April 2, 2012

The morning after the night before - what future for Canadian aid?

The news of last week’s budget cuts are still sinking in. And it feels like the hangover is going to last a while.

On the one hand, it is good to finally have some clarity on what the landscape for Canadian aid – or at least the numbers – will look like over the next three to four years.

On the other hand, if you look a little closer, the landscape seems vaguely reminiscent of Vimy Ridge - field upon field pocked by massive craters where explosions have torn apart grasslands and forests.

The image may seem overly dramatic, but in the coming weeks and months, as the details of the budget roll out, the cuts are going to take shape, and the impacts on programs and priorities are going to make the numbers in this budget feel much more real.

Perhaps what is most alarming is the fact that, whereas the Liberal and then the Conservative governments both invested in rebuilding Canadian aid a decade ago after earlier spending slashes to tackle Canada’s previous deficit, there is no ambition now by the Conservatives to sustain this progress.  Canadian aid is set to decline or stagnate for the foreseeable future – the International Assistance Envelope, and with it the aid budget, will flatline again beyond 2015, but at $4,622, not the $5 billion set in 2010.

To add further doom to an already gloomy picture, Canada is following in the footsteps of some other bilateral donors, who are using aid to promote their country’s national economic interests. Last fall CIDA was putting the finishing touches on its Corporate Social Responsibility Framework for the Extractive Sector. And this fall (or sooner), on the heels of its Sustainable Economic Growth Strategy, it is set to launch its Private Sector strategy, with early indications suggesting that it may be favouring Canada’s – not partner countries’ – private sector development. 

CIDA Minister, Beverley Oda, said as much in an interview with Postmedia News in January, 2012, when asked how she separates Canada's trade and foreign policy interests from Canadian development goals. Minister Oda replied, "I really don't separate them.”

Equally telling is where issues related to aid now fall in the budget  – under a section focused on “Expanding Trade and Opening New Markets for Canadian Businesses”.

So what is the news from this section in the Budget on aid? How are things going to shake down for CIDA and for Canada’s official development assistance?
  • Over the next three years, between FY 2011/12 and FY2014/15, the International Assistance Envelope (IAE) will decline by 7.6%.
  • Between this current fiscal year (2011/2012) and FY2015/16 when the time period to reach the Millennium Development Goals will have elapsed, Canada will have reduced Canadian official development assistance (ODA) by close to $1.2 billion. This is on top of the 2010 cut of $4.4 billion to future aid that the Conservative government implemented by abandoning the annual 8% increases to aid in Budget 2010. These annual increases would have put the IAE in 2015/16 at about $7.6 billion instead of the $4.9 billion this budget now projects for that year.
  • Between the current fiscal year and next year alone, Canada’s ODA will plummet by almost 600 million, assuming no additional supplementary estimates in 2012/13. This is equivalent to CIDA pulling all of its funding for education programs ($250 million), for the Global Fund to fight HIV AIDS, Tuberculosis and Malaria ($180 million), for water and sanitation ($70 million), for the World Food Programme ($70 million) and more – although this is not necessarily where the cuts will be made.
  • Relative to FY2010/11 ($3.59 billion), for which we have the most accurate statistical information, we can say that the cut to CIDA’s own ODA disbursements in the coming year will be about 4.3%. We don’t yet know where the exact cuts will be, but given the magnitude of the cuts, it will likely have to be both to transfer flows and operational budget.
  • Perhaps more astonishingly,  Canada’s aid relative to its Gross National Income (GNI) will tumble ten points between 2010 and 2015, from 0.34% to 0.24%, assuming no supplementary estimates and GNI growth remains consistent with current levels.  Again, if aid had grown by 8% from 2010/11 to 2015/16, Canada’s performance ratio would have been 0.37% instead of an expected 0.24%.  The last time the ODA ratio performance for Canada was as low as 0.23% was in 2003/04, just as the Liberal government launched its 8% increases. This drop in ODA is set to put Canada among the lowest ODA performers (although it may also be that other donors will cut their budgets by 2015/16). Last week, both the Dutch and Spanish governments also made historic cuts to their aid budgets.

Decline in ODA over the next five years
Note that figures are in millions of dollars
FY 2010/11 and 2011/12 include supplementary estimates. Subsequent years do not.
Beyond the broad cuts, it is also interesting to note how the key Departments responsible for implementing Canadian aid are going to get hit.
  • Finance Canada (which provided $384 million to the World Bank in 2010-11) is the only significant government department that seems to be completely untouched by the cuts in the IAE. It will see no decline in its ODA transfer budget.
  • CIDA will get disproportionately hit (relative to its share of the IAE – see table below), largely compensating for no comparable decline in Finance’s budget (relative to its share of the IAE).
  • The cuts to IDRC and DFAIT are in proportion to their share of the IAE.
Percentage share of the IAE (FY 2009/2010)
Departmental cut as a percentage of the total cuts (FY2012/13)
Total dollar cuts per Department (for FY2012/13 to 14/15)
Canadian International Development Agency
$663.5 million
Department of Foreign Affairs and International Trade
$73.4 million
Finance Canada
International Development Research Centre
$44.5 million

We will have to wait another few weeks until CIDA’s Part III Report on Plans and Priorities (Estimates) are released in early April make the details of the cuts more evident.
It is only at that point that the dust will settle on the landscape, and we will better see the size of the craters and just where this budget has hit hardest.
This blog post was written by Fraser Reilly-King, Policy Analyst (Aid and International Co-operation), Canadian Council for International Co-operation, and Brian Tomlinson, Executive Director, Aid Watch Canada.
The views expressed in this blog are those of the authors and do not necessarily reflect the positions of CCIC nor its members.

1 comment:

  1. In summary - why don't you give us a picture of how much Canada gleans from resource-extraction in developing countries? By the numbers if you can.