Wednesday, October 26, 2011

Catalytic Foreign Aid Coming?

Andy Sumner writing on Global Dashboard questions "Is ‘aid exit’ or ‘catalytic aid’ a new development strategy for poor countries? 

An extract below... Full post here

You might think so judging by comments buzzing around about ‘catalytic aid’ or ‘aid to end aid’ from leaders of some of the world’s poorest countries – for example, the President of Rwanda in the FT a while ago and more recently President Sirleaf of Liberia. 

As well, not a low-income country (yet), the UK Prime Minister, David Cameron visiting Nigeria recently (see here) said: …we can spend aid in a catalytic way to unleash the dynamism of African economies… …kickstarting growth and development… …and ultimately helping Africa move off aid altogether. 

Added to this are the recent related report from international NGO, ActionAid on ending aid dependency which notes: …the proportion of government spending that comes from aid and over the last decade it has fallen on average by a third in the poorest countries. In Ghana aid dependency fell from 47% to 27%, in Mozambique from 74% to 58% and in Vietnam from 22% to 13%. 

Although aid levels increased, economic growth and the countries’ ability to mobilise their own resources increased faster… Reading all this you might say hey, what happened to the 0.7 thing? So, what does it all mean for foreign aid and poor countries development strategies? 

The ultimate sign a country is no longer poor is surely it has no longer a need for foreign assistance in the form of aid flows (or even better is a foreign aid donor itself such as South Korea). A new and evolving concept that seems to be buzzing around is ‘catalytic aid’ – meaning foreign aid aimed at ending the need for foreign aid I think. 

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