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Does aid go to the poorest?

The two largest bilateral donors, the United States and Japan, and the largest multilateral donor, the European Commission, spend much of their aid budgets in small, relatively well-off countries. Whilst a disproportionate amount of aid is given to these few small countries many larger and poorer nations receive a lot less. Can anything be done to re-target assistance to the chronically poor?

A paper from the Chronic Poverty Research Centre analyses data on the value of aid given in 2001 by the 27 bilateral and 19 multilateral donors belonging to the Development Assistance Committee (DAC).

Japan stands out from other bilateral donors as almost two thirds of its aid is in the form of soft loans rather than grants. Also bucking trends are the Scandinavian donors who have exceeded the 1969 Pearson Committee recommendation that industrialised countries should give at least 0.7 per cent of their national incomes in aid. Indeed, generous Denmark gave over one per cent in 2001.

The Netherlands and UK’s bilateral aid programmes are commended for giving significant assistance to a number of poor African countries and to the populous countries of South Asia (Bangladesh, Pakistan and India) which are home to 45 per cent of those below the global poverty benchmark of income of less than a dollar a day.

Egypt and Russia lead the middle income countries which appear to receive a disproportionate amount of DAC aid. The three most populous poor countries – India, China and Nigeria – receive far less aid than their contributions to the global poverty headcount suggest should be given.

The author describes a scale of measurement (a modification of the ‘Suits index’ used by economists to determine whether tax systems are progressive) to assess whether donors are helping the neediest large and small nations. Loans provided by the World Bank receive high marks as they target both the major large developing countries and the smaller least developed countries. The European Union scores badly as large amounts of grant aid go to Brazil, South Africa, Turkey and relatively well-off states in Eastern Europe.

The author challenges the aid community to ask:

why four of the six most important bilateral donors and two of the three most important multilaterals give significant proportions of their aid budgets to middle income countries
whether ex-colonial attachments, geo-political objectives and desires to promote trade take precedence over professed poverty reduction objectives
whether aid sent to the poorest countries actually reaches the poorest groups
whether their aid concentration patterns are exacerbating the risk that in many large poor countries sub-regions will miss out from significant growth or aid at the national level.

To increase prospects of aid being re-targetted to those in greatest need, donors should:

complement analysis of monetary poverty (using the $1/day measure) to look at such non- monetary indicators of poverty and ill-being as child malnutrition, primary school enrolments, under-five mortality, adult illiteracy, access to safe water and incidence of HIV/AIDS
compare aid disbursements before and after adoption of the Millennium Development Goals to see if donors are taking seriously their commitments to achieving the MDGs
extend analysis to include other foreign direct investment and other types of financial flows to developing countries
refine techniques for assessing the numbers of people in very poor countries who live in chronic poverty.

Research on non-monetary indicators of poverty and ill-being in relation to aid is currently being conducted at the Chronic Poverty Research Centre on behalf of the UK Department for International Development.

Source(s):
‘Aid for the poorest? The distribution and maldistribution of international development assistance’ by Bob Baulch, Working Paper 35, Chronic Poverty Research Centre, September 2003 Full document.

Funded by: Department for International Development

id21 Research Highlight: 27 February 2004

Further Information:
Bob Baulch
Institute of Development Studies
University of Sussex
Brighton BN1 9RE
UK

Tel: +44 (0)1273 678774
Fax: +44 (0) 1273 621202
Contact the contributor: R.J.Baulch@ids.ac.uk

Institute of Development Studies (IDS), UK

Chronic Poverty Research Centre
IDPM
University of Manchester
Harold Hankins Building
Precinct Centre
Oxford Road
Manchester M13 9QH
UK

Tel: +44 (0)161 275 2810
Fax: +44 (0)161 273 8829
Contact the contributor: elaine.m.rossi@man.ac.uk

Chronic Poverty Research Centre, IDPM, UK

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