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In his April 26 testimony to House appropriators, new Director of Foreign Assistance Randall Tobias left no doubt about his determination to ensure that the fragmented U.S. foreign assistance regime be overhauled to reflect strategic guidance from the Secretary of State -- and to ensure that U.S. aid advances the administration’s broad foreign policy and national security goals, rather than being driven by the desires of individual agencies or country missions. But he remained pretty vague about how this will work in practice, beyond stating that the 5 priority goals of U.S. foreign assistance are to (i) advance peace and security; (ii) promote just and democratic governance; (iii) encourage investments in people; (iv) promote economic growth; and (v) provide humanitarian assistance.
Now, thanks to conversations with well-placed administration insiders, we've got a much better idea of what to expect.

Over the past couple of weeks Tobias has briefed senior State and USAID officials in detail about his reform plans. The most significant innovation is his plan to classify 154 developing and transitional countries into 5 distinct categories – and to design aid programs in those countries on the basis of the specific challenges they present to achieving the priority goals of U.S. assistance. These five categories include:

  • “Rebuilding Countries” - This category will include “states in, or emerging from and rebuilding after, internal or external conflict.” At present, this category includes 12 countries: Afghanistan, Colombia, Haiti, Sudan, Liberia, Kosovo, Iraq, Democratic Republic of Congo, Nepal, Cote D’Ivoire, Sierra Leone, and Somalia.
  • “Developing Countries” - This category will encompass what is sometimes referred to as the muddling middle – “states with low or lower-middle income, not yet meeting MCC [Millennium Challenge Corp.] performance criteria, and the criterion related to political rights.” The 66 countries in this cohort range from Albania to Cambodia, Egypt to Ecuador.
  • “Transforming Countries” - these are “states with low or lower-middle income, meeting MCC performance criteria, and the criterion related to political rights.” The 24 countries in this category – ranging from Bolivia to Mali to Thailand – are ones that are moving toward the threshold for MCA eligibility.
  • “Sustaining Partnership Countries” - This category includes 43 countries that are “upper-middle income or greater for which U.S. support is provided to sustain partnerships, progress, and peace.” These include a number strategic partners of the United States, notably including Israel -- the giant of aid beneficiaries, receiving nearly $2.5 billion a year – as well as Panama, Argentina, Kuwait, and Singapore.
  • “Reforming Countries” - The final (weirdly named!) category is reserved for 11 poorly governed authoritarian countries, “states of concern where there are significant governance issues” and in some cases serious restrictions on direct U.S. funding. Although the list of countries may not be made public, they presumably include such garden spots as the North Korea, Zimbabwe, Belarus, and other “outposts of tyranny.”

The assumption behind this categorization is that advancing core U.S. assistance objectives – peace and security, good governance, investments in people, economic growth, and humanitarian assistance – will have to be done differently and with a different mixture of aid resources in different contexts. Whether the categorization results in a significant reallocation of aid among countries – and among aid sectors – remains to be seen.
The administration is not wasting any time in implementing this new assistance framework. For the FY07 budget, some 34 countries--representing 61% of all bilateral foreign assistance--will be placed on a “fast track”, with operational foreign aid plans drawn up to reflect their country classification. Beginning in FY08, this framework will drive all foreign assistance--with the important exceptions of the Administration’s two flagship aid initiatives, the Millennium Challenge Account (MCA) and the President’s Emergency Plan for AIDS Relief (PEPFAR).
We’ll be keeping a close eye on the implications of this new typology of foreign assistance for aid effectiveness, policy coherence, and poverty alleviation. Stay tuned!

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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.