Budget 2017: How to decipher Canada’s commitments

When it comes to funding for global initiatives, numbers can deceive. Here’s what to keep in mind this week as the budget is tabled.

By: /
March 21, 2017
Bill Morneau
Canada's Finance Minister Bill Morneau arrives to speak to journalists after announcing the date of the federal budget on Parliament Hill in Ottawa, Ontario, Canada, March 7, 2017. REUTERS/Chris Wattie

This week the Liberal government will table its 2017 budget. While most of the focus will be on domestic themes, some of us will be looking for progress towards realizing Canada’s globalist, feminist prime minister’s ambition of getting Canada back on the world stage.

The budget however is a political document (and the worst kind of political document at that, one with a lot of numbers). Politicians and numbers mix like oil and water — numbers can mask the government’s true commitment or be spun to overplay it. So, we will be ready to un-spin, with several areas in mind. 

A penchant for “doubling”

Despite significant international achievements for which Prime Minister Justin Trudeau is celebrated by progressives the world over — resettlement of Syrian refugees, leadership at home and abroad on climate change, on global health and sexual reproductive health rights (SRHR) — the Liberal track-record is not without its flaws.

Budget 2016 had significant transparency gaps. The numbers on Canada’s international assistance envelope literally did not add up.

The prime minister’s penchant for suggesting everything is being “doubled” or otherwise inflating the significance of increases (compared to the Conservatives) has made things worse. It is also at odds with his explicit rejection of development spending targets (like the UN’s recommended 0.7 percent of GNI, which Canada falls far below with 0.28 percent) as well as GAC’s position on the same which has been that 0.7 is too ambitious in the current fiscal climate. 

The Liberal government has made a series of key international pronouncements that are often a combination of lofty rhetoric and big numbers — and Budget 2017 may be no different. Let’s un-spin some examples:

Climate finance: In November 2015, just before COP21, the prime minister announced a major five-year $2.65-billion climate finance commitment to developing countries and called it a “doubling” of previous levels. This got us confused. The original fast-start financing commitment to developing countries, made by the Conservatives, was $1.2 billion. But, it was over three years. If the Liberals were doubling it they would reach it by 2018-19. But they will not until 2020-21, so this is not doubling.

The increase in funding to the Global Fund: In September 2016, Trudeau hosted the replenishment of the Global Fund and Canada received praise for increasing its pledge by 23 percent. The Fund converts pledges to U.S. dollars, because the things it buys — vaccines, medicines, health equipment — are priced in U.S. dollars. Canada’s latest pledge was indeed a 23 percent increase compared to the last round in 2013, but in Canadian dollars. Since the last round, the Loonie has fallen about 23 percent to the U.S. dollar. Which means in real U.S. currency terms this pledge is flat, or may even end up being a decrease. We checked the past track record: Canada has raised its pledge in every round. The past two rounds (2008-10 and 2011-13) were 25 percent and 29 percent higher respectively — and, pledged in U.S. dollars.  

Recent investment in Sexual and Reproductive Health and Rights (SRHR)We find the opposite when it comes to the government’s recent announcement on International Women’s Day of a “doubling” of Canada’s financing for SRHR to $650 million over three years. The government appears to have underestimated or downplayed its new commitment. The announcement suggested Canada currently spends $108 million on SRHR. This is impossible to verify because SRHR is not a category in any Canadian or global aid database. Despite significant data gaps, we analyzed the issue further, and could not back up the government’s math. The best we can say, based on credible independent analysis, is that Canada spends about US$43 million on family planning. This new commitment is therefore much more than doubling. Naturally we are curious why the government didn't say “quadrupling” as would be the case taking it at face value.    

The trouble with talk

Government rhetoric often does not translate into spending, and recent examples on everything from feminism to infrastructure show this. They are another reminder that just because the government has been emphasizing something in the global arena, doesn’t mean it will put its money where its mouth is this week.

In its recent Feminist Scorecard, for instance, Oxfam Canada concludes: The Liberal government’s bold feminist rhetoric has not yet translated into policy and spending decisions that push the needle forward on gender equality.

When it comes to infrastructure, the Parliamentary Budget Office notes: the government’s spending is far short of plans. There is growing risk that money the government originally expected to be spent in 2016-17 will be deferred to subsequent years. The government has provided no performance measurement framework with which to evaluate the New Infrastructure Plan’s performance, and only limited visibility on tracking how the money is being spent.

What we can expect

Budget 2016 added $256 million over two years to the international assistance envelope (IAE). It was a modest investment (the total budget is nearly $5 billion per year); nevertheless, it was the first increase in years. We do not expect any significant financial addition to this.

We expect Budget 2017 will pay lip service to forthcoming outcomes of the year-long international assistance review Global Affairs Canada (GAC) has been conducting, which is expected to result in a new “feminist international assistance policy.”

Key action on development will likely be outside GAC’s development arm (i.e. outside the former CIDA). Especially key to watch will be the implementation of the development finance initiative (DFI) — a mechanism announced within Budget 2015 by which taxpayer dollars can be used to leverage greater investment in development from the private sector and other non-traditional partners. The initial financial commitment under the Conservatives however was paltry: $300 million over five years. Two years on, the mechanism is not yet operational.

It would be no surprise if the Liberals not only (finally) implemented the DFI, but also stepped it up significantly. Given the scale of opportunity and need, anything less than a quintupling of the Budget 2015 level, or $300 million a year, would be nothing to write home about. Watch for whether it will be setup as an independent crown corporation or remain within Export Development Canada, how the DFI’s risk orientation and development mandate will be secured, and whether it will have the full range of financial instruments.

Overall, when it comes to Budget 2017 and development, watch what the government does, not what it says. 

Development spending is increasing modestly after years of stagnation and decline. The Liberals however are not about to hug balloons reading “0.7 percent of GNI” any time soon. Budget 2017 will cobble together re-announcements and, prospectively, the DFI.

The budget is a political document and politicians live in spin. So, as the Russians remind us: doveryai, no proveryai — trust, but verify.