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Wednesday, October 22, 2008

The international financial crisis and the financing for development agenda

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Source: Cidse Advocacy Newsletter, nr. 40, October 2008

The UN General Assembly session in September was intended to renew high-level support for action towards the Millennium Development Goals (MDGs) at their half-way point. It was overshadowed by the breaking international financial crisis. The global impact of the crisis provides an added significance to the fall’s two major international conferences on financing for development, in Accra and in Doha.

The OECD High-level Forum on Aid Effectiveness in Accra, Ghana in September already took place against the backdrop of stagnating aid levels. The financial crisis has meant more pressure on donor government budgets. U.S. Presidential candidate Barack Obama’s campaign has announced that his pledges to double national aid would be affected by the current crisis. European countries are struggling to reach their commitments to allot 0.7% of their national income to development expenditures. They have dismissed calls to stop inflation of Official Development Assistance (ODA) figures and to guarantee that resources invested in international efforts to combat climate change or raised through innovative resources will not be counted in the 0.7% as politically impossible.

Happily for donors attending the Forum, its agenda did not dwell too much on ODA volumes but rather on aid effectiveness. Being so limited, the general evaluation of its outcome was positive. Donors committed to manage ODA through countries’ public finance systems instead of parallel donor structures and provide reliable forecasts of aid resources for governments’ budgetary planning. But the generally positive language is no guarantee of any stronger political will to take action. To date, official reports on the implementation of the Paris Declaration on Aid Effectiveness, supposed to be operational since it was adopted in 2005, have concluded an alarming lack of progress.

Can we expect more? The aid system is largely run on donor defined principles and managed by donor dominated institutions such as the OECD and the World Bank, with an unwieldy attempt to include ‘partner countries.’ Such a system is incapable of reforming quickly enough, for aid to make the contributions needed for the attainment of the MDGs by 2015. It cannot or does not want to look critically at aid and development. A forum to review the effectiveness of ODA management, ODA’s real contribution to reducing poverty, its relative value as compared to other avenues developing countries have at their disposal to combat poverty (ability to effectively raise and deploy fiscal revenue, combat capital flight, rely on fair trade rules and be free from debt burdens) and the need for ODA to fit in a coherent development framework remains the urgent need of the day.

The Doha Financing for Development Review Conference this December is the ideal opportunity to make such a forum happen. It will review the implementation of the Monterrey Consensus set against today’s realities and crises. Its holistic agenda and its multi-stakeholder approach puts it in the best place to answer difficult questions on the fiscal responsibilities not only of developing countries but also of other actors such as tax havens, transnational companies and the countries in which they are registered; ODA; trade; the financial architecture; and other elements impacting development. The critical determining factor of its success though, is high level representation of countries, international institutions, civil society and the private sector. Rendez-vous in Doha?

For more information contact Denise Auclair and Jean L. Saldanha

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