Aid policy experts say that G8 countries are not reaching their aid targets, and instead are reporting “inflated aid”. Funds used for debt cancellation and on foreign students or refugees, accounted for 10% of EU total reported “aid” in 2010. The result is that aid figures can vary widely, and are often reported in inflated form, hindering the aid debate and complicating transparency and accountability.
IRIN News
May 31st, 2011
Poor-performing donors were lambasted by UK Prime Minister David Cameron at this year’s G8 leaders’ meeting for failing to move towards meeting 0.7 percent [of gross national income] aid targets; but most major donors are to blame for tying aid to donor-based contractors, say aid watchdogs, and for reporting money spent at home as aid.
AidWatch, a group of European aid experts representing 1,600 NGOs, estimates European Union members reported US$7.4 billion (EU5.2 billion) in inflated aid in 2010 - that is, the money was actually spent on debt cancellation, on foreign students, and on refugees in donor countries.
This is equivalent to almost 10 percent of the total aid provided that year.
Donors may report the first year of housing costs for refugees, and costs spent on foreign students, as part of official development aid (ODA).
In 2009 - the most recent year for which data is available - the US reported the highest volume of aid on refugees at home ($740 million), while Canada and France reported the highest percentages of their overall aid (6 and 4 percent, respectively) on refugees at home, according to Josh Lozman, chief of staff at aid watchdog ONE.
France, Germany and Canada, the only G8 countries that report foreign student costs as part of ODA, spend 14, 8 and 9 percent respectively.
Consultants
A significant proportion of the rest is tied - that is, spent on consultants and contractors from donor countries, said Karin Christiansen, director of NGO Publish What You Fund.
Much progress has been made to untie aid: several large donors have stopped formal aid-tying, including the UK, Canada, Denmark, Australia, Norway and Switzerland; while bilateral untied aid grew from 46 percent to 76 percent as a proportion of all aid between 2001 and 2007, according to the Organisation for Economic Cooperation and Development’s Development Assistance Committee (OECD DAC).
But these figures exclude food aid and “technical assistance”. When these sectors are included, 17 percent of all OECD aid was tied in 2009, according to ONE; the biggest offenders being Italy at 38 percent; the US at almost a third; and Germany at 27 percent.
Even when aid-tying is banned, contracts can still easily end up in the coffers of companies from donor countries, according to Christiansen. A study of UK contracts awarded in 2009 said 65 percent were awarded to UK companies.
Aid-tying makes the aid 30 percent more expensive, said Christiansen. “Tied aid is like a form of subsidy. Even if you’re less efficient, you’ll get the contract,” she told IRIN.
“Untying aid is about allowing greater efficiency and flexibility to aid recipients, increasing country ownership over development,” said Lozman. “It is also more cost-effective.”
Debt relief, inflation
Analysts also take issue with debt relief being included as part of official development aid figures, said Franz Berger, coordinator at AidWatch.
Many donors include past, current and future interest payments in their aid figures, which distorts reality, he said. “ODA is presented as money to lift the poor and marginalized out of poverty, but debt relief is not a transfer of resources to a developing country - so it should not be included.”
In the end, aid figures vary wildly depending on who is reporting them and how. In the pre-G8 accountability report, leaders claim to have fallen short of 2005 Gleneagles aid commitments by just $1 billion per year; while the OECD DAC estimates they were $22 billion short - the difference, says Berger, is that donors did not take into account inflation.
Spending aid at home, and aid-tying are unlikely to disappear soon, said Christiansen, but more open reporting of aid figures would at least enable a more honest debate, and less quibbling over numbers .“This is why we need transparency - so we can have a genuine conversation about the numbers… We can’t influence decision-making around spending, if all the information is based on hunch and rhetoric.”
Donors pledged to improve transparency as part of a wider agenda to improve aid quality when they signed up to the Paris declaration on aid effectiveness in 2005, and the follow-up Accra Agenda for Action in 2008.
In the future, she hopes to see links between donor aid spend on projects and procurement databases, so people can examine exactly where the money is going; how much is tied; and how efficient the procurement is. “We can then shift from endlessly arguing over which numbers are accurate, to having a far more interesting conversation: Is the aid actually working?” she said.
Progress, with caveats
There has been progress, said ONE’s Lozman. Donors now report on “country programming aid” (CPA) - or aid that can be programmed in-country; and as a proportion of total G7 official aid CPA has increased from a third in 2005 to 61 percent in 2009.
G8 leaders stressed aid transparency and accountability at this year’s summit, stating in a communiqué: “We will improve transparency of our aid information. In particular, we will make further efforts on publishing information on allocations, expenditure and results.”
ONE and Publish What You Fund welcome these commitments. But Luca De Fraia, global governance expert and NGO ActionAid’s deputy director in Italy, stresses donor accountability must focus as much on recipients as on taxpayers at home.
Donor rhetoric over recent months has emphasized accountability to taxpayers - as evidenced, for example, by several statements by European Development Commissioner Andris Piebalgs; and a pre-G8 communiqué from President Barack Obama and UK Prime Minister David Cameron.
What is lacking, according to Da Fraia, is a process by which donors are held accountable when they fail on their promises. “The system now is very unbalanced,” he said, calling for sanctions on donors whose aid projects cannot be accounted for.
These questions and others will be debated at the fourth high level forum on aid effectiveness to be held in Busan, South Korea, at the end of 2011.
