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Why Does British Foreign Aid Prefer Poor Governments Over Poor People?

European donors are moving towards increasing direct budget support to governments of aid-receiving countries. Leading the charge is the UK, which gives the largest percentage of direct budget support of any bilateral or multilateral donor (although the World Bank, the European Commission, the US and France also give substantial budget support).

Giving cash directly to host country governments for use in the general budget for public spending has a number of advantages. The donors say it gives recipient governments more predictability, and more control over the aid resources being funneled in. Rather than serving a plethora of masters in the international donor community, funds given as budget support can be corralled by the host government and spent coherently according to host government priorities, while building government capacity to do what everyone wants governments to do for themselves in the long run: competently manage their own affairs. The aid jargon for this is “country ownership.”

So how is this working out in practice? In 2007, the UK gave 20 percent of their total bilateral ODA in the form of budget support to 13 countries: Tanzania, Ethiopia, Pakistan, Ghana, Uganda, Mozambique, Vietnam, Malawi, Zambia, India, Sierra Leone, Nepal, and Nicaragua. (Source)

Of this list, only Ghana and India were classified as “free” by the annual Freedom House ratings on democracy (according to either the 2007 or 2008 rating). For the 11 other countries that did get British budget support, how much is there “country ownership” when the government is not democratically accountable to the “country”?

Moreover, Human Rights Watch (HRW) accused some of these governments of serious human rights violations. Ethiopia’s autocratic government, which is inexplicably the largest recipient of UK budget support in Africa, won 99% of the vote in the last “election.” The government army is accused by HRW of war crimes in the Somali region of Ethiopia. Nor is this brand new — neither army officers nor civilian officials have been “held accountable for crimes against humanity that ENDF (Ethiopian National Defense Force) forces carried out against ethnic Anuak communities during a counterinsurgency campaign in Gambella region in late 2003 and 2004.” HRW also notes that today: “Credible reports indicate that vital food aid to the drought-affected [Somali] region has been diverted and misused as a weapon to starve out rebel-held areas.” Ironically, Ethiopia’s autocratic ruler, Meles Zenawi, was the Africa representative at the recent G-20 meeting campaigning for more aid to Africa during the current crisis, because, among other reasons, Meles said “people who were getting some food would cease to get it and … would die” (from an article in Wednesday’s Financial Times.)

As for Vietnam, HRW reports: “In March 2008 police arrested Bui Kim Thanh, an activist who defended victims of land confiscation and involuntarily committed her to a mental hospital for the second time in two years. … In October a Hanoi court sentenced reporters Nguyen Viet Chien of Young People (Thanh Nien) newspaper to two years in prison and Nguyen Van Hai from Youth (Tuoi Tre) to two years’ “re-education” for having exposed a major corruption scandal in 2005…..”

Oh yes, and let’s consider corruption, which may affect whether aid to governments translates into aid to poor people. Another country on the UK budget support list, Malawi, had received $148 million in budget support from its donors from 2000 to 2004. It ended those four years with poorer government capacity and greater fiscal instability than it began them, according to one evaluation. Also during those four years, the Malawian president was accused of awarding fraudulent contracts, and government officials achieved new lows when they sold off all 160,000 tons of the country’s grain reserves for personal profit. In the ensuing famine, provoked by drought and floods but made worse by the loss of the grain reserves, the government had to borrow an additional $28 million to feed its starving people. Yet Malawi continues to receive British budget support today.

Elsewhere on the corruption front, British aid continues to give direct transfers to the Sierra Leonean government even though its own 2006 report found that previous support to the “Anti-Corruption Commission” had “made no progress on the overall goal of reducing corruption, had made no impact on reducing real or perceived levels of corruption, had suffered a fall in institutional capacity since the previous year.” (Quote from a 2008 Transparency International report). Sierra Leone is ranked the 158th worst country in the world on corruption (where the worst ranking is 180th).

Of course, low income countries have lower ratings on democracy, human rights, and corruption than richer countries, so poverty-alleviation aid has to face the tricky tradeoff of directing aid to the poorest countries while trying to avoid the most corrupt and autocratic ones. Unfortunately, a recent article found that the UK was one of the best (least bad) official aid agencies in doing this, so most of the others are apparently even worse.

This study did not consider the issue of direct budget support. There is nothing that says you have to give aid meant for the poorest peoples directly to their governments, if the latter are tyrannical and corrupt. With the examples above, which side are UK aid officials on, on the side of poor people or on the side of the governments that oppress them?

