Opinion: Aid isn't going to the world's poorest people. Why?

The first thing apparent in the latest Organisation for Economic Co-operation and Development’s Development Assistance Committee’s figures was that for the second year in a row, global aid levels have decreased. More worrying, however, is another emerging theme: Donors are prioritizing short-term political goals over long-term development and poverty reduction.

Despite repeated commitments to reverse the trend in declining aid to the least developed countries, aid flows to LDCs and countries in Africa have fallen by almost 3% and 4% respectively. This is in spite of overwhelming evidence that these are the places with the greatest needs.

The latest poverty figures from the World Bank show that Africa is currently home to more than half the people living in extreme poverty, yet the continent receives only 33% of total aid. By 2030, projections show that Africa could be home to 9 out of 10 people living in extreme poverty.

Between 60-80% of the world’s population living in poverty are projected to live in fragile and conflict-affected states in 2030.

Research shows that most donors are bad at targeting aid to the poorest. The countries that contain 75% of the world’s poorest received 35% of official development assistance disbursed in 2016, while countries with less than 1% of the world’s poorest received 25% of ODA. And countries with the fewest domestic resources — low-income countries — receive 10 times less aid per poor person than middle-income countries.

So what is the reason that aid is not going to where it is needed most? Several trends may explain this persistent challenge:

1. Aid staying in donor countries

A sizable chunk of aid never leaves its donor country, but can be counted as ODA, such as “in-donor refugee costs,” to support refugees seeking asylum. OECD rules allow donors to count this support as aid for the first year of a refugee’s arrival.

It is absolutely right to help people fleeing instability and terror. the question is if this should come from funds to fight extreme poverty. Following the crisis in Syria, these amounts soared, peaking at 14% of total aid in 2014. Although now having fallen somewhat, down to 9% in 2018, they still represent a significant amount of aid. At a time when aid budgets are not growing overall, the more money spent in donor countries generally means less money going directly to the poorest countries to meet urgent needs.

2. Aid being used to leverage private finance

Since the World Bank announced its “billions to trillions” agenda in 2015, donors have sought new ways to unlock more private finance for development through leveraging aid. Of course, private finance is a critical source of funding for development, creating jobs, and investing in infrastructure; and with less than 3% of global foreign direct investment, Africa badly needs to attract more. But the notion that scarce aid resources can unlock trillions in financing for the poorest countries is misguided.

While development finance institutions have been partnering with the private sector for years in developing countries, a 2017 OECD study found that 77% of the private funds mobilized by donors were for projects in upper- and lower-middle-income countries. Only $7.7 billion (10%) was mobilized for projects in LDCs and in other low-income countries.

Further, Overseas Development Institute research shows that for every $1 of donor public spending invested, just $0.37 in private finance is mobilized in low-income countries. There are also currently no means to accurately assess the development impact of these investments.

Unless the incentives and risk modalities change significantly, it can be expected that the more aid money diverted to leverage private finance will mean less going to the poorest countries.

3. Aid in the national interest

Foreign policy priorities shape development assistance allocation, and aid has long been used to secure alliances and complement defense and military interventions. Yet, recently, “aid in the national interest” arguments have proliferated.

In this way donors can seek to shore up support with the public or elected parliaments to make the case for aid in increasingly nationalistic environments. But if aid is given for reasons not directly related to economic development or poverty reduction goals, then it is less likely to achieve these aims.

It is in the world’s interest to end extreme poverty and achieve the global goals, but to do this requires concerted efforts. The progress made in more than halving extreme poverty and child mortality since 1990 show what is possible. But getting to zero on poverty and deaths from preventable diseases will take more than business as usual.

It will require countries to reexamine needs, refine funding models, and truly adopt “leave no one behind” policies. This includes reorienting aid programs toward the poorest countries and focusing on social sectors which will increase human development. Fully funding the Global Fund to Fight AIDS, Tuberculosis and Malaria in November, for instance, could help save 16 million lives between 2021-2023. Investing in women and girls is a sure-fire way to improve development outcomes for everyone, and the G-7 this year is an opportunity for the world’s richest countries to make bold commitments on gender equality and women’s economic empowerment.

To achieve the Sustainable Development Goals, donors must reconsider their approach and commit to delivering aid in a way that prioritizes alleviating poverty. Political considerations will always be relevant, but aid must do the job it’s meant for, and donors must be transparent about their motivations.

It is no longer sufficient to talk the talk, without walking the walk.

Update, April 29, 2019: This article has been updated to reflect that fully funding the Global Fund could help save 16 million lives between 2021-2023.