Global development leadership is faltering, yet remains necessary for advancing an equitable recovery from the COVID-19 pandemic, tackling global challenges, and driving progress towards the sustainable development agenda. We suggest that as traditional forums for leadership fail to make progress, informal groups provide an opportunity to advance common interests.
CGD Policy Blogs
The phrase “giving with one hand while taking with the other” has never been more apt than when applied to the UK’s recent approach to aid.
Under current plans, the UK will intentionally reduce the total amount of aid it makes available to developing countries by increasing its contributions to an IMF lending pot–and take credit for doing so. Because of how they are measured, the UK contributions to the IMF will displace other aid more than one-for-one, so overall, aid will be reduced.
There is no economic reason to reduce aid to accommodate such loans. Arguments about the deficit are irrelevant given that loans of this nature do not count towards it.
Here, we set out how this would work, how Treasury claims that they are simply “following the rules” do not justify this move, and what the IMF can do to mitigate the impact of this perverse move.
There are a plausible set of circumstances under which the UK’s status as a serious bilateral donor would be under existential threat. They would take the Foreign, Commonwealth & Development Office (FCDO) from having slightly more than £8 billion in 2019 over which it has full flexibility to spend bilaterally on its priorities in the most effective manner it can, to having just about £2 billion next year. This would amount to a complete gutting of the UK’s status as a major bilateral development presence, essentially depriving its new Secretary of State of one its most potent weapons almost immediately after she assumes the brief.
The new foreign secretary, Liz Truss, will meet with the chancellor in the coming weeks to determine her department’s budget over the coming three years. If the chancellor maintains his current stance on counting aid spend even where it has no fiscal cost, and also treating the aid target as a ceiling rather than a floor, it would be like the tail wagging the dog,* with the Chancellor’s stance on the aid target (the tail in this case) directing the UK’s international approach (the much-weightier dog) instead of vice versa, as one would hope. And it could also mean the foreign secretary would have to implement a third round of cuts in UK aid in spring 2022.
A year ago, the UK Government announced the integration of the Department for International Development (DFID) into the Foreign and Commonwealth Office (FCO), which became the Foreign Commonwealth and Development Office (FCDO). Soon after the merger, the UK’s development budget was cut by £4.5 billion and reduced from 0.7 percent to 0.5 percent of gross national income (GNI). The cuts—which disproportionately hit bilateral spending and some UN agencies—have seen steep reductions in support for some of the world’s poorest countries.
The recent $5 billion overnight cut in UK foreign aid highlights the importance of understanding the politics of aid spending. This blog explores the role of international travel by rich country citizens to poorer countries in determining attitudes towards aid, and the potential value of volunteer trips in shaping MPs development policy decisions.
After deciding that the UK can only afford to spend around £10 billion in aid, the Treasury is reportedly proposing further cuts in real aid spending solely to accommodate some unusual (but ODA-eligible) accounting items under the 0.5 percent target. These accounting items have no bearing on the affordability of, or expected benefits from, spending the initial £10 billion. In contrast to 2005, it seems the Treasury is about to let accounting anomalies dictate real-world decisions, and as a result, worthwhile programmes risk being cut for no other reason than to keep ODA constant as a percentage of GNI. There is no economic rationale for this, “difficult fiscal circumstances'' or otherwise
If B3W is to be the better Belt and Road, it will have to embrace the role of government in infrastructure provision and ensure private sector infrastructure projects are designed and run in the public interest. Otherwise, and despite the denials-, low- and middle-income countries would be right to see it as not about them, but just about China.
Since the Foreign, Commonwealth and Development Office (FCDO) began implementing the steep cuts to the UK’s aid budget imposed upon it by the Treasury, much of the immediate reaction has focused on the immense human cost of reducing aid during a global pandemic. What has not been clear, however, is if the cuts are being used to realise a new vision of what UK aid is for. This blog sets out where it looks like the portfolio is going, and the next round of challenges it faces.