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The policies and practices of the US government wield formidable influence on global development. CGD seeks to strengthen US foreign assistance tools with evidence of “what works” and propose reforms grounded in rigorous analysis across the full range of investment, trade, technology and foreign assistance related issues. With high-level US government experience and strong research credentials, our experts are sought out by policymakers for practical ideas to enhance the US’s leading role in promoting progress for all.
With last week’s decision by the Trump Administration to extend the review period for permanent removal of long-standing sanctions on Sudan, the debate over the nature of future US engagement with Sudan will continue. As this month’s report of the Atlantic Council’s Sudan Task Force points out, US support for debt relief will be high on the Sudanese government’s agenda; such relief would unlock international financing that supports economic development and poverty reduction. What the report does not mention is that such relief would likely require significant new funds being appropriated by Congress. In light of proposed cuts to US foreign aid and doubts about Sudan’s human rights record it is hard to imagine the US Congress agreeing to any money for Sudan debt relief now. But in the event the necessary political support is established down the road, I offer three options for addressing the financing challenge.
Sudan’s Debt is 60 Percent of its Entire GDP
As shown in the most recent World Bank/IMF debt sustainability assessment, Sudan is in debt distress. At end-2015, it had $48.2 billion in external public and publicly guaranteed debt, equivalent to roughly 60 percent of the country’s gross domestic product. 86 percent of the debt was in arrears. The Paris Club group of creditors accounted for almost $18 billion of the total, and the United States is reportedly the third largest Paris Club creditor. Virtually all the debt owed to the United States is in arrears.
Sudan is one of three remaining countries that are eligible for comprehensive debt relief under the HIPC Initiative , launched in 1996 (the other two are Somalia and Eritrea). Sudan’s access to debt relief is also a key element of the cooperation agreement with South Sudan. Under the 2012 agreement, Sudan agreed to retain all the external liabilities of the two states contingent upon a commitment from the international community to provide Sudan with debt relief within two years (the deadline has since been extended). This debt relief would allow Sudan to normalize relations with its creditors, including the international financial institutions (IFIs). The IFIs would then be in a position to finance development projects.
No HIPC debt relief without US participation
The HIPC debt relief process is extraordinarily complex, requiring a number of actions by creditors and the intended beneficiary. A key early step in the process is an IMF request for assurances from the Paris Club creditors that they will be in a position to provide preliminary debt relief (using so-called “Naples terms of treatment”). Without these “financing assurances” the HIPC process stops. Unfortunately for Sudan, the US is not currently able to provide such financing assurances as discussed below, and the likelihood for being able to do so down the road is bleak.
Roadblocks to US participation
While the US Congress has passed various laws that constrain any US support for the Sudanese government, there does not seem to be any provision that would bar bilateral debt relief, providing certain conditions are met and the necessary funds are appropriated. For example, the annual appropriations bill generally includes language prohibiting the use of funds for debt relief for Sudan, but it provides exclusions such as “assistance to support implementation of outstanding issues of the Comprehensive Peace Agreement [with South Sudan].” Presumably debt relief funds could be covered by this exclusion. A more significant obstacle is Sudan’s designation as a state-sponsor of terrorism, but there are reports it may be removed from the list and, in any case, the President has the authority to waive any legislative restrictions associated with such a designation.
The primary roadblock to US participation is lack of funds to cover the cost of debt relief. Under arcane US government accounting rules, the US government agencies that lent money to Sudan decades ago must be compensated for writing those debts off. According to the US Foreign Credit Reporting System, roughly 60 percent of what Sudan owes is held by the Department of Defense and 40 percent by the Department of Agriculture. And the amounts owed are increasing every year due to penalties and interest. Even though there is virtually no chance that Sudan will ever make payments, there is a residual value—the expected net present value—that will be calculated at the time the debt is written off. In the case of Sudan, this could amount to as much as $350-400 million by the end of FY2019.
