%
JAPAN
Africa Continent-Wide
1990 $1,069 1996 $1,331 Percent change: +25%
Africa South of the Sahara
1990 $830 1996 $1,084 Percent change: +31%
UNITED STATES
Africa Continent-Wide
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%
Canada
1990 $2,470 1997 $2,146 Percent change: -13%
European Union
1990 $28,552 1997 $26,602 Percent change: -7%
Japan
1990 $9,069 1997 $9,358 Percent change: +3%
United States
1990 $11,394 1997 $6,168 Percent change: -46%
This material is being reposted for wider distribution by the Africa
Policy Information Center (APIC), the educational affiliate of the Washington
Office on Africa. APIC's primary objective is to widen the policy debate
in the United States around African issues and the U.S. role in Africa,
by concentrating on providing accessible policy-relevant information and
analysis usable by a wide range of groups individuals.
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