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Africa Economic Institute

Impact of Recession on Aid in Africa

Official Development Aid (ODA) to Africa is likely to see cuts across the board as the global financial crisis continues to spread throughout the globe. ODA is the main funding source for most UN agencies. For example, ODA accounted for more then 70 percent of the UN Children's Fund (UNICEF)…

Official Development Aid (ODA) to Africa is likely to see cuts across the board as the global financial crisis continues to spread throughout the globe. ODA is the main funding source for most UN agencies. For example, ODA accounted for more then 70 percent of the UN Children’s Fund (UNICEF) budget of $3 billion in 2007. 

Global ODA from all donors in 2007 was $117.6 billion according to the Organization for Economic Cooperation and Development (OECD). The European Union and its 27 member states are by far the largest ODA providers, supplying half the global amount. Because of a downward trend, their ODA fell to $59.4 billion or 0.38 percent of GDP in 2007, down from 47.7 billion $61.4 billion, or 0.41 percent of GDP, in 2006.

There is historical precedent as global ODA has fallen up to 40 percent from established trends amid previous periods of market turmoil and recession. Analysts cannot seem to reach a consensus on the amount of decrease, as predictions range from just a few percentage points to one-third.

As far as ODA is concerned, not everyone foresees a major decline. For instance, US funding rose in both 2001 and 2002, despite the eight-month recession in 2001 linked to the dot-com bust. “We never saw the effect of it in ODA budgets,” Antonie de Jong, UN Development Fund for Women (UNIFEM) outreach and business development adviser said. But, he added: “Of course we are concerned.”

No UN agency has yet reported a slowdown in contributions, and no clear idea has yet been formed on the potential impact. “I wish I had more answers. Everyone would like more answers on this one, frankly,” Stephanie Bunker, spokeswoman for the UN Office for the Coordination of Humanitarian Affairs (OCHA) said.

As the global financial crisis continues, many countries are expected to decrease foreign aid and focus on domestic issues first. The protectionist tendencies are common during harsh economic times and countries prefer to look after its own citizens. John Clancy, of the European Commission Humanitarian Aid and Development noted, “The concern that we hold is that not only the EU states but also the broader donor community become very inward-looking, in the sense of their home policy, to an extent understandably, because they now have to deal with the economic impact on the ground.”

However, some governments are pledging to stand by their commitments. Norway’s overall humanitarian aid was at $425 million in 2007, $447 million in 2008 and is expected to be at $422 million in 2009. In terms of percentage of GDP, Norway’s aid commitment has risen and will pass the one percent of GDP mark for the first time.

Denmark is expected to increase aid by 7 percent when compared to 2007. “We do not expect the global economic crisis to influence humanitarian aid in the future,” Foreign Ministry humanitarian assistance officer Ttrine Barnøe told IRIN.

As for the United States, the second-largest ODA contributer worldwide, mixed messages have been sent. In 2008, $25 billion in ODA was committed. Before leaving office last December, President Bush spoke about aid in saying, “America is committed - and America must stay committed - to international development for reasons that remain true regardless of the ebb and flow of the markets.” During his presidential campaign, Barack Obama said he would double US foreign assistance from $25 billion to $50 billion, but vice-president Joe Biden said in October this commitment would probably be “slowed down” due to the crisis.

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