Global Development Matters
CARMA site badge

U.S Foreign Assistance 101

WHAT:

The standard definition of foreign aid comes from the Development Assistance Committee (DAC) of the Organization for Economic Cooperation and Development (OECD), which 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 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 U.S. is the largest provider of ODA, contributing about $23.5 billion in 2006.

Despite increases in foreign assistance by the Bush administration, development-type assistance (as defined by the administration) is less than ½ of 1% of the federal budget and only .27% of GDP in FY 2006. In 2007, the U.S. ranks 19th out of 21 major donors in terms of aid quality as captured in CGD’s Commitment to Development Index.

Allocation of U.S. foreign assistance funding:

  • 56 percent of U.S. foreign assistance goes to just six countries, all allies in the war on terror or the war on drugs. The rest is spread amongst nearly 100 other countries.
  • 56 percent of U.S. foreign assistance goes to middle-income countries, and just 23 percent to low-income countries. On average other donors do almost the reverse, providing 34 percent to middle-income countries and 42 percent to low-income countries.
  • More than 90 percent of U.S. foreign assistance is delivered through bilateral programs rather than multilateral channels.

     
    Shares of Total Foreign Assistance Funding
     
    U.S.
    Average for other DAC Donors
    Largest Six Recipients
    56%
    45%
    Low-Income Countries
    23%
    42%
    Middle-Income Countries
    56%
    34%
    Sub-Saharan Africa
    17%
    30%
    Multilateral
    8.5%
    30%

WHO:

U.S. foreign assistance is currently administered by more than 19 agencies of the U.S. government, through bilateral and multilateral channels, and is provided to over 153 countries in the world in widely varying amounts per country and region. This tangled and fragmented organizational structure of overlapping missions reduces the effectiveness and efficiency of U.S. foreign assistance.

WHY:

Foreign assistance is vital to our national interests -- enhancing our security, expanding economic opportunities and promoting our values. Long term investments by the U.S. 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, with resources matched to objectives and results measured and made publicly available. U.S. foreign assistance programs, their organizational structure and their statutory underpinnings must be modernized for the 21st Century.

Key Resources: