What Does Poverty-Focused Foreign Aid Look Like?Poverty-focused aid goes to the poorest countries.Because poverty reduction is not the guiding principle of the U.S. foreign assistance program, aid is often not directed to the poorest countries. Many of the top recipients of U.S. foreign aid are selected for commercial, political, and security reasons unrelated to poverty. The U.S. directs just 29 percent of its development assistance to the least developed and low-income countries.[1] On average, other major donor countries give over half of their aid to the poorest countries. Since 2003, the UK has maintained a policy of directing 90 percent of its aid to low income countries.[2] Foreign aid reform should establish country need as a clear criterion for assistance. Poverty-focused aid is untied.With a few exceptions, U.S. foreign aid is “tied.” This means that goods procured with foreign aid funds must be purchased from U.S. suppliers, and services — such as the training of teachers or health care workers — must be provided by U.S. firms. While this practice supports a domestic constituency, it fails to fully invest in local capacity and is often grossly inefficient. U.S. food assistance is among the most egregious examples of tied aid. The requirement that 75 percent of food aid be carried on U.S. ships may add an additional 50–75 percent to delivery costs, and 65 cents of every dollar is spent on overhead costs.[3] Poverty-focused aid is more multilateral.Current U.S. law requires that foreign assistance programs be clearly identified overseas as American aid, and USAID has extensive rules and regulations for marking projects as “from the American people.” While effective aid can help soften the U.S. image abroad, sometimes getting credit is at odds with getting results. Multilateral aid — funding given in cooperation with other contributing countries — allows for better coordination, and reduces the burden on recipient countries of managing funds from multiple donors. The U.S. can also leverage its multilateral spending to encourage contributions from other donors. Unfortunately, while other donor countries give about 28 percent of their aid through multilateral channels (like the Global Fund to Fight AIDS, Tuberculosis and Malaria), the U.S. gives far less — as low as 8 percent in 2005.[4] Poverty-focused aid provides our fair share.While the U.S. is the largest international aid donor in absolute terms, it is not the leading donor relative to the size of its economy. The U.S. gives just 0.16 percent of its national income to development assistance, well below the international target of 0.7 percent, and last among major donor countries.[5] A serious commitment to achieving the Millennium Development Goals will require a scale-up in aid dollars. [1] OECD. The United Status Development Assistance Committee Peer Review. 2006. http://www.oecd.org/dataoecd/61/57/37885999.pdf [2] DFID. Public Service Agreement 2003–2006. July 2002. http://www.dfid.gov.uk/pubs/files/publicserviceagreement03-06.pdf [3] GAO. Various Challenges Impede the Efficiency and Effectiveness of U.S. Food Aid. April 2007. http://www.gao.gov/new.items/d07560.pdf [4] OECD. [5] OECD. |