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Aid Dependency on the Decline

Miriam Gathigah

Delegates from Africa at Busan  Credit: Miriam Gathigah/IPS

Delegates from Africa at Busan Credit: Miriam Gathigah/IPS

BUSAN, South Korea, Nov 29 2011 (IPS) - Poor countries have depended on rich nations to supplement their sector budget without which millions of people would have continued to live in abject poverty. Have the years of funding made these countries any less dependent?

Delegates from Africa at Busan  Credit: Miriam Gathigah/IPS

Delegates from Africa at Busan Credit: Miriam Gathigah/IPS

Sector budget is aid that is allocated to developing a country’s particular development priorities, which could be in the areas of health, education or even sanitation and housing.

Most poor countries struggle to raise funds to supplement sector budgets, remaining at the mercy of donors. But statistics are now showing that poor countries are slowly becoming more self reliant.

Lucia Fry of ActionAid UK says, “Aid dependency among 54 of the world’s poorest countries has declined by a third in the last decade. This means that poor countries are now much less dependant than they were 10 years ago.

“This has been a consequence of giving real aid to poor countries- aid that addresses inequalities and poverty by empowering poor women and men to realise their rights or aid that supports tax systems, better governance and economic development with the ultimate goal of reducing dependency.”

In Africa there are indeed countries that have been able to significantly cut their aid dependency because they have grown and are able to mobilise local resources to create revenues that can be ploughed back into sector budgets.

In 1994 Rwanda was making headlines for 100 days of terror and massacre which, according to the United Nations statistics, left 800,000 people dead and an estimated 500,000 widowed.

Women and children were subjected to physical, emotional and sexual abuse. A large number of women were infected with HIV. Then an example of a failing nation, Rwanda is a different place today.

“Rwanda is actually one of the countries that is leading in terms of human development in Africa. It has the highest representation of women in parliament and has significantly cut down aid,” explains Emma Kaguruzi, a delegate at the ongoing Fourth High Level Forum on Aid Effectiveness, underway in this South Korean city.

Fry agrees. “ActionAid has established that in Rwanda, aid as a percentage of government spending, or money that goes into government to be spend on the country’s national development priorities, has dropped from 85 percent in 2000 to 45 percent in 2010.”

Ronald Nkusi, director of Rwanda’s external finance unit in the finance ministry, has consistently advocated donor funding that allows people to be in the driving seat, that is accountable and transparent and whose goal is to address the needs of its people, bridging the inequalities and addressing poverty.

Rwanda is not alone though. Again between 2000 and 2010 donor dependency in Ghana fell from 47 percent to 27 percent, placing it well on its way to becoming a middle-income country.

Also in Africa, Mozambique has shown a significant cut in donor dependency from a high of 74 percent to 58 percent.

This reveals a changing pattern in the extent to which poor countries are increasingly looking inwards for resources and less on the traditional aid commitments from donor giants such as the European Union and the World Bank.

Bodo Ellmers, a policy and advocacy officer with European Network on Debt and Development (Eurodad), attributes this shift to the fact that “developing countries are now able to raise more domestic resources by turning to natural resources.”

Africa is well endowed with rich natural resources such as oil and fertile lands for agriculture.

“These countries are also looking to new opportunities for funding as new donors emerge. Angola is now benefiting significantly from Brazil’s development assistance. Many other African countries are now turning to China for loans.”

Ellmers further notes that these countries need to realise that raising more money for development through taxes is a sustainable way of acquiring more money that can be used to supplement the sector budget and, consequently keep key development projects going.

Chinese loans, though a positive alternative, are not a sustainable option because they will have to be repaid.

In addition, the emergence of the private sector as a key player in development will have an implication on aid dependency.

“Due to the current global crisis, many foreign investors are turning to Africa in search of new grounds on which to invest. This means more employment and revenue to African governments,” Ellmers explains.

It is, however, not enough that African countries find new ways of raising revenues, it is important that this is complemented by good governance that is mindful of the needs of its people and is also open, transparent and accountable.

Rwanda is now a shining example among many developing countries, having risen from a bloody ethnic conflict to become a role model for development.

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