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International Aid

International Aid. Africa in the Global Economy Dr. Renata Serra – April 17 th 2007. Official Development Assistance. ODA definition: bilateral grants and loans on concessional terms, and official contributions to multilateral agencies from 22 OECD members (DAC) ODA includes:

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International Aid

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  1. International Aid Africa in the Global Economy Dr. Renata Serra – April 17th 2007

  2. Official Development Assistance • ODA definition: • bilateral grants and loans on concessional terms, and official contributions to multilateral agencies from 22 OECD members (DAC) • ODA includes: • Non-financial components (technical cooperation) • Food aid and emergency aid e.g. non-development aid • Agencies’ own administration costs • Debt relief • Transfer to multi-lateral aid agencies • ODA excludes: • Aid from non OECD member governments – e.g. China • Private charity giving (e.g. foundation like Bill and Melinda Gates)

  3. OECD Countries’ Net ODA 1990-2005 (and projections until 2010)

  4. The debate on aid levels • Aid should increase considerably • MDGs; UN system; British DfID and others • J. Sachs ‘The end of poverty’: $70 per person • Arguments: • Renewed confidence in the effectiveness of aid • Better conditions in recipient countries • Aid is too much • W. Easterly “The white man’s burden” • Arguments: • Aid maintains corrupt and non-legitimate governments • The ills of aid are greater than its benefits • Aid is ineffective or even counter-productive

  5. The debate on aid effectiveness • What does figure 8.2 tells us about aid effectiveness? • What should aid be effective for? • How can the effectiveness of aid be demonstrated? • Ex: the paradox of US food aid! Aid for whom?

  6. Aid effectiveness (cont’d) • Aid and the culture of dependency: • Are countries and societies like people? • Perverse aid regimes and biased donors-government relationships • The politics of aid: van de Walle • Little relationship between aid flows and developing countries’ long term needs: • Food aid which disposes of agricultural surpluses • Provision of surplus commodities of little economic value • Administrative costs • Grants to NGOs and to domestic agencies • Technical co-operation grants which pay for the services of nationals of the donor countries

  7. Distribution of aid Use of $30 p.c. of aid to SSA in 2002: USA: Out of $3 p.c. to SSA, the aid per African is 6 cents Source: J Sachs “The end of poverty” p. 310

  8. When is aid effective? • Aid can be effective for economic growth and poverty reduction if: • It is sustained over time and is predictable • Recipient countries have effective institutions • It is based on true partnership and inclusive processes • Policies are owned and have domestic support  Hence the current emphasis on governance, public policy and institutional capacity building

  9. No single blueprint • Assessing aid effectiveness is a difficult exercise because: • There are other objectives for aid other than development • Aid and money are fungible • Development is itself a complex and elusive goal • Successes are shared between many actors and merits are very difficult to attribute • Aid must differentiate among countries • There is no single recipe for promoting development

  10. Should aid flows increase? • Yes, but: • Aid should go where the needs are the greatest • Aid should reward good performance • Aid should respect local absorptive capacities • Aid-per capita is the highest in small countries and post-conflict societies • Focus on proven effective types of aid • Aid may not be the main channel of support from rich to poor countries: • Trade, debt, FDI, and other global issues

  11. Useful tools • Recommended websites for the aid topic: • www.globalissues.org/traderelated/debt/usaid.asp • www.oecd.org/dac

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