US aid budget: Winners, losers and question marks

Assistant Secretary of State for Economic, Energy and Business Affairs Jose Fernandez and Salvadoran Technical Secretary Alexander Segovia negotiate an action plan for the Partnership for Growth initiative. Each of the four PFG countries, including El Salvador, will see increases in U.S. foreign aid under the fiscal 2015 request. Photo by: U.S. State Department

Last week, the Obama administration unveiled its much-anticipated international affairs budget request for fiscal 2015. In line with the omnibus budget agreement signed in December, the request asks Congress for more than $50 billion in international affairs spending — a modest 1.4 percent reduction from 2014 levels.

Yet even as the administration’s proposed fiscal 2015 budget would largely protect U.S. foreign aid spending, a Devex analysis of the account-level data reveals a much more mixed picture at the country and regional level.

Contrary to what might be expected from the topline figures, only 45 out of 101 U.S. bilateral aid programs worldwide would see increases in their U.S. development aid spending, when compared with fiscal 2013 — the latest year when actual figures are available. At the same time, the fiscal 2015 request would only increase development aid to two regions: sub-Saharan Africa (2 percent) and East Asia and the Pacific (5 percent). Sub-Saharan Africa receives the bulk of U.S. development assistance.

Elsewhere in the U.S. development aid portfolio — which also include Europe and Eurasia, Latin America and the Caribbean, the Middle East and North Africa, and South and Central Asia — the vast majority of U.S. bilateral aid programs are actually on the chopping block. Overall funding to each of these four regions will also decrease substantially.

Below, Devex breaks down the winners, losers — and question marks — in the Obama administration’s fiscal 2015 development assistance request for bilateral and regional programs. See the full data set here.

This map provides a snapshot of the impact of the budget request on U.S. aid funding around the world. Click here to view a larger version.

WINNERS

Partnership for Growth countries

Each of the four countries (El Salvador, Ghana, the Philippines and Tanzania) participating in the Obama administration’s oft-touted Partnership for Growth initiative record anywhere from modest to substantial increases in U.S. foreign aid under the fiscal 2015 request. Sources close to the administration emphasize that PFG is aimed squarely at promoting a “whole of government” approach to U.S. foreign aid — and isn’t necessarily about the money.

PFG’s four partner countries — all of which are also on the Millennium Challenge Corp.’s portfolio — may be less likely to heed that message in light of the fiscal 2015 request. Among the four PFG countries, the Philippines sees the largest percent increase in U.S. aid (9 percent) over fiscal 2013 and also outpaces Indonesia to become the largest recipient of development aid in the East Asia and Pacific region. Interestingly, El Salvador — the country where there appears to have been the most progress recorded on PFG’s benchmarks — sees the lowest percent increase (1 percent).

East Asia and the Pacific

The Philippines isn’t the only country in the East Asia and Pacific to see a sizable increase in U.S. assistance in the fiscal 2015 request. In fact, 11 of the 13 U.S. development aid recipients in the region emerge as winners in the request — perhaps an indication that it’s still full speed ahead for Obama’s “pivot” to Asia despite the contrary speculation in Washington.

The caveat here is that as in fiscal 2013, East Asia and the Pacific would still only garner 5 percent of total U.S. development aid, ahead of the 3 percent allocated for Europe and Eurasia. In contrast, 13 of 14 countries in Europe and Eurasia will see reductions in U.S. development aid in fiscal 2015 — with the notable exception of Ukraine, which isn’t all that surprising in light of recent developments.

Under the fiscal 2015 request, Vietnam would be the only major U.S. Agency for International Development partner in East Asia and the Pacific to see reduced aid levels, and only by just 1 percent. Two years after Obama personally dedicated the re-opening of USAID’s mission in Yangon, U.S. development aid to Myanmar is set to rise by 34 percent over fiscal 2013 — more than any other country in the region except Laos. (If you were following our budget preview last week, as in last year’s request, U.S. aid funding is still not necessarily tracking with USAID’s overseas restructuring. Only five of 10 upgraded USAID offices — including Myanmar — would see increased budgets in the fiscal 2015 request.)

Syria, Tunisia and Yemen

Despite its apparent retreat on the Middle East and North Africa Incentive Fund, the administration is dramatically increasing aid to three countries in the region: Syria, Tunisia and Yemen. To support opposition efforts inside Syria, the administration has requested $125 million from the State Department’s economic support fund — a 502 percent increase from fiscal 2013. (If funding for all Syria-related programs is counted, then total U.S. foreign aid for Syria could reach as high as $1.3 billion in the fiscal 2015 request). Meanwhile, the administration has also asked for development aid increases of 107 percent for Tunisia and 121 percent for Yemen.

Egypt, another country engulfed by the Arab Spring and the second-largest recipient of foreign aid in the region is, however, expected to see a significant decline in development aid — down 17 percent from fiscal 2013. Tellingly, the fiscal 2015 request actually increases U.S. security assistance to Egypt by 5 percent, proof perhaps that Egypt’s military government still has more friends than critics in Washington.

