1

Aid and Debt: The Challenge at Gleneagles

Glasgow University Pre-G8 ConferenceDuncan Green, Head of Research, Oxfam GB

2

Compared to achieving the MDGs, on current trends…

45 million more children under five will die between 2005 and 2015

247 million more people in sub-Saharan Africa living on less than $1 a day in 2015

97 million more children still out of school in 2015

53 million more people without proper sanitation facilities

3

The case for aid

Econometric studies Case study evidence at national level Evidence for productive use of aid at

grassroots level in many low-income countries

To meet the MDGs, we need immediate extra $50 billion now and binding timetables to meet 0.7% by 2010

4

Aid levels up, but generosity downNet ODA, $ million and as a percentage of GNI, 1960-2004, OECD countries, 2003 prices

0

10000

20000

30000

40000

50000

60000

70000

80000

1960 1965 1970 1975 1980 1985 1990 1995 20000.00

0.10

0.20

0.30

0.40

0.50

0.60

Net ODA $ Million

ODA as a % of GNI

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Progress on meeting the 0.7% targetNet ODA as % of GNI, OECD donors, 2004 preliminary data

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Making aid work better for poverty reduction

Too many donors Poor coordination eg on allocation Conditionality: undercutting ownership Too slow!

7

‘Effective’ aid volumesNet ODA by purpose, 2002

8

Expect delays in aid deliveryResponses to the question `Generally speaking, how late do the donor’s aid disbursements arrive?’

35

20

25

3

14

21

29

21

0

5

10

15

20

25

30

35

40

ON TIME 1-6 MONTHS 6-12 MONTHS OVER 1 YEAR

All otherdonors

EC

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Governance and Corruption

Corruption is both a symptom and a cause of poverty

Countries become less corrupt as their economies grow

Aid is part of the solution to corruption In Africa, political governance improving,

economic is lagging ‘Operation Rathole’ Congressman (later Senator) Everett

McKinley Dirksen (R-Ill.)

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Corruption is not an excuse for inaction on aid…….. When? 1947 About? The Marshall Plan

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Debt repayments still divert vital government revenue36.6

28.8

24.121.8 21.1 21

18.8 18.7 18.1 17.7 17.115.6 14.9

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35

40

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What we got on debt from G8 Finance MinistersPlus Side Permanent

cancellation Includes IMF debts Additional Aid will be

given to make up the debt relief

$1.5bn a year saved on debt service

$ 55bn written off debt stock

Concerns Additional aid may

not go to write-off countries, leaving them no better off

Only 18 countries included, with nine to follow, out of 60+ low income countries that need debt relief (10x amount agreed)

Doesn’t cover IDB

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Conclusions and recommendations:

Build on debt deal to ensure genuine additionality and widen group of countries

More and better aid is needed: More:

– Immediate $50 billion aid hike – binding timetables to meet 0.7 by 2010

Better: – harmonise donors – restrict use of conditions

Corruption is not an excuse for inaction And above all, don’t forget trade