US Foreign Assistance 101

What

The Development Assistance Committee (DAC) of the Organization for Economic Cooperation and Development (OECD) defines foreign assistance as financial flows, technical assistance, and commodities that are (1) designed to promote economic development and welfare as their main objective (thus excluding aid for military or other non-development purposes); and (2) are provided as either grants or subsidized loans.

The DAC further separates foreign aid into three categories, of which the most relevant to this CGD initiative is official development assistance (ODA). ODA comprises the biggest portion of international aid flows, and is provided by donor governments to low- and middle-income countries. The United States is the largest provider of ODA, contributing about $26 billion in 2008.

Despite increases in foreign assistance during the Bush administration, ODA accounted for less than 1 percent of the federal budget and only 0.18 percent of GDP in FY2008. In 2010, the US ranked 11th out of 22 major donors in terms of aid quality as captured in CGD’s Commitment to Development Index. A new tool, the Quality of Official Development Assistance (QuODA), rates the United States on four dimensions of aid quality.

The United States provides additional assistance that falls outside of the DAC's definition, including security and narcotics aid, and some emergency assistance in response to natural disasters. When including these types of assistance, the US foreign aid budget comprises roughly 1.4 percent of the federal budget.

Who

In 2008, 20 US government agencies administered US foreign assistance activities through bilateral and multilateral channels, providing aid to over 150 countries around the world in widely varying amounts. This tangled and fragmented organizational structure of overlapping missions reduces the effectiveness and efficiency of US foreign assistance. The US Agency for International Development (USAID) and the State Department manage the bulk of assistance programs, but other agencies, such as the Department of Defense and the US Department of Agriculture, have seen their international roles grow in recent years. Tracking the entire government-wide development budget has become increasingly difficult and has led to calls for a transparent and timely reporting mechanism.

Why

Foreign assistance is vital to our national interests -- enhancing our security, expanding economic opportunities and promoting our values. Long term investments by the United States. to reduce poverty, build capable and effective states and mitigate threats must be priority objectives of foreign assistance efforts. These objectives should be articulated in a coherent strategy and funded adequately, with resources matched to objectives and publicly-available results measured and made publicly available. US foreign assistance programs, their organizational structure and their statutory underpinnings must be modernized for the 21st Century.