1. International Development Finance and the UK James Copestake BRLSI World Affairs Talk 20Nov2018

2. Outline What is international development finance?
Development finance and the global struggle against extreme poverty.
UK aid trends: is the commitment to poverty elimination weakening?

3. 1. What is international development finance
1. What is international development finance? Three definitions… and their limitations
Official Development Assistance
Excludes other important financial flows to developing countries.
Controversies over how to (re)define ODA.
Finance for Developing Countries
Classifying countries as ‘developing’ is dodgy.
Not all finance for developing countries is used for development.
Private money with development intent
Debate over definitions of development.
The road to hell is paved with good intentions.

4. Official Development Assistance defined
Flows of money and in-kind resources.
Concessional in character (grant element of at least 25%).
From official government agencies.
Administered with the promotion of economic development and welfare of developing countries as its main objective.
To countries on the ‘DAC list’ of low and middle income countries.
Source: Organisation for Economic Cooperation and Development (OECD) Development Assistance Committee (DAC)

5. ODA trends
Source: Figure Based on data from the OECD Development Assistance Committee
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6. Finance for developing countries
(2011 US$ trillions, 1990 to 2011)
ODA is smaller than
Loans
Private remittances
Foreign Direct Investment
Domestic resource mobilisation
Source: Table 1.2

7. International financial flows to developing countries
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8. Private Development Assistance
Total in 2016 was $45bn (2016).
Stable since 2012.
Two-thirds ($31bn) from USA
UK ($3.9bn) = one third of ODA
[BRAC ~US$ 750m]
Source:

9. Footnote: blended finance mechanisms
Example 1: using ODA to boost PDA through the charity sector
UK Aid Direct
UK Aid Match
UK Aid Connect
Example 2: using ODA to ‘crowd-in’ private investment
DFID Impact Programme
Private Infrastructure Development Group
My own research area: impact evaluation of international development interventions: see

10. 2. Development finance and the global struggle against extreme poverty.
Why focus on this?
International consensus
A SMART goal
Not ambitious
Sustainable Development Goal, target 1.1: To eradicate all extreme poverty for all people everywhere by 2030.
Defining extreme poverty as living on $US 1.90 or less per day (at 2011 PPP prices).
Incidence in 2013: 783 million (11%, down from 27% in 2000).
Business as usual forecasts for 2030: million.
Cost of doing better: average annual transfer per person of less than £5 per month (10% of £600) plus universal basic health and education.

11. Recent publications (all 2018)
Development Initiatives. Investments to end poverty 2018: meeting the finance challenge to leave no one behind.
Overseas Development Institute. Financing the end of extreme poverty.
UK Government. Implementing the Sustainable Development Goals. GOV.UK.
World Bank. Poverty and shared prosperity: piecing together the poverty puzzle.

12. Global distribution of extreme poverty
[Projected rise in SSA share from 51% to 86%]
Source: Table

13. A feasible international strategy?
Focus international effort on those countries currently falling behind most sharply (mostly in Sub-Saharan Africa).
Assist in promoting political stability and economic growth
To increase domestic revenue earning potential and effort (including through reduction of illicit financial flows).
Promote minimum targets for public spending to meet universal basic education, health and social protection (Internationally agreed target of = 50% of government revenue (compared to OECD average of 60%).
Prioritize use of ODA to finance any shortfall.

14. Thirty countries most at risk of being left behind
Thirty countries most at risk of being left behind. Lowest ranked on at least two out of three ‘at risk’ lists based on (1) poverty forecasts (2) human development (3)climate fragility Source: DI (2018)
Source: Figure1.5.