Where to Find $400 Million for Debt Relief
The customary process for securing the necessary funds for HIPC debt relief is for the US Treasury Department to request the money in its portion of the overall foreign assistance request (once the budget is signed into law, Treasury dispenses the money to individual agencies to cover the debt relief costs). $400 million would represent a 25 percent increase over the FY2018 request, and the largest single amount ever requested for bilateral debt relief. In light of current budget constraints and the prospect for cuts to foreign assistance, it is implausible to think that there would be widespread support for any such request. (In fact, it should be noted that the Trump Administration FY2018 budget proposal did not include language from the Obama Administration budgets that contemplated transfer of funds from the State Department for this purpose).
I offer three possible options for the Administration and Congress to consider:
Follow the usual procedure, with Treasury requesting funds in its budget submission—presumably for FY2019—while explaining that the request is an anomaly that does not reflect an ongoing program.
Make the agencies that extended the loans cover the costs of debt relief in their own budgets. In the case of Sudan, the Department of Defense and USDA would take the hit. In view of the shrinking foreign assistance pie, it doesn’t seem right that Treasury Department would have to cover the costs of bad loans extended by these other agencies.
Ask Congress to waive the statutory requirements for funding debt relief for Sudan and strike it from the US books without an appropriation. There are sound arguments for providing such a waiver given the unique circumstances involved and it may be the only politically feasible option.
Doing nothing is not a viable option. If sanctions are permanently removed, pressure will immediately build to provide Sudan with debt relief so it can resume borrowing from the World Bank and other international financial institutions. Not only would the image of the United States, which has the largest economy in the world, be further tarnished by reneging on its past debt relief commitments, but the US would be accused of walking back from debt relief commitments made in the context of the Sudan-South Sudan cooperation agreement. This could exacerbate tensions in the east Africa region and weaken Sudan’s interest in working with the United States on regional conflicts and the threat of counterterrorism, among other issues.
The bevy of hearings revealed an Administration struggling to get its message straight on foreign aid. In one camp are those who favor sharp budget cuts and a shift away from a values-driven foreign policy—OMB director Mick Mulvaney, senior strategist Steve Bannon, and (perhaps to a lesser extent) Tillerson. But another camp advocates robust continued support for US global engagement and promotion of US values—including UN Ambassador Nikki Haley, Green, and Ivanka Trump. One of the big questions surrounding the President’s draconian foreign aid budget was how aggressively and effectively the administration would defend it, given these internal divisions.
In his hearings, Tillerson tried to split the difference but ultimately offered no compelling strategic rationale for the proposed cuts. With his strategic review of the Department still underway, he struggled to articulate why his “cut first, strategize second” approach wasn’t putting the cart before the horse. He asserted that the United States could slash resources by a third but sustain its leadership in international development, global health, and disaster response—but this ran into widespread, bipartisan skepticism from legislators.
Mark Green’s nomination hearing was strikingly different, and put him squarely in the more traditionalist camp. Speaker Paul Ryan, a fellow Wisconsinite, opened the hearing by praising Green and calling USAID “a very important agency at a very important time.” Green expressed a foreign aid vision more in step with the bipartisan consensus of the past decade—and received glowing reviews from senators as a result. Congress seems to be signaling its support for Green and Haley’s more mainstream approach to foreign assistance—but Green and Haley could still face an uphill battle in persuading their colleagues in the administration.
2. …and with Congress
Of course, the administration does not set foreign aid policy on its own. And Congress, importantly, controls the purse strings. Congressional leaders have been signaling for months that they continue to see value in constructive US engagement. But the big question has been how aggressively members would stand up to oppose the President’s proposed aid cuts.
