Aid, Financing and Debt

Wealthy countries give aid to support developing countries with one hand, but they also take it away with the other.

It is a shocking fact that, for every $1 given in grant aid to developing countries, more than $5 comes back in debt repayments. And in 2007, aid actually decreased by 8%.

Debt repayments are crippling developing countries and international financial institutions are often built around the needs and interests of the wealthy nations that set them up, not the developing nations they are meant to help.

Is it all talk?

In 1970 wealthy nations committed to giving 0.7% of their gross national income towards overseas development assistance. This aid is a crucial source of financing for many developing countries.

But nearly 40 years on, only five countries have actually fulfilled their promise. And in many countries aid levels are going down not up.

The right kind of aid

Developing countries don’t just need any old aid. They need more effective aid that is spent properly.

This means longer-term, predictable aid. And it means reducing duplication, harmonising reports back to donors and giving recipients more say in how aid is used.

The US in particular has been too ready to use its aid to achieve moral objectives.

A new direction?

The launch of the International Health Partnership in 2007 by a coalition of seven donor governments, health agencies and other international donors may be a step in the right direction. It aims to build national health systems and improve health by helping countries to identify, plan and address their own problems, and promote coordination, efficiency and accountability.

The first developing countries to join the partnership were Burundi, Cambodia, Ethiopia, Kenya, Mali, Mozambique, Nepal and Zambia. Madagascar and Nigeria have followed suit.

The institutions

The international trade system is often detrimental to developing countries, but so are international financial institutions such as the International Monetary Fund (IMF), the World Bank and the regional development banks. The wealthiest countries effectively control them, and through them promote policies that suit their international economic agendas. These policies are often not best suited to promoting the economic development, nor the health and well-being of developing countries.

The World Health Organisation (WHO) was set up as the UN’s specialist health agency after the Second World War. But in recent years it too has lost out to global financial institutions that are playing an increasingly decisive – and often damaging – role in health policy-making.

Bodies such as the World Bank, IMF and World Trade Organisation, now wield much greater influence on the health policy decisions of member governments than the WHO.

Health Poverty Action says:

  • Donor countries must increase their overseas development assistance to 0.7% of gross national income as promised.
  • Wealthy nations should cancel the debt of the poorest developing countries and make sure debt repayments are sustainable for all other countries.
  • The International Monetary Fund and World Bank must be overhauled to reflect the needs and interests of developing countries better.
  • Donors must work together to coordinate their aid and harmonise their reporting requirements to maximise aid effectiveness.
  • A revitalised WHO must develop a stronger analysis of how economic and financial policies impact on health so that it can challenge the far-reaching decisions made by global financial institutions and big international companies. It must also be prepared to champion the interests of poor and marginalised people more strongly.

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