Mobilizing external resources for poverty alleviation

Obtaining foreign aid for poverty alleviation
In the eyes of the general public in the donor countries the main purpose of aid is to help alleviate and reduce poverty, and this is what stimulates public support for it. Aid can, indeed, do this, both indirectly by supporting macro-economic and sectoral policies and programmes/projects which contribute to growth and directly by supporting policies and programmes/projects which attack poverty through direct income transfers, the provision of social/basic human needs services and the promotion of income-generating activities. This explains and justifies the frequent plea for more assistance, the agreement on aid targets by most DAC donors and the dependency on aid and its indispensability in poor countries unable to mobilize sufficient domestic resources on their own. Most low-income countries, and the least developed countries in particular, have had little access to private capital flows and rely almost exclusively on concessional finance to meet their external capital requirements.

While it is generally agreed that viable anti-poverty strategies require increased assistance flows, the absorption problems that may arise and the potential disincentive effects of aid are also recognized. Issues related to the quality of aid are thus as important as those concerning its volume. Another important issue is the degree of complementarity of aid programmes and projects to recipients' policies and programmes. This raises questions of dialogue and coordination for ensuring effective benefits to the poor and for optimizing the respective roles of the main actors, [ie] the various donors, bilateral and multilateral, as well as central and local government entities, NGOs, self-help movements among the poor, etc.

Bilateral and multilateral donors have shown a great interest in funding safety nets that can successfully reach the target groups and make an impact on poverty. Mobilizing external resources can useful be seen within the framework of an international donor-recipient partnership for the prevention, alleviation and reduction of poverty.

In 1992, overseas development aid (ODA) from all sources to developing countries is estimated at US$ 58,300 million, 98% of which came from donors members of the Development Assistance Committee (DAC) and the multilateral agencies mainly financed by them. With the end of the Cold War, DAC donors have become the providers, through bilateral and multilateral channels, of the overwhelming share of such aid to developing countries, as aid flows from the former USSR and the countries of eastern Europe quickly dried up, and aid from OPEC donors continued its downward trend, falling sharply in particular after the conflict in the Gulf. In addition, international NGOs (financed by voluntary private sources and official agencies in developed countries) have come to be regarded as the "third channel" of external resource flows to developing countries, still relatively small overall, but steadily increasing in recent years (in current and real terms) and especially relevant as development NGOs are generally poverty-focused and operate at the grass-roots level.

On the whole, aid has grown at a slow pace. The availability and allocation of concessional resources has taken place in the context of major budgetary constraints faced by many donors and of growing global demands, buoyed up by newly eligible or potentially eligible claimants for aid. In terms of donors' efforts (bilateral flows and contributions to multilateral agencies) growth in aid has tended to decelerate in recent years. In terms of developing countries' receipts (bilateral flows and flows from multilateral agencies) growth has fluctuated, being twice negative in real terms during the 1990s (in 1990 and 1992). In particular, aid has not predominantly gone to low-income countries and has grown at a slower pace for the poorest countries than for the other developing countries. In quantitative terms, aid receipts of poor countries and of countries with large segments of poor population have fallen short of their external capital requirements for reaching sustained growth and thereby reducing poverty. According to a recent note by the OECD/DAC secretariat, "on the basis of present plans, for several donors - including some of the larger ones - aid growth is likely to be lower than GNP growth, with the prospect of reduced ODA/GNP ratios". A positive development however is that there has been no apparent weakening of DAC support to multilateral institutions. The share of DAC aid in form of contributions to multilateral agencies is on average in the 1990s close to the average in the 1980s, and the share of multilateral disbursements in total ODA receipts of developing countries rose to nearly 30% in 1992.

The EC is the sixth largest provider of official development aid and the second largest multilateral donor. Taken together, EC programmes and the programmes of the 15 member states account for about two-thirds of global development aid.

Increasing concern has been voiced about the urgent need to reduce poverty in poor countries. The members of the Development Assistance Committee (DAC) of OECD have renewed their commitments in respect of a development partnership strategy designed to reduce the proportion of the world's population living in extreme poverty by 50 per cent by the year 2015. The volume of ODA should be progressively brought into line with the United Nations target of 0.7 % of industrialized countries' GDP and the target of 0.2 % for the LDCs.

Food not Bombs
Type Classification:
D: Detailed strategies
Related UN Sustainable Development Goals:
GOAL 7: Affordable and Clean EnergyGOAL 10: Reduced InequalityGOAL 16: Peace and Justice Strong Institutions