If these hearings are any indication, Trump’s proposed spending reductions face strong headwinds on the Hill. Key members of both appropriations and authorizing committees have repeatedly indicated they will disregard them: Senator Lindsey Graham (R-SC) called the President’s budget “reckless,” Senator Bob Corker (R-TN) opened his hearing by calling it a “total waste of time,” and Representative David Cicilline (D-RI) noted that virtually every serious foreign affairs expert has dismissed it. Tillerson’s counter-arguments fell flat, and the administration’s efforts to defend the broader request have fallen short as well. In one telling example of the administration’s weak budget outreach, Representative Kay Granger (R-TX) told Tillerson that had she called his office four weeks ago to offer help and never received a response. This outreach is unlikely to improve: the lack of senior political appointees at State and USAID means the administration has few officials in place to sell its budget behind the scenes.
However, this does not mean development advocates can declare victory and pack it in. There is clear Congressional opposition to the massive cuts proposed in the Trump budget. But individual accounts still face risks, and cuts of even 5-10 percent—though less politically toxic—could still be damaging.
3. Cuts to humanitarian assistance are a front and center concern
Trump’s FY2018 budget request proposes to cut foreign aid across the board, but the 38 percent cut to humanitarian assistance garnered some of the most vocal opposition from lawmakers. Given four potential famines and the ongoing mega-crisis in Syria, we’re glad to see attention to these cuts. Multiple lawmaker across committees and party lines, including Senator Graham, Representative Chris Smith (R-NJ), and Representative Karen Bass (D-CA), pressed Tillerson and Green on the cuts to humanitarian assistance. Green pledged USAID would not be walking away from its commitment to humanitarian assistance.
The crisis in Yemen got particular attention—not just as a budget priority but as a policy issue. Senators Todd Young (R-IN) and Chris Murphy (D-CT) pressed Tillerson on the importance of diplomatic engagement to support humanitarian access there. This is critical, as humanitarian assistance on its own will not be able to contain the crisis there—a big diplomatic push will be needed.
4. The Hill wants a say in the State Department-USAID reorganization efforts
Members of Congress pressed Tillerson about plans to reorganize US development and diplomacy functions amid rumors the administration may seek to merge USAID into the State Department. Tillerson mostly punted on these questions. Numerous lawmakers nonetheless indicated they expect congressional involvement in any substantial decisions. Senator Todd Young directed attention to a task force on reform and reorganization he is co-chairing with Senator Jeanne Shaheen (D-NH), and Representative Eliot Engel (R-NY) pointed out that a reorganization process would require statutory changes (i.e. Congress would need to be involved).
During Green’s hearing, Senator Bob Menendez (D-NJ) likewise noted the USAID-State rumors and pressed the nominee on whether the United States’ primary aid agency should remain independent. Green avoided answering the question directly, but noted that USAID and the State Department have distinct roles and cultures.
Here at CGD, we have explored how to judge a State Department-USAID reorganization plan and will be publishing further ideas of potential reforms. Stay tuned for more work on this front in the coming weeks. Speaking of which….
5. A real opportunity for foreign aid reform?
Interestingly—and unexpectedly—the stars may be aligning to enable one of the best opportunities for serious foreign aid reform in years. But it will depend on which camp within the administration ends up leading on the design of potential reforms. Mark Green emphasized the need for reform as one of the main pillars of his testimony, citing the United States’ evolving relationship with the rest of the world and the need to update the US development policy toolbox. But Tillerson’s vocal defense of aid cuts raises questions about whether the ongoing review process at State will simply lead to a predetermined outcome. And OMB’s credibility to lead good-faith reforms is also questionable, given the draconian vision it outlined in the President’s budget.
But if, once confirmed, Green can grasp the lead on aid reform within the administration, he will find a receptive audience in Congress. The leadership of the congressional authorizing committees—on both sides of the aisle—is fairly unified in support for constructive reform. Given his favorable standing on Capitol Hill and the Hill’s clear interest in the issue, Green may have a unique opportunity to build bipartisan support for a smart set of reforms. There a plenty of options, from development finance to a multilateral review. Here’s hoping he can seize the opportunity.
I don’t claim to know about financing movies, but I have some sympathy for the bemusement Treasury Secretary Mnuchin has displayed over the state of US financing for the multilateral development banks (MDBs). At a recent budget hearing, committee chairman Hal Rogers drew Mnuchin’s attention to the fact that the “past due” notices from the World Bank and regional MDBs are now approaching a record $2 billion. Mnuchin acknowledged a problem, expressed some degree of mystification about federal budget accounting, and pledged to get things in order.
So what’s all of this about?
It’s true that the US government has gotten way behind in meeting its commitments to these institutions, and worse, is the only country in the world that routinely fails to make good on its MDB pledges.
Source: US Treasury
This problem does not exist when it comes to US capital contributions to the MDBs – that is, financial contributions that are tied directly to the purchase of equity shares with direct implications for voting power. When the United States pledges capital to the MDBs, it pays on time and in full with very few exceptions, out of fear of losing voting power. In contrast, the “arrears” problem afflicts the annual US grant contributions to the MDBs’ subsidized lending arms, largest of which is the World Bank’s International Development Association (IDA).
So how did we get into such a fix? It’s because, unlike most other countries, the United States does not make pledges from a known pot of money. US Treasury officials make a pledge and then go to Congress the next year with hat in hand, asking that the pledged funds be appropriated. In most other countries, pledges are drawn from a pool of funds already appropriated by their parliaments. Given the very different sequencing, it’s not surprising that the track record for other countries in meeting their pledges is something like 99.9 percent, while for the United States a good outcome is something like 80-90 percent.
The MDBs themselves are complicit in the problem. The US pledge, typically one of the largest, has an inflationary effect on other donors, who tie their pledges automatically to the overall fundraising effort. For example, Belgium might pledge to meet one percent of the overall replenishment. So, the more the US pledges, the more Belgium automatically pays, no matter whether the United States ever fully delivers on its pledge. As a result, the MDBs themselves are aiming for the highest US pledge possible. You might think the other donor countries would be less enthused, but for the most part, they’ve been largely indifferent in recent years. This is likely because their politicians and parliamentarians are not entirely aware of the problem.
Mnuchin’s responses to Rogers were interesting. He was careful not to commit to make good on the past pledges. He simply pledged to fix the accounting. Given the cuts contained in the FY2018 budget, it may finally be time for the United States and the MDBs to end the dysfunctional relationship and simply acknowledge that much of these arrears will never be paid. That may be easier said than done, since any explicit agreement could very well provoke the negative reaction from other donors that has been seemingly dormant.
Whether he can produce a viable plan or not, Secretary Mnuchin’s instincts are right that there is some gimmickry in play here that is problematic. When the dollar amounts are small relative to the pledges themselves, it may not matter much. But with arrears that now equal the entire annual US contributions to the MDBs, it is too big of an issue to politely ignore.
Ambassador Mark Green—President Trump’s pick to lead the US Agency for International Development (USAID)—is slated to appear before the Senate Foreign Relations Committee for his nomination hearing on Thursday morning.
Green’s nomination was heralded by many in the international development community, who know his extensive development experience and orientation toward smart reform. While his qualifications are not in dispute, Green is likely to face questions from lawmakers about how he’ll position USAID for success, in light of massive budget cuts proposed by the administration and ongoing discussions of potentially major reorganization.
Drawing on themes of efficiency, effectiveness, accountability, and results, here are a few questions we’d pose to Ambassador Green (and a few of the things we’d love to hear in response).
How can USAID plan for sustainable engagement with partner countries over the medium to long term?
