Aid Isn’t Reaching the Very Poorest Countries

January 06, 2016

The good news is that international aid reached a record high, in real terms, in 2014. The bad news is that aid to the very poorest countries fell sharply in 2014, both in cash terms and as a share of total aid, reversing the welcome trend over the last decade of allocating more aid to the poorest countries. The proportion of global aid going to least developed countries has fallen from about 33 percent in 2013 to 30 percent in 2014.

This is a problem because least developed countries need aid the most. They have less access to development finance from domestic tax revenues, foreign investment, remittances, and export earnings. And they have the biggest needs. So you would expect a disproportionately large share of global aid to go to these poor countries. But this isn’t what is happening, as the graph below shows.

In 1990, about 12 percent of the world’s poor lived in countries classified in 2014 as low income, and those countries received about 28 percent of aid. In 2014, the proportion of the world’s extreme poor living in those same countries had more than doubled, to at least 30 percent, but the proportion of aid had remained roughly the same, also at 30 percent.  The proportion of aid going to low-income countries has risen over the last decade, roughly in line with the increase in the proportion of the world’s poor living in those countries, so the 2014 figures are an unwelcome reversal. (These figures are for low-income countries. This group is not quite the same as least developed countries; but for the present purpose of looking at aid totals there is very little difference between the two.)

Why are the least developed countries now being neglected? In part this reflects the shift of aid toward the fallout from the conflicts in the Middle East, and in particular the big increase in aid being spent on refugee costs. In part it reflects the growing emphasis on delivering aid in ways that meet the donors’ national interest. (If you want to use aid to promote your strategic and commercial interests, you are more likely to find opportunities to do so in Turkey, Brazil, or Vietnam than in Mozambique or Nepal.)

In July 2015, donors reiterated the (admittedly weird) target of increasing aid to least developed countries to “0.15 percent to 0.20 percent” of national income. The 2014 figures show that they are moving in the wrong direction, with the figure falling below 0.10 percent. Unless donors reallocate existing aid away from middle-income countries, they need to increase total aid by 20 to 40 percent, and spend all the increase in least developed countries, to meet this target.

Some multilaterals tend to spend too little aid in the poorest countries. For example, the EU spends only 27 percent of its aid in low-income countries (the biggest recipients of EU aid are Turkey, Serbia, Morocco, Tunisia, and Ukraine). The World Bank, by contrast, does well on this measure, spending 55 percent of its ODA in low income countries. The UK’s bilateral aid programme is somewhere in between, with 38 percent spent in low-income countries.

Here in the UK, the decision to spend more money in fragile and post-conflict countries, and the increased focus on Britain’s national interest, is going to make it difficult to protect aid allocations to stable but poor countries such as Zambia and Malawi. That’s a pity, because these are countries that need aid most and where it is likely to be most effective.

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CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.