Development Assistance

Across the globe, smart and targeted aid is saving lives, supporting people in poor and fragile countries, and laying the groundwork for sustainable economic growth in developing countries.

The Challenge

In 2000, 189 countries adopted the Millennium Development Goals (MDGs). These eight goals were designed to reduce global poverty and disease by 2015, and transform the lives of millions in the world’s poorest countries.

We are now on the final stretch for these ambitious targets, and ONE’s 2013 DATA Report revealed the remarkable progress being made across many sub-Saharan African countries. But poor countries can’t reach the goals alone. By signing on to the MDGs, world leaders acknowledged that progress towards the first seven goals would largely depend on leadership in developing countries.

These goals are an end to extreme poverty and hunger, universal primary education, gender equality, reduced child mortality, improved maternal health, progress in the fight against HIV/AIDS and other diseases, and environmental sustainability. But by committing to goal eight – a global partnership for development – wealthy nations around the globe clearly affirmed the importance of donor support in the fight against extreme poverty and disease.

The spirit of this commitment has been captured in several agreements since the 2000 Summit. In 2002 at the International Conference on Financing for Development in Monterrey, Mexico, wealthy countries committed to spending 0.7% of their gross national product on development. At the Gleneagles Summit in 2005, the G8 agreed to deliver an additional $50 billion in global development assistance by 2010, half of which – an additional $25 billion – would be for sub-Saharan Africa. However, only 61% of the promised increases were actually delivered by 2010.

The Gleneagles agreements expired in 2010 and have not been replaced with any similar set of commitments. Key donors including the United States, Canada and Japan no longer have overall official development assistance (ODA) targets. The European Union (EU) plus Norway represents the only group of countries that have ongoing collective targets to increase ODA as a percentage of gross national income (GNI).

These countries committed to increase ODA to 0.7% of GNI by 2015 and to provide 50% of all increases to Africa. ONE’s DATA Report, which tracks progress against donor commitments, found that EU countries have slipped backwards on meeting their collective Africa target, having achieved just 13.8% of the promised increases so far. Collectively, EU countries will need to boost their aid to Africa by $28.9 billion between 2012 and 2015 in order to keep their promise.

In 2012, global aid flows from rich countries fell for the second year in a row – a scenario we have not seen since the 1990s. The decline of 2.8% reveals the continuing impact of the global economic crisis, with government budgets across Europe coming under particular pressure. In this environment, it is even more critical that donors target their aid investments effectively and prioritise those countries that are most in need of support. As poor countries struggle to cope with the effects of the food, climate and global financial crises, progress – supported by donor assistance – is at risk.

While core development assistance (predictable and programmable money which actually flows from the donor country to the partner country) is expected to rise slightly this year and remain steady, the allocation of that aid is expected to increasingly favour middle-income countries, primarily in the form of loans rather than grants. In many poor countries, particularly across sub-Saharan Africa, aid remains the largest resource for development spending, but aid flows to many of these countries are already falling. This poses a serious challenge and it is vital these trends are reversed. If donors turn away from sub-Saharan Africa now, it would jeopardise many hard-earned successes.

 

The Opportunity

ONE’s DATA Report has shown that sub-Saharan African governments’ own budgets account for the majority of public resources in the region, but aid remains a critical part of the picture. Across the globe, smart aid from rich countries is helping to unlock other sources of finance, build infrastructure and lay the groundwork for continued and sustainable growth.

But more importantly, it is essential to the poorest and most fragile countries that still depend heavily on development assistance. Resources available to poor countries have more than doubled over the last decade and considerably changed. Foreign direct investment (FDI), remittances and loans have significantly increased. But aid remains the largest resource for the poorest countries, mostly in sub-Saharan Africa. More than 100 million people in extreme poverty live in countries where government spending is less than PPP$200 per person per year (55 cents a day), and in those countries more than half the population lives below $1.25 a day. As the only resource flow which focuses uniquely on poverty reduction, aid can literally save lives in these countries.

The current MDGs and 0.7% ODA commitment will expire in 2015 and the UN is working with governments, civil society and other partners to agree on an ambitious post-2015 development agenda to eradicate extreme poverty by 2030. This New Development Agenda is likely to include targets on development finance.

The Global Fund to Fight AIDS, Tuberculosis and Malaria saved an estimated 8.7 million lives between 2004 and 2012. As of end-2013, it had provided 360 million mosquito nets to help protect families from malaria, testing and treatment for 11.2 million cases of tuberculosis and antiretroviral therapy (ARV) for 6.1 million people. Since 2000, the GAVI Alliance has supported the immunisation of 440 million additional children, saving 6 million lives. GAVI’s support for vaccines through to 2015 will contribute to averting close to an additional four million future deaths.

Targeted development assistance and savings from debt relief have also allowed an extra 54 million children to start primary school in sub-Saharan Africa between 1999 and 2011. These results were achieved with only a portion of the assistance promised to poor countries, suggesting that the full amount could have an enormous impact.

For development assistance to be effective, it must also be transparent. Citizens both in donor and developing countries should be able to follow the money and hold their leaders to account over how it is spent. Publish What You Fund’s 2012 Aid Transparency Index showed that aid transparency is improving, though progress is modest. The 2012 average score was just over 41%, compared to 34% in 2011. At their 2013 Summit, G8 leaders pledged to implement the International Aid Transparency Initiative (IATI) by 2015, a common standard on publishing comprehensive and open aid data. All donors now need to join, and as soon as possible.

Donors are also developing tools to provide sustained development funding through innovative financing mechanisms. For example, the International Finance Facility for Immunisation uses financial pledges by government donors to issue bonds (long-term, government-backed debt) in capital markets in order to buy vaccines.

The Advance Market Commitment is an agreement by donors (including Canada, Italy, Norway, Russia, the UK, and the Bill and Melinda Gates Foundation) used to spur pharmaceutical companies to focus their efforts on otherwise neglected diseases, by guaranteeing a good market if they successfully develop a vaccine to protect children against pneumonia and meningitis, which could save 7 million lives by 2030.

Partnerships with the private sector are also key. The public are supporting the Global Fund to Fight AIDS, TB and Malaria every time they buy a (RED) product. Innovative mechanisms like these raised an estimated $57 billion for development between 2000 and 2008.