The administration proposed deep funding cuts that, if enacted, would appear to force the near-term closure of several USAID missions. Lessons from previous mission closures suggest hurried deadlines that leave insufficient time to develop a transition strategy in consultation with partner country and US interagency stakeholders can damage bilateral relationships and compromise US interests. Not only that, mission closures are costly in the short-term, so decisions to close that are revisited shortly thereafter (witness the reopening of the closed mission in Tunisia, for example) can be deeply inefficient. That said, USAID can and should do more to plan for what US engagement, in its set of partner countries, should look like over the medium to long-term. In some cases, especially among middle-income partner countries, that planning should consider shifting away from bilateral grant assistance. As part of prioritizing where USAID spends its grant resources and planning for how longer term US engagement should look, Green should reject hasty decision-making in favor of strategic processes that involve deep participation of partner country and interagency stakeholders. For countries under consideration for reduced grant-based assistance, we hope he will encourage missions to explore approaches and tools that help transition countries to a new kind of partnership. Avenues for engagement that move beyond traditional grant-based financing could include trade promotion, loans, and other sources of US development finance.
USAID has made significant progress toward greater accountability through transparency over the last two administrations. What will you do to build on that progress?
When Publish What You Fund first started measuring donors’ progress on transparency in 2011, USAID was in the bottom quartile of the evaluated agencies. By 2016 it ranked better than half of the 46 global donor organizations—a commendable jump in a fairly short time.
Green has an excellent opportunity to build upon recent momentum toward greater transparency by committing to publish USAID’s contracts. The benefits include shortening the chain of accountability, increasing the likelihood that contracts are in the public interest. It can also increase the quality and competition for contracts and has the potential to save the government money and prevent corruption. As our colleague Charles Kenny points out this is totally doable—in fact, other countries are already onboard.
Even short of agreeing to publish USAID contracts, Green could do more to ensure data on USAID contracts and their implementation is made available to the public. Under the Federal Funding Accountability and Transparency Act of 2006, prime awardees of USAID contracts are required to report first-tier subawards, but that information isn’t published in any comprehensive way. (This is a big reason our colleagues had such a hard time tracking aid money that went to Haiti after the 2010 earthquake.) Green could take a small but meaningful step toward greater transparency by ensuring data on USAID subcontractors is made publicly available.
How will you work to institutionalize learning and evidence-based programming to maximize the potential for delivering results?
Both of the last two administrations have made concerted efforts to make US foreign assistance a more evidence-based enterprise. Important steps have been taken to increase evidence-based program design and to track and measure the outputs, outcomes, and impacts of US foreign assistance programs. Working with a strong policy foundation, Green could redouble USAID’s commitment to evaluate and learn from its programs and apply that learning (as well as external evidence) to future project design and implementation. The agency, with Green at the helm, also has the opportunity to develop leadership in emerging approaches in evidence-based programming. One interesting opportunity USAID has so far left on the table, is to pilot programs that disburse funds upon the achievement of outcomes. By exploring innovative approaches—such as cash on delivery and development impact bonds—the United States’ largest aid agency can ensure value for money from our aid dollars by paying only when development outcomes are achieved. And, again, the road is not untested. Rather than paying for textbooks, school construction, or teacher training, the UK’s aid agency committed to support education progress in Ethiopia by agreeing to pay a fixed amount for each additional student above a baseline to complete grade 10 and sit for the final exam. The same approach can be applied to sectors beyond education. The agency could agree to pay for each additional household and business with access to reliable electricity, or for decreased travel time and costs across a commercially valuable transit route. Let’s hope Green is willing to give it a shot.
How will you ensure that USAID's emerging "policy voice" doesn't disappear amidst budget cuts and structural changes?
Despite being the largest bilateral aid provider in the world, USAID has long suffered under an inferiority complex in relation to other aid agencies, particularly the UK's Department for International Development. In large part, that reputation came from being known more as a procurement agency than a development policymaker. Fortunately, the agency has made important strides in more recent years toward a robust internal policy function and a strong policy voice within the US government and in multilateral settings. It remains important for US interests around the world to have USAID at the table, helping to shape policy informed by experience on the ground. Policymakers at the State Department or Treasury typically lack an on-the-ground development perspective. And, if confirmed, it will fall to Green to ensure USAID continues to fulfill this important role. A US government foreign policy that lacks USAID’s vital input, whether pertaining to a country relationship or a multilateral set of issues, will be weaker and less effective as a result.
