Aid dependency among 54 of the world’s poorest countries has declined by a third over the last decade, according to a new report from ActionAid. The Real Aid 3 report reveals that since 2006 there has been an increase in good quality aid – real aid – from 51 per cent to 55 per cent.
Some of the world’s poorest countries are far less reliant on aid than 10 years ago. For example Ghana and Rwanda have reduced their dependency on foreign aid to provide essential services such as hospitals, education and roads by almost half and Nepal by over a third.
ActionAid’s European aid expert, Laura Sullivan said:
The good news is that the quality of aid is improving so that each Euro spent is getting more results for the poor, which is helping to reduce aid dependence.
"But while countries such as the UK, Denmark and Sweden are giving a high amount of real aid, other leading EU donors such as France and Germany are falling short".
To qualify as real aid, aid must be targeted at the poorest, and the recipient country must be given the space to own and lead its development plans. Real aid is not tied, is administered efficiently and is used in the recipient country. If it comes in the form of technical assistance, it must be wanted by the recipient and competitively priced. And debt cancellation should not be counted as real aid.
Aid’s ultimate goal should be to end aid dependency. It makes governments answerable to their own citizens, rather than to donors. Not all aid is the same. Real aid is effective and has few strings attached. It puts poor countries where they should be – in the driving seat of their own development.
The Real Aid 3 report also reveals that some aid allocation is being driven by the interests of rich countries, rather than the needs of poor people.
Over €1.37 billion of cash earmarked for spending in poor countries is being used to finance European companies1 with Italy and Spain among the worst offenders, while in Austria, Greece and the Netherlands, money spent on receiving refugees is counted as aid.
ActionAid’s research shows that investing aid in local companies can dramatically increase its impact, with the cost of building one kilometre of road in Ghana or Viet Nam falling by 30-40 per cent when built by a local company.
EU governments must provide more real aid so that poor countries can reduce their aid dependency even faster. They can do this in November at the High Level Forum on Aid in Busan, South Korea. This is the perfect opportunity to make sure poor countries get more of the real aid they need to tackle poverty more effectively.
Notes to Editors:
1 According to the OECD’s figures on the percentage of bilateral aid that is tied
In 2005 and 2006, ActionAid produced the first two Real Aid reports, which identified how much aid was "Real Aid".
This report, Real Aid 3, focuses on how aid dependency is declining and data has been analysed for the 54 lowest income countries (OECD).