LOSERS

Front-line states

Against the backdrop of the upcoming NATO drawdown, the Obama administration is staying the course in its plans to simultaneously reduce the U.S. development footprint in the front-line states of Afghanistan and Pakistan. Even as Afghanistan remains the largest recipient of U.S. development assistance, the war-torn country is slated for a 25 percent reduction in U.S. development aid in fiscal 2015 compared with fiscal 2013. If the onerous congressional caps and restrictions on U.S. assistance to Kabul in fiscal 2014 are any indication, then the administration’s $1.2 billion fiscal 2015 development aid request for Afghanistan seems unlikely to hold — a scenario that becomes more likely the longer that Kabul delays a bilateral security agreement with Washington.

Similarly battered by allegations of corruption and mismanagement, U.S. development aid to Pakistan is also set for a 25 percent reduction in fiscal 2015. The administration has requested $546 million in development aid to Pakistan, which would make Islamabad the fourth-largest recipient of U.S. development assistance. Notably, the administration has sought only a 5 percent reduction in security assistance to Pakistan, compared with a 43 percent reduction for Afghanistan.

Despite the massive reductions in aid spending to Afghanistan and Pakistan, neither country seems likely to meet the same fate as Iraq — whose strategic importance to Washington has eroded since the end of the Iraq War. The top U.S. aid recipient late in the Bush administration, Iraq is slated to receive only $23 million in U.S. development aid in fiscal 2015, down 69 percent from fiscal 2013.

Latin America and Caribbean

While Afghanistan and Pakistan account for the bulk of the reduction in U.S. international affairs spending in fiscal 2015, the Latin America and Caribbean region is also hit hard by aid cutbacks. U.S. development aid to the region is slated to fall 10 percent in fiscal 2015, compared with fiscal 2013 levels. Among the 17 countries receiving U.S. development aid in the region, only six are on track for funding increases: Barbados, Cuba, El Salvador, Guatemala, Paraguay and Peru.

As expected, the administration is requesting no aid money for either Ecuador or Bolivia in light of USAID’s recent expulsion from both countries. For now, fears that USAID might pull out from Venezuela have yet to materialize; the administration does cut development aid to Caracas by 14 percent. U.S. aid reductions elsewhere in the region are much more surprising, including an 11 percent cut to earthquake-ravaged Haiti, as well as a 20 percent cut to Colombia. Both countries will, however, remain the largest and second-largest recipients of U.S. aid in the region, respectively.

QUESTION MARKS

PEPFAR

While bilateral funding for the U.S. President’s Emergency Plan for AIDS Relief, or PEPFAR, has been largely protected, a closer analysis reveals that some of the initiative’s partner countries have fared much better than others in the fiscal 2015 request. Among PEPFAR’s 15 initial focus countries, eight countries end up on the losing end in the fiscal 2015 request, of which six are on track to see reduced PEPFAR funding: Vietnam, Ethiopia, Haiti, Rwanda, South Africa and Guyana. While overall U.S. development aid funding for Nigeria is slated to increase by 3 percent in fiscal 2015, the West African country’s PEPFAR budget is likely to remain flat. All but three (Vietnam, Haiti and Guyana) of PEPFAR’s 15 initial focus countries are located in sub-Saharan Africa.

In the three countries where PEPFAR is known to be furthest in its transition to country ownership, only South Africa is slated for yet another significant cut (14 percent) in its U.S. development aid budget, including to PEPFAR. Contrary to what might be expected, Botswana and Namibia are expected to see sizable increases in funding from PEPFAR and other U.S. development programs. The fiscal 2015 request thus seems likely to raise even more questions over how’s PEPFAR transition to country ownership will play out — a process that is likely to accelerate over the next five years.

Emerging economies

Emerging economies must be increasingly seen as strategic partners, rather than as aid recipients, in global development — that’s been the message coming out of USAID’s leadership lately. The fiscal 2015 budget request suggests this change in tone may not necessarily translate into less U.S. aid money for some of the world’s rising economies. Most notably, unlike last year, emerging donor India is expected to see a sizable (13 percent) increase in U.S. development aid in fiscal 2015 over fiscal 2013. Of course, the fact that the U.S. aid program is re-asserting its presence in East Asia and the Pacific makes clear that emerging economies, including the Philippines and Indonesia, will remain high up in the U.S. development agenda for the foreseeable future.

Excluding India, however, the other BRIC economies all end up on the losing end of the fiscal 2015 request. China will be only one of two countries in East Asia and the Pacific to see reduced U.S. aid — down by 54 percent. Amid USAID’s increasing trilateral cooperation with the Brazilian aid program, U.S. aid to Brazil will decline by an even more staggering 80 percent. The Obama administration is requesting no development aid to Russia for fiscal 2015, which had been expected following Moscow’s expulsion of USAID a year and a half ago.

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About the author

  • Piccio

    Lorenzo Piccio

    Lorenzo is a former contributing analyst for Devex. Previously Devex's senior analyst for development finance in Manila.

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