In your view, what is USAID’s comparative advantage vis-à-vis other US departments and agencies working to deliver US foreign assistance?
There are many US institutions involved in foreign assistance. (You can read more about the roles of a few key players here.) Members of the committee are likely to seek assurances from Green that he will provide a strong voice on development and humanitarian issues in any conversations on government reorganization. His approach to this will depend on how he views USAID’s role in the development and humanitarian landscape. Having served two stints on MCC’s board, Green will have a particular advantage in explaining USAID’s role relative to that of the Millennium Challenge Corporation whose model inherently limits its scope. But it will be critical for him to articulate USAID’s strengths and ensure that any reorganization seeks to capitalize on those.
Secretary of State Rex Tillerson’s appearances before important Congressional Committees this week give us some clues about where the battle lines will be drawn between the Trump Administration’s budget proposals, including an almost 30 percent reduction to the State Department, and the negotiating positions of US lawmakers keen to defend America’s role on the global stage.
Here, CGD experts Amanda Glassman, Scott Morris, and Jeremy Konyndyk weigh in on some of the key points we heard (and live tweeted) during Secretary Tillerson’s testimony before the Senate Foreign Relations Committee and, later, when he answered questions from the Senate Appropriations Subcommittee on State, Foreign Operations, and Related Programs.
Did we miss anything? Please have your say in the comments section below. And thanks to Gailyn Portelance and Jared Kalow, star research assistants with CGD’s US Development Policy Initiative, for being on Twitter duty.
For the US Development Policy Initiative’s inaugural Voices of Experienceevent, three former Treasury Under Secretaries for International Affairs took the stage: Tim Adams of the Institute of International Finance, Lael Brainard of the Federal Reserve, and Nathan Sheets of Peterson Institute for International Economics. The conversation, moderated by CGD Board Member Tony Fratto, revealed the “esprit de corps” of the International Affairs team, and covered everything from the central yet oft under-the-radar role the Office of International Affairs plays in the formulation and execution of international economic policy, to each Under Secretaries’ proudest moments. Interestingly, the event highlighted significant policy continuity across administrations and a nonpartisan approach to key decisions. See for yourself here, and take a peek at a few takeaways:
Global economic success equals success at home
Brainard kicked off the discussion noting that the primary but less understood role of Treasury is to negotiate the interface of US domestic and global economic policy. Panelists emphasized that continued engagement with the global economy serves domestic interests, but in the current political climate, the message must be communicated consistently and clearly. Brainard, who served during the recent US financial crisis, reflected on both sides of the isle coming forward in the wake of the crisis to support the recapitalization of every multilateral development bank. This remarkable feat represented a bipartisan recognition that economic recovery in the US happens only in concert with the rest of the world. Adams added that this engagement can be a difficult sell to the public particularly in times of domestic hardship, but that the case can rests strongly on three pieces: values, economics, and national security.
Strong, continued support of IFIs, but not without US leadership
The Office of International Affairs manages the United States’ engagement with international financial institutions and other financial international fora, such as the G-20 finance ministers and central bank governors process. All three urged that the US must continue to play a leadership role. Reflecting on his own experience, Sheets’ team time and time again turned to the IFIs to tackle some of the most challenging issues facing the international economic system. This meant taking advantage of the all-important leverage attached to every US dollar funneled through multilateral channels, and he asked: If the new administration is not willing to engage multilaterally with global challenges that affect the US, is the American taxpayer willing to foot the bill in its entirety?
Adams explained that not only should the US continue to have strong support for IFIs, but the US must lead in these institutions if they are to effectively confront global challenges and challenges at home. Reflecting on his (somewhat controversial) speech on shaking up the IMF, he noted that it is in US interests to push for more transparency and more accountability in these institutions. IFI’s are already international standard setting bodies, yet must constantly evolve in order to stay relevant for both domestic and global interests.
