Measuring Canada’s role among global donors

Looking at the size of aid, Canada’s rank as donor continues to fall. Is it all bad news?
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April 13, 2015
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Data released this past week by the Organization for Economic Cooperation and Development (OECD) Development Assistance Committee (DAC) shows that Canada’s rank among global aid donors continues to fall. In 2014, Canada’s aid totalled about $4.2 billion (in USD). This represents a decline of 11 percent in real terms (i.e. after accounting for inflation and exchange rate changes) compared to the previous year (2013), which was already down about 11 percent from the year before (2012) when Canadian stood at $5.6 billion.

In terms of size, Canada now ranks 10th among the 28 major global donors that make up the majority of global aid, down from 6th in 2012. In terms of generosity measured by the aid to gross national income (GNI) ratio Canada now ranks 16th, in the bottom half of the OECD-DAC club. Less than one quarter of one percent of Canada’s GNI was spent on aid in 2014. This comes at a time when global humanitarian assistance networks are stretched to a breaking point with needs consistently outpacing capacity to respond whether to conflict in Syria or Ebola in West Africa.

These trends are out of step with what Canadians care about. The majority of Canadians agree that Canada should be one of the leading global donors. But before we get caught up in the unsophisticated “the more aid the better” refrain that is sure to come from the usual cast of civil society organizations, academics and politicians, here are a few things to consider.

Quality versus quantity: Let’s look at the quality of aid. Canada performs well above peers in two out of four areas assessed to measure the quality of aid by the Brookings and Center for Global Development’s index — fostering institutions in developing countries and transparency and learning. From 2008 to 2012, the quality of Canadian aid improved in all areas measured. The index also shows that less than half of global aid is ‘above average quality.’ Clearly donors can do more to improve the quality, and not just the quantity of aid.

Development is about more than aid agencies. It is about forging new partnerships and setting ambitious targets. Here Canada has a leadership role to play whatever the size of our aid budget.

The development agenda: 2015 is a crucial year for setting future agendas. In September global leaders will adopt a new set of Sustainable Development Goals (SDGs), which will replace the Millennium Development Goals (MDGs). In July they will agree to a financing for development (FfD) framework for how to pay for these goals. These agendas will have an influence on what happens to future Canadian aid, just as the MDGs catalyzed an unprecedented increase in global aid, which had a direct impact on dramatically reducing the number of children dying from preventable diseases and nearly brought about an end to polio.

Canada can lead in two areas: making the SDGs more focused, and ensuring innovative financing plays a bigger role in the FfD agenda.

The “169 commandments” that comprise the draft SDGs have been described as “worse than useless” because they lack focus. A weak agenda will be damaging for international development. Canada’s experience shows that even with a declining aid budget, greater prioritization is possible and indeed necessary. Canadian aid to maternal and child health for instance has grown, and will continue to grow given the $3.5 billion commitment (from 2015-2020) announced last year. The SDGs could use a renewed focus on what is most needed from the perspective of the poorest countries.

One thing is certain, the bill for the SDGs will be huge — $5 to $7 trillion in annual infrastructure financing alone according to the UN. Total foreign aid at $135 to $140 billion annually will barely make a dent.

Which is why as part of its work on the Redesigning Development Finance Initiative, chaired by Minister Christian Paradis, Canada is leading the effort behind a new Global Finance Exchange (GFx), which is expected to launch at the FfD conference in July. GFx is part of a strategy to scale up blended development finance, a concept that has matured rapidly in recent years. The idea is to utilize aid money to lower the risk of investing in frontier markets and thereby leverage additional investment for development from private investors and foundations. GFx will attempt to close key information gaps between prospective investors and bankable projects, and create space for innovation in development finance.

It may only be a small step, but could unlock new and additional resources for development. It also shows that we can lead with the currency of ideas even if our aid budgets continue falling.

In an election year, Canadians ought to take stock of recent trends as they decide on what kind of Canada they want on the global stage.

This post has been updated.