In 2005, donors at the G8 summit in Gleneagles, Scotland promised to double aid by up to $50 billion in five years — an ambitious promise that has not been matched by reality.
Furthermore, a trend since then towards more aid delivered via grants risks going into reverse as cash-strapped rich-country finance ministers seek out cunning ways to make their development budgets go further.
For instance, by most definitions a bilateral loan qualifies as “aid” if a quarter of it is a grant, meaning donors can cut today’s cost of their aid bill by 75 percent, and then swallow the cost of a low lending rate over the duration of the loan.
“In 2009, France’s proportions of aid going in loans just rocketed,” Coppard said. “This theoretically will need to be paid back.”
The implications of such a switch by other donors would be dire, burying many African states under the same mountain of obligations that triggered the 2005 Heavily Indebted Poor Countries (HIPC) debt forgiveness initiative.
For example, if all its overseas grants became loans tomorrow, Tanzania would be running a budget deficit of a staggering 25 percent of GDP — a ratio that would leave its plans for a $500 million Eurobond dead in the water.
Debt may be appropriate for specific projects that generate government revenues to service the debt, but if borrowed funds are sunk into more general budget substitution, experimentation, projects that reflect donor priorities that may not have local buy-in or results, it seems a stretch to equate a loan to a grant or gift.
Worth noting that Kenya specifically has a had a big run up of domestic debt recently.
Texas in Africa has a great related multi-part series of discussion questions May 4-7 about the Western approach to aid and development in Africa:
This week I’ve been trying to sketch an outline of how Westerners tend to develop and characterize our relationship with Africa and the people who live there, specifically with reference to the international aid and development system. I’ve argued that the savior mentality is misguided, that Africa is not rightfully ours to save, and that a better way to assist would be through a paradigm of empowerment. . . .
Today I want to conclude this series by thinking about what is probably the biggest barrier to moving into an empowerment paradigm: the governments that give and receive aid. . . .
Why? Because aid – for donor governments and the governments which receive the bulk of aid – is inherently political. Except in cases involving natural disasters or epidemic disease, donors don’t typically give freely to everyone out of the goodness of their intentions. Aid projects are funded at least in part (and sometimes entirely) on the basis of donor priorities. When aid projects take into account the real, expressed needs of recipients (which is, I’m glad to say, increasingly real for most project), they are often structured in such a way as to advantage suppliers or producers in the donor state, or to reward good governance or provide support to an ally.
As we might expect, there is often a contrast between donor goals and what is actually needed in order to improve the material situations of the recipients. . . .