Policy continuity and collaboration across administrations is at the core of the office
The conversation revealed a remarkable level of mutual respect and policy agreement. This was no more striking than when each Under Secretary highlighted proudest moments on the job. Adams spoke of commencing the glide path from the G-7 to the G-20, and pushing the IMF to pursue its surveillance mandate more vigorously, including exchange rate policies, for which Brainard and Sheets kept the ball rolling. Sheets also spoke to the IMF’s now sound outlook for the next five years, and his office’s work to continue integrating China into the global financial system, which the panelists all agreed was important for global financial markets and growth. Brainard is proud of the US role in getting the world economy on track to recovery after the financial crisis, and seeing a convergence on exchange rate management in the G-20 with a commitment to avoid use as a trade competitiveness tool. After all, she said, Treasury has always been a mission driven organization, focused on putting the American economy first.
This panel was the first in CGD’s Development Policy Initiative (DPI) Voices of Experience series, which will feature discussion with senior officials from past administrations of both parties who shaped international development, economic, and financial policy.
Thanks to Nancy Lee for helpful comments on this post.
Secretary of State Rex Tillerson is likely to face some tough critics when he heads to Capitol Hill this week. In his first appearance(s) before Congress since his January confirmation hearing, Secretary Tillerson will have the unenviable task of defending a deeply unpopularFY2018 budget request for international affairs.
Despite promises of continued support for national security and economic priorities, the administration’s proposed budget takes an axe to foreign aid—leaving plenty of questions about how to reconcile the narrative and dollar figures. But with four hearings scheduled over two days, lawmakers may just have a chance to ask them.
Here are a few big picture issues (of many) that deserve greater scrutiny.
Prioritizing near-term foreign policy objectives over sustainable development
The budget’s rhetoric emphasizes the administration’s desire to allocate foreign aid in service of achieving US strategic and security objectives, which include building markets for US businesses and fighting violent extremism. And in key ways, rhetoric matches reality in this budget, whether in the wholesale shift in programming from the development oriented budget accounts to the strategically-oriented Economic Support Fund (newly rebranded as the “Economic Support and Development Fund”), or the full protection of support for Israel and Egypt amidst deep cuts nearly everywhere else. Using development assistance to accomplish near-term foreign policy goals isn’t new, but when aid has mixed objectives political or security needs frequently override development considerations. This can lead to tensions in program design and implementation—where the focus on achieving actual development outcomes gets blurred.
In fact, when the George W. Bush administration and Congress teamed up to establish a new aid agency focused on results—they deliberately insulated the agency from political interference. Secretary Tillerson praised the Millennium Challenge Corporation (MCC) during his January testimony. He should acknowledge that one of MCC’s key strengths lies in its ability to target assistance to promote economic growth without pressure to fulfill other objectives.
Furthermore, to the extent that private sector activity is the key to sustained growth—both at home and abroad—it makes zero sense to kill OPIC, especially since it expands opportunities for US businesses.
Targeting assistance to maximize efficiency
While not a popular subject, the issue of aid selectivity is one that deserves attention. In a joint CGD-Brookings effort to measure the quality of official development assistance (QuODA) donors earned higher marks for focus and specialization by country and sector. This is consistent with the aid effectiveness literature which suggests donors can maximize impact through targeting assistance to reflect their comparative advantage rather than risk fragmentation or programs that are spread too thin. And yet there is little in this budget to suggest that evidence of effectiveness or comparative advantage was used to guide the decision-making that produced such deep cuts. The budget request would reduce the development aid budgets of 46 countries by more than 60 percent (see map below), absent anything other than a broad, topline justification. And the request would slash spending for global health—where we have some of the best evidence of successful interventions—by more than a quarter.
An ounce of prevention is worth a pound of cure
Amidst four looming famines and the ongoing refugee crisis in Syria, the budget request proposes deep cuts to humanitarian funds, including life-saving emergency food assistance. Where Congress has increased appropriations in recent years to address these realities, under the administration’s budget the US response would come up short.
