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US Development Policy

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As the leaders of the G8 countries meet in Gleneagles in Scotland, they probably wonder whether President Bush will deliver on his promises.
According to administration figures, during the Bush presidency, the United States roughly tripled aid to Africa, to about $4.3 billion. On June 30, before he left for the G8 Summit in Gleneagles in Scotland, President Bush said in a major speech on development that U.S. aid to the continent would double again by 2010, meaning $8.6 billion per year.
Most of the implied $3 billion increase has previously been announced - about $2 billion would be accounted for by full funding for the MCA and the President's Emergency Plan for AIDS Relief (PEPFAR). Much of the additional $1 billion would take effect only after the 2008 presidential election.
"In a developing world, we have an unprecedented opportunity to help other nations achieve historic victories over extreme poverty with policies and approaches that are tested and proven, Bush said. "These victories will require new resources...And we're making a strong commitment for the future."

Whether U.S. Congress will embrace President Bush's commitment remains to be seen. In June the House Appropriations foreign aid subcommittee approved only $1.75bn for the MCC next year, which is well below the administration's request for $3bn. The cut is part of a larger reduction reflected in the $20.3 billion foreign aid bill approved unanimously by the subcommittee.
Nevertheless, the President was unequivocal in linking global poverty to our welfare and world security. "September the 11th, 2001, Americans found that instability and lawlessness in a distant country can bring danger to our own," he said. This week's terrorist attacks in London can only have strengthened his conviction about such links.
In many ways, Bush echoed the global call for more engagement to the eradication of poverty, as evidenced by the Live 8 movement and the G8 cancellation of multilateral debt owed by highly indebted countries.
In Chance to break free from cycle of debt, an op-ed published on June 30, CGD Senior Fellow Steve Radelet analyzed the importance of this historic debt cancellation and highlighted the opportunities and pitfalls for poor countries and multilateral donors.
"The agreement wipes out more than $40bn in debt but, since the loans were heavily subsidized, it generates only about $1bn per year in new money," Radelet wrote. "This is equivalent to just over 1 per cent of global aid flows - nice but hardly enough to dent world poverty."
Furthermore, many poor countries that had not borrowed enough to be considered "heavily" indebted will now end up with more debt than the heavy debtors. They need a similar deal.
"Now that the deal is done, it is critical that these countries do not soon end up in another debt mess," Radelet explained. "Donors should be smarter with their aid, giving less to middle income countries and political friends and more to well-governed countries with a commitment to good development policies. The debt problem forced the donors to devote more funds to the most indebted just to keep them solvent."
Read President's Speech
Read Steve Radelet on Debt Cancellation

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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 does not take institutional positions.