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13 Comments

  1. April Harding wrote:

    somewhat relatedly, from Foreign Policy, Herbst and Mills make a good case that we’ve accomplished so little in helping the people who live in DRC, because we keep pretending there is a gov’t (cause we just have to have one to work with).

    http://www.foreignpolicy.com/story/cms.php?story_id=4763

    Posted March 20, 2009 at 5:56 pm | Permalink
  2. Moussa wrote:

    To April Harding:

    That is correct. But what is harder for me to believe is that these sophisticated donor countries don’t know or don’t see these facts and the roots of the problems.

    Maybe the true intentions of “aid” are sadly not the stated ones. Political scientists understand that very well. Maybe one day economists will follow suite.

    In that sense, initiatives like this blog are called for to try to get the “aid”‘s outcomes to match the stated intentions.

    Posted March 20, 2009 at 10:58 pm | Permalink
  3. Laura,

    You’re comparing British support of Malawi recently (2007) to the political climate of Malawi from 2000-2004. But in May of 2004, the long-serving and infamously corrupt president Bakili Muluzi finished his two year term. His successor, Bingu wa Mutharika, went on to split from Mulizi’s party and began prosecuting members of the former government for corruption.

    Malawi’s anti-corruption campaign hasn’t been perfect, and the current administration has had its flaws, but to compare Malawi today to Malawi five years ago is quite misleading. While there are still problems with transparency, things have definitely improved! That’s why Malawi still receives money today – do your research!

    On another hand, it’s not obvious that just giving money to poor people is going to improve accountability in the region. Yes, governments with windfall resources like general budget support (or oil!) are less likely to feel accountable to their people, but similarly a population who receives free public goods from a posse of foreign donors isn’t likely to be as interested in making government accountable.

    The ideal system is one of mutual dependence, the government gets its revenue from the people, and the people, concerned about the money taken from them, hold the government accountable to produce the types of public goods they desire. Aid crowds out accountability on both ends. Why not instead tie general budget support to income tax revenue, as part of a revenue matching scheme?

    Posted March 21, 2009 at 8:14 am | Permalink
  4. Matt Baker wrote:

    “Unfortunately, a recent article found that the UK was one of the best (least bad) official aid agencies in doing this, so most of the others are apparently even worse.”

    So why target this article at the UK? I guess US aid, chaneling as it does grain from mid-west American farmers to the needy poor around the world and undermining local markets, is much more up your street.

    And I don’t know how many NGOs you have worked with, but many are hardly a haven of fiduciary accountability, and they don’t even have the pretence of accountability to the people of a country.

    You accept their are complexities, and then write them off. I don’t really see what the point of this piece is. And that comes from someone who is fairly sceptical of the role of direct budget support.

    Posted March 21, 2009 at 8:57 am | Permalink
  5. AJK wrote:
    Posted March 21, 2009 at 2:14 pm | Permalink
  6. Owen Barder wrote:

    As a former UK aid official whose judgement and integrity are questioned by this article, you might want to read my rebuttal at:

    http://www.owen.org/blog/2229

    Owen

    Posted March 22, 2009 at 11:42 am | Permalink
  7. Per Kurowski wrote:

    Q. Suppose that all the net results from the oil placed by providence in a country had been equally divided among its citizens, those arguably the most legitimate owners of said oil. Let us then suppose that the central government requests the citizens to give all these moneys to it… what would we have?

    A. We would have the mother of all the regressive tax systems, with the marginal tax rate for the poorest being 100%.

    Would anyone really support such a regressive tax system? I don’t think so!

    The reason the most fundamental piece of the oil curse, the centralization of oil revenues in government´s hands, making them wealthy independently of their citizens, is so little discussed is because governments speaks mostly to governments and, in these discussions, among colleagues, the citizens are really of secondary importance.

    The truth is that there is no such thing as an oil-cursed politicians, oil-cursed governments or oil cursed policymakers, on the contrary they are all most often shining examples of oil blessings… there are only oil-cursed citizens and that is why we need a global coalition of oil cursed citizens.

    Posted March 22, 2009 at 3:17 pm | Permalink
  8. Back in 2007 I visited Ethiopia, it was my first, and so far only visit. I’ll not go into too much detail here, but just that one visit, preparing for it, and what happened next taught me a lot about Ethiopia, aid, and how my own country – I work for the UK Met Office, fails to help the poor.

    The reason for the visit was the realisation that I and some colleagues had that providing “developed country grade” weather forecasts to Ethiopian farmers would enable them to produce more food, perhaps as much as 10% more for the whole country. So we wanted to see if the infrastructure there could support delivering the right information to the right people, and as far as it went the answer was yes. Though as with so many things related to aid, the sensible thing didn’t happen, so the farmers still don’t get the forecasts.

    What happens instead is of course entirely rational if aid is being provided by a democracy. Except of course much of the aid is wasted – since there’s no reason to be efficient, or effective, just as fair as possible. It seems likely that those who identify where UK aid goes don’t want to be providing aid to people who could be helped by their own government. Hence aid goes to the poorest countries.

    Once the country has been identified the aid is then directed towards the poorest regions, and quite possibly to the poorest communities and eventually to the poorest people. In many ways I’m entirely happy with this arrangement if it doesn’t stop development. Trouble is my own experience is that it does inhibit development.

    To trial improvements in agricultural productivity in Ethiopia our project needed to work with farmers that weren’t on the edge of famine but who produced a surplus and had the necessary networks to market an even greater surplus and invest in their community. There are many such farmers in the more central regions on Ethiopia, that of course never get discussed when aid is the topic.

    We haven’t given up, and after quite a lot of grief from our bosses, we didn’t even get sacked – I suppose that’s one bonus of being a UK civil servant.

    So if all goes well the project will restart later this year, but working with farmers in Nepal.

    Posted March 22, 2009 at 4:02 pm | Permalink
  9. koster wrote:

    The Anglo-Americans love “friendly tyrants” from Mobutu/Meles to Pinochet. Unfortunately such attitude of supporting enemies of their people did not brought peace and development either for the countries in the South or North.

    It is high time for the US to reconsider their politics and associate with friends of the people but not enemies of the people.

    Posted March 22, 2009 at 6:34 pm | Permalink
  10. KFC wrote:

    You are talking across each other. But that is the nature of budget support arguments. Little clear evidence for either side. On Ethiopia, Aidwatch has been sloppy with its 99 percent figure. However, being familiar with the repressive nature of the EPRDF regime, some of their vote was certainly coerced. Though probably not all of it. Not all Ethiopians are enamoured of the old aristocracy represented to some extent by the CDU. Question is, does the expansion of public services, with foreign government funding, underwrite this oppressive regime? Or does it, as Barder tries to argue, encourage greater accountability within Ethiopia? My suspicion is the former, I’m afraid, and Barder probably suspects that too, living in Addis.

    Barder’s presentation of oecd material as ‘evidence’ is pretty weak. DFID itself is a major figure in OECD, the donors club. Their evaluations are hardly disinterested. So dismiss oecd reports, in this case.

    As for corruption? Here in Tanzania, DFID’s largest aid recipient I believe, the unseemly scramble for rents by elites is played out more and more publicly, with little sign of it abating and every sign it may be getting worse – rents that wouldn’t be so considerable but for the 35 percent of the government budget that comes from donors.

    So the trade off is between patchy improvements in indicators that at times have a real impact on poor people’s lives and supporting dodgy regimes who ultimately couldn’t care less about those same people. It’s a tough one and I’m suspicious of the cheerleaders on both sides. But you can probably work out which way I lean.

    Posted March 23, 2009 at 9:58 am | Permalink
  11. DKF wrote:

    The US doesn’t (yet) give budget support.

    Posted March 24, 2009 at 4:35 am | Permalink
  12. (How) does budget support build domestic accountability?

    A few weeks ago, William Easterly published a characteristic attack on DFID’s  promotion of general budget support on his Aidwatch blog entitled  Why Does British Foreign Aid Prefer Poor Governments Over Poor People? He argues that DFID gives b…

    Posted March 27, 2009 at 3:51 am | Permalink
  13. BP wrote:

    This blog has some of the most intelligent and reasoned commentary I’ve come across … I get as much information from the comments section as I do from the articles themselves. Really appreciate that.

    Posted March 27, 2009 at 12:10 pm | Permalink
  • About Aid Watch

    The Aid Watch blog is a project of New York University's Development Research Institute (DRI). This blog is principally written by William Easterly, author of "The Elusive Quest for Growth: Economists' Adventures and Misadventures in the Tropics" and "The White Man's Burden: Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good," and Professor of Economics at NYU. It is co-written by Laura Freschi and by occasional guest bloggers. Our work is based on the idea that more aid will reach the poor the more people are watching aid.

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