And while the situations referenced above are caused by a complex set of political factors rather than food shortages alone, the administration’s budget also ignores an age-old adage by reducing US assistance designed to mitigate other causes of hunger. USAID’s Bureau for Food Security (BFS) works to bolster agricultural production—achieving higher yields and bringing drought and flood resistant crops to regions susceptible to such conditions. And in particularly vulnerable areas, US investments include pre-programmed response tools. Under the administration’s budget, BFS would lose 70 percent of its funding compared to FY2016. And the development assistance account—the largest source of funding for agricultural development initiatives in recent years—suffers a proposed cut of nearly 45 percent as part of its merger into the Economic Support and Development Fund. These cuts are short-sighted.
In addition to being called upon to explain massive spending cuts, Tillerson is likely to face questions about the structure of the institutions tasked with delivering US foreign assistance. Check out the questions my colleagues would pose of any reorganization plan or effort. Needless to say, we’ll be watching closely to see what gets asked—and answered—in the days ahead.
Thanks to Jared Kalow for the interactive map and chart.
The UK election has shown again that electorates can throw up unexpected results, with long-standing poll leads evaporating in a matter of weeks. The British public seem uninspired by any single leader but there was little sign of descending into nationalism and populism. The only party that stood on a platform of dismantling the aid budget—UKIP—suffered a heavy defeat. Here we propose two ambitions for the government which emerges.
Election 2017 and manifesto commitments
Theresa May’s Conservative Party won the most seats in the UK’s general election but they won insufficient seats to control a majority in Westminster. For now, the Conservatives will attempt to work with the ten MPs from the Democratic Union Party (DUP), to establish a wafer-thin majority (of some 328 seats, out of 650). The House of Lords may or may not feel bound by the Salisbury Convention of not opposing manifesto commitments after their first reading. Either way, another election can’t be ruled out.
The DUP don’t reference international development in their manifesto - so it will be hard for them to exert much authority on the Conservative commitments in coalition talks. They do argue for more cooperation with the Commonwealth. The DUP are less socially liberal—and less likely to support say women's’ rights, abortion or sexual and reproductive health. The Conservative manifesto includes a long-list of admirable commitments to international leadership. Whatever government emerges, we propose two ambitions.
A positive vision for aid and development
The new government should set a positive vision of aid and why development is worthwhile. So far, Prime Minister May’s approach to development has been largely defensive—protecting the UK’s commitment to spend 0.7 percent of national income on aid, absorbing press criticism of waste and standing up for the importance of cash transfers as reaching those that need it most.
Over 630 of 650 MPs stood on a manifesto which explicitly commits to 0.7 percent of national income on aid. There is an opportunity now for the government to step away from piecemeal, parochial and defensive posture from last autumn, and to set out a positive development vision, describing what the UK will do, building on British values for a fairer, more prosperous world.
Brits believe in aid if the government can ensure it's well-spent and they surely share the Conservative manifesto’s intolerance of social division, injustice, unfairness and inequality beyond the UK too. A modern vision of effective British aid should address both.
A holistic view of development
The new government should broaden its approach to development. At home, Conservatives believe that it is better that people have opportunities for decent work rather than depending on hand-outs, which should be reserved for the most vulnerable people.
The new government should not lose the values that underpin both the Conservative and DUP manifestos—free trade, rule of law, security, the importance of work and enterprise, people living up to their responsibilities, tackling corruption, all supported by an enabling government—instead, it should apply them in its approach to international development.
A positive, broad-based vision of development
The strength of support for UK development in the manifestos of elected politicians shows that Britain will continue to take its leadership role in the world seriously.
A positive and holistic vision will enable development to take its place alongside defence and diplomacy as key planks of Britain’s outward-looking, self-confident, open and engaged contribution. The result will be a better world for all of us.