Response to report
Related pages: Millennium Development Goal
8: Aid, Trade, Growth and Global Partnership | Case studies |
Rough
Guide to a Better World
1. ActionAid's "phantom aid" is real aid
Middle-income countries
Aid to middle-income countries includes
reconstruction in
Sri Lanka
following the tsunami; in
Grenada
after storms hit the island; and support for AIDS orphans in
South Africa. One third of the poorest people in
the world live in middle-income countries.
Debt Relief
Debt relief
frees up money to feed people, educate children and combat the scourge of AIDS
In 2000, Uganda received debt relief of approximately US$700 million, which helped Uganda to increase the amount it spends to reduce poverty by over 75% (from $402.5 million in 2000 to $719 million in 2003). Uganda has abolished health user fees, increasing attendance at clinics by 87% since 2000.
- Five goals, ten countries, many achievements including more on primary school enrolment in Tanzania.
Technical Assistance
Image courtesy of WaterAid
It is right that donor countries share expertise and support institutions as well as giving money to partners. For example, DFID has used technical assistance to help:
- Rwanda: The Revenue Authority has increased revenue by 40% over 2 years, allowing spending on health and education to double;
- Uganda: We have supported a radio station in northern Uganda which has become a major force in conflict resolution. By publicising offers of amnesty, the station has encouraged a large number of combatants including child soldiers to return home;
- Malawi: Our technical assistance to the justice sector has reduced the proportion of prisoners on remand from 50% to 22% of the prison population;
- India: We have helped India's National AIDS control programme to map high-risk groups, so that resources can be targeted where they are most needed;
- India: We have helped Indian farmers to test out new varieties of drought-resistant seeds;
- The Caribbean: We have helped Caribbean countries to negotiate trade arrangements on bananas and sugar;
- South Africa: We have helped provincial education departments to reform their curriculum and provide in-service training for their teachers;
- Lesotho: We have helped Lesotho to develop a new constitution and hold free elections in 2002, after the coup in 1998;
- Grenada: We have financed a forestry expert to help reforestation after storms hit the island.
2. ActionAid's figures don't stack up:
For example:
- They deduct the same bits of money from "real aid" several times over. For example, the transaction costs of technical assistance to a middle-income country are deducted three times.
- They claim our administration costs are 11.5% when they are actually 5% (£187 million against a programme spend of £3.9 billion in 2003/4).
- They have plucked from the air an assumption that 13% of all donor aid is wasted in "transaction costs" of donor activities. Transaction costs are things like the time governments spend dealing with accounting for donor money. They are very difficult to measure. But it is misleading to imply that transaction costs are the same for all donors, irrespective of what type of aid they give.
3. DFID agrees with ActionAid's suggestions for improving aid.
That is why we are:
- Giving 90% of aid to the poorest countries
- Using aid only to support poverty reduction
- Working together to support partner governments' own plans for development and poverty reduction, rather than imposing policy choices on them
- Working for better coordination among donors behind country-led plans, to reduce aid conditions and transaction costs
- We have untied all our aid since 2001
- Making aid more predictable
- Strengthening monitoring so that both donors and recipients are held accountable for aid effectiveness.
Background
1. ActionAid claim that 37% of UK aid is "phantom", based on the following assumed discounts from DFID's overall programme:
- Debt relief - 8.5% (all debt relief is deducted)
- Administration costs - 3.5% (excess over an 'acceptable' 8%)
- Technical assistance - 12% (75% of the total value of technical assistance)
- Transaction costs - 13% (standard rate of discount for all donors)
2. ActionAid recognises that the UK performs well on targetting aid to the poorest countries (we provide only 10% of aid to middle-income countries, compared to the 30% which they regard as justified), tied aid (all UK aid is untied) and spending on immigration services (the UK does not count any immigration-related expenditure as aid).
3. On debt relief, ActionAid argue that this should be additional to ODA. They also argue that it is wrong to count the total stock of debt as a grant in the year it is granted - because the impact on the country is to save debt service over many years, and the country might well not have paid the debt service anyway.
4. The way in which debt relief is counted as official development assistance is agreed with the OECD/DAC. We agree that it would be better to count this as and when the debts were due to be repaid, rather than as a single one-off aid credit. But to discount 100% of the debt relief goes too far - some debt relief is given for debts that would otherwise be repaid and there is a net resource benefit.
5. DFID's aid to Middle-income countries was high in 2003/04 because of spending in Iraq. It has since fallen - from 26% of the bilateral programme in 2003/04 to 16% in 2004/05 (provisional figure), and we plan to meet our target of reaching 10% in 2005/06.
6. Our spending on consultants has dropped from 10% of the aid programme in 1997/98 to 5% (£213 million) in 2003/4.
7. Our spending on administration costs is not just the costs of administering projects. DFID is a development ministry, influencing international policy on globalisation and trade. For example, we use our administration costs budget to finance all our policy work - including our work to tackle corruption through the Extractive Industries Transparency Initiative.
