Belt-tightening among traditional donors is forcing the U.N. Development Program to impose administrative cuts, reduce program focus and diversify its funding.
“We’re entering in an era where we really have to take a fresh look at development,” says William Davis, director of UNDP’s Washington, D.C. office.
Resources, Davis tells Devex, “are becoming tight not only in United States, but many of our traditional donors in Europe are looking at difficult economic times in a foreseeable future.”
Just this week, UNDP Administrator Helen Clark announced a strategic plan that will guide the agency in the next four years filled with uncertainty over donor commitments. Clark’s roadmap, which will be presented to its 36-member Executive Board in September for approval, proposes to reduce the number of development outcomes from the current 25 to seven.
The U.N. agency is crafting its new strategy as the geopolitical face of development financing is evolving: Traditional donors are grappling with economic hardship while former developing nations and aid recipients are becoming new donors and increasingly relevant contributors to development cooperation.
Nosedive in core funding
Over the past years, UNDP has seen declining contributions, especially for core funding, where the U.N. agency sources its operational expenses like auditing projects earmarked by donors, and draws from to finance projects for low-profile countries.
Core funding fell to $846.1 million last year, while non-core funding — allocated by donors for specific programs and countries — reached $3.79 billion.
This illustrates how multilateral agencies are exposed to cuts when developed economies are weak, as UNDP relies on cash-strapped traditional donors which are financing their commitments voluntarily. Dependence on a limited number of traditional donors and a voluntary scheme of contribution to core funding is a risk in times of budget austerity from traditional donors.
In the recent past, UNDP’s top ten donors provided 80-85 percent of its core funding, exposing the institution to “burden-sharing” and raising its vulnerability to reductions in contributions even from one or two donors.
Finding other donors
But reaching out to new donors is not easy.
“We can’t rely on just the same 10 developed donors that fund the vast majority of our budget. We need to start looking at some of the new actors upon the scene whether they’d be Brazil, China or India,” Davis explains.
UNDP is also eying prospective partnerships with NGOs that have the money to bankroll development projects: “We also need to look at some of these new nongovernmental entities that are on the scene, whether that would be the Gates Foundation or privately-funded or philanthropic endeavors.”
The U.N. agency, he adds, could also tap into the vast richness of the private sector. By now, official development assistance is not just a one-way thing traditionally coming from developed countries.
“The more that we can work as a partner with the private sector that wants to see many of these development goals realized not only for the greater good but also for profit interests, that’s the way to harness an enormous amount of energy,” says Davis.
Whatever may lie ahead in the future, budget cuts are now a reality.
This year alone, UNDP cut $50 million from planned 2013 spending, which translated into a painful hiring freeze and suspending or stopping lower-priority activities.
“We’ve been in discussions in our headquarters colleagues. We’re going to see budget cuts coming more in the order of ten percent this year and another ten percent next year. So we’ll have to manage those as best we can,” notes Davis.
The UNDP official for instance suggests making changes in how his office handles outreach events with visiting U.N. officials: “Perhaps we’ll be hosting fewer of those and maybe looking to partners in the think tank and NGO community to host our speakers when they come to town.”
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