15. 21/30 of the countries most at risk are also among the 30 with least government revenue
Least govt revenue per person*
Ethiopia
Eritrea
Republic of Congo
Lesotho
Mauritania
Nigeria
Papua New Guinea
Sudan
Syria
Yemen
Somalia
Central African Republic
Madagascar
Burundi
Afghanistan
Malawi
Niger
DR Congo
Guinea-BIssau
Uganda
Chad
The Gambia
Ethiopia
Liberia
Togo
Haiti
Mali
Comoros
Benin
Mozambique
South Sudan
Sierra Leone
Tanzania
Burkina Faso
Guinea
Bangladesh
Rwanda
Senegal
Cambodia
*estimated by ODI (2018) to lack the tax potential to meet even half the cost of universal basic health, education and social protection services

16. Domestic public resources are lowest where poverty is highest
Source: DI (2018, Figure 3.4).

17. ODA is needed to augment local resources in ‘at risk’ countries

18. 3. UK aid: rising to the challenge?
Labour
Eliminating world poverty: a challenge for the 21st Century”
Gleneagles G8 commitment to 0.7% of GNI target for ODA.
Results-based aid management (performance target culture)
DFID exclusive poverty mandate - International Development Act 2002.
Partnership approach to delivering ‘global public goods’
Iraq and Afghanistan.
Global financial crisis.
Conservatives
Tackling global challenges in the national interest”
Continued commitment to 0.7% target - ID (ODA Target) Act 2015
Continued emphasis on value-for- money.
Aid spending spread more widely across government departments
Increase in sub-contracting to and through the private sector
Austerity
Brexit

19. ODA and public spending trends (IFS Briefing, 2017)
2005/6 to 2017/18
UK ODA nearly doubled (£7.4bn to £13.6bn).
But this is still less than 2% of total government spending
2010/11 to 2016/17
ODA budget (£12 bn) rose by £2 billion
Health budget (£122 bn) grew by £12 bn.
Education (£64 bn) and Defence (£39 bn) were stable
Budgets of all other departments were cut by 28% (£50 bn)
“ODA spending is among the most scrutinized part of UK government spending”

21. Change over 2015 (£ million)
But more of the the UK aid budget is being diverted to other activities…
2016 Budget
(£ million)
2016
Share (%)
Change over 2015 (£ million)
Dept for International Development
9,544
70.2
-568
Dept Business, Energy & Ind. Strategy (inc ICF & GRCF)
700
5.2
419
National Security Council (CSSF & Prosperity Funds)
623
4.6
435
Foreign & Commonwealth Office (inc. British Council)
521
3.8
140
Home Office (inc. asylum seekers in first year)
368
2.7
226
IMF contribution (Poverty Reduction & Growth Trust)
454
3.3
European Union attributions
993
7.3
168
Other
1,377
10.1
297
Total
13,587
100.0
1,403

22. UK ODA allocations 2016 rank (2015) Country specific bilateral 2016
(£m)
1 (1)
Pakistan
463
2 (5)
Syria
352
3 (2)
Ethiopia
334
4 (4)
Nigeria
320
5 (3)
Afghanistan
235
6 (8)
Tanzania
186
7 (22)
Jordan
175
8 (7)
South Sudan
161
9 (6)
Sierra Leone
154
10 (14)
Somalia
152
2012
2016
Bilateral aid (% of total UK ODA)
63.2
63.8
Of which, country specific (%) na
66.0
Of which, humanitarian relief
<10
15.0
Total country specific bilateral (£m)
3,463
4,841
Of which via DFID (%)
86.6
73.8
DFID to low income countries (%)
67.3
59.3
Non-DFID to low income countries
35.0
25.1
Source: DFID Statistics on International Development 2017: Final 2016 UK ODA spend statistics.

23. Summary
1. International development finance is highly diverse: official aid is important part only one part of the mix
2. There is a strong consensus across the international development community that eliminating extreme poverty by 2030 is a priority and is feasible. This entails focusing efforts on helping governments to deliver basic health, education and income safety nets, particularly in a small number of at risk countries (mostly in Africa).
3. The UK has made an important contribution to establishing this consensus, is playing a leading role through DFID in helping to deliver it. But there is evidence of increasing diversion of effort away from extreme poverty elimination in those countries most at risk towards less poor country and activities that serve the UK national interest in other ways.