Aid and beyond: Mobilising more resources for financing development

By Geert Laporte on the Friends of  Europe Website The scenario is quite familiar. If budget cuts are to be made in times of crisis, development spending is the first and easiest target for European policymakers. In preparing for the 2013 budget, several EU member states seem to have forgotten about their longstanding commitments to reach the 0,7% target of GDP as Official Development Assistance (ODA) by 2015.

Cutting development budgets first is also common practice in EU institutions. In trying to broker a compromise deal on the multi-annual budget for 2014-2020, EU Council President Herman Van Rompuy, has proposed the biggest proportional cuts in the ‘Global Europe’ chapter (-9%) and the European Development Fund (-11%). Clearly these proposals provoke less opposition than cutting budgets that directly affect European citizens such as the Common Agricultural Policy or Cohesion funds.

How much should we be worried that global and EU aid budgets are declining for the first time since 2000? Let there be no misunderstanding: at least 15 African low income countries still very much depend on foreign aid. In proportional terms the aid share is substantially higher than the revenue generated by these developing countries themselves. 

However, while global aid counts for roughly 100 billion Euros a year, its share is largely surpassed in many middle income developing countries by other financial flows such as remittances, foreign direct investments and revenues from the extractive industries. These other financial flows are increasingly important to tackle longstanding development problems and the immense new global challenges. 

Countering for example the devastating effects of climate change in Africa will require substantially more resources than current aid budgets are able to provide. The post 2015 development agenda therefore requires an ambitious financial strategy that looks beyond the traditional “aid business” into other types of development funding. 

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Image credit: Tiggy Ridley Department for International Development