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

Explore the concept of international development finance, its impact on global poverty elimination, and the UK's commitment to aid. Discover strategies for effective development financing.

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

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  1. International Development Finance and the UKJames CopestakeBRLSI 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? Three definitions… and their limitations

  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: Organisationfor Economic Cooperation and Development (OECD) Development Assistance Committee (DAC)

  5. ODA trends Source: Figure 2.1 http://devinit.org/post/investments-to-end-poverty-2018/ Based on data from the OECD Development Assistance Committee Back

  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 http://devinit.org/post/investments-to-end-poverty-2013

  7. International financial flows to developing countries Back

  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: http://devinit.org/post/private-development-assistance-key-facts-and-global-estimates/

  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 www.bathsdr.org

  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: 270-400 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 1.4. http://devinit.org/post/investments-to-end-poverty-2018/

  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 20+15+15= 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.Lowest ranked on at least two out of three ‘at risk’ lists based on (1) poverty forecasts(2) human development (3)climate fragilitySource: DI (2018) Source: Figure1.5. http://devinit.org/post/investments-to-end-poverty-2018/

  15. 21/30 of the countries most at risk are also among the 30 with least government revenue Most at risk Least govt revenue per person* Ethiopia 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 Eritrea Republic of Congo Lesotho Mauritania Nigeria Papua New Guinea Sudan Syria Yemen 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? Conservatives 2015 - 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 Labour 1997 - Eliminating world poverty: a challenge for the 21stCentury” • 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.

  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”

  20. But more of the the UK aid budget is being diverted to other activities…

  21. UK ODA allocations Source: DFID Statistics on International Development 2017: Final 2016 UK ODA spend statistics.

  22. 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.

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