Development Aid and Development: Implications of Development Aid Budget Cuts (The UK-Yemen Perspective)

Abstract

The paper is written from an interpretive point of view, it used research method that involves a detailed understanding of development and development aid as a concept, employing thick interpretive descriptions and putting forward an argument through the dense elaboration and multi-layered description of aid patterns in the United Kingdom (‘UK’).

The paper in addition, focuses on the impact UK budget cuts have on development (projects, partners, development actors etc.) in recipient countries with a focus on Yemen. Yemen was chosen because the UK governments 60% cut in aid to Yemen has dire consequences for a country plagued by one of the world’s worst humanitarian crisis and which is on the verge of arguably the largest famine the world has witnessed in decades.

The paper concludes by stressing the need for UK to review its decision on budget cuts not only for Yemen but other countries plagued by hunger, flood, drought, famine and several other natural and man-made challenges.

It is important to highlight that for this paper, the term development aid and foreign aid have been used interchangeable. A host of authors opine that they have slightly different meanings, and they are closely related to other concepts like International Aid, Development Assistance, Development Cooperation, Technical Assistance etc.

Keywords: Development, Development Aid, Foreign Aid, Budget, Budget Cuts, ODA

INTRODUCTION

In order to address the implications of budget cuts on development aid and by extension development, it is important that we get a general overview on the idea of Development and Development Aid as two different concepts.

Development as a Concept

Development as a term is vast and has different interpretations in different fields, from the social science — psychological development, political development etc. — to the sciences — developmental geology, developmental science etc. — but for the purpose of this paper, we will view development from the conceptual viewpoint of international development, economic development and sustainable development.

The concept of development includes many aspects and has evolved over time, it is described as ‘a multidimensional undertaking to achieve a higher quality of life for all people’ by the United Nations (UN Agenda for Development 51/240, 1997). The former goes further to highlight the importance of sustained economic growth in the development of a country, especially developing countries. This sustained economic growth will in turn lead to an ‘improved standards of living of through the eradication of poverty, hunger, disease and illiteracy, the provision of adequate shelter and secure employment for all and the preservation of the integrity of the environment’ (UN Agenda for Development 51/240, 1997). It is important to highlight that in evaluating the level of development of a country, these — hunger, literacy, disease, employment etc. — are the indicators used by the World Bank.

Although development is assessed on a country level, development must also take place on the individual level, as adopted by the UN General Assembly (UN Declaration of Rights to Development, 1986). The declaration stressed that ‘individual rights cannot be disassociated from collective rights’ and that every country has the right to development.

From the forgoing it is clear that the agenda for development as we have it today is defined by International Development actors. Uma Kothari stressed that the very agenda in development today is set out by the programs of multilateral and bilateral donor organizations, as evidenced in the widespread development aims like the Millennium Development Goals and the Sustainable Development Goals, 2000–2015 and 2015–2030 respectively (Kothari et al., 2002)

Having touched on the concept of development, the paper now goes a step further to the give an overview of Development Aid.

Development Aid as a Concept

Development aid is the freewill shift of resources from one country, usually a developed country to another country often a less developed or developing country, as highlighted by (Thapa, 2020). Thapa further writes that foreign aid could be either a soft loan or a hard load — hard loans are often given by institutions like the World Bank — depending on the terms of the loan and the donor.

Since this paper is not exclusively about the concept of development aid, despite it’s relevant I will not go in-depth, but I will highlight within the next paragraph other areas of development aid that will help in answering the research question.

There are different types of development aid. Aid could be bilateral — when aid flow is between two countries, directly between the donor country and the recipient country — or aid could also be multilateral — when aid flows to a recipient country through various channels mostly multilateral agencies — depending on the context (OECD). Other types of aid include tied aid, military aid — military assistance was viewed as a form of foreign aid until the 1950s, although some countries currently give military assistance and equipment to other countries, it is usually termed military aid or assistance (Wells, 2015) — and project aid. This paper will focus on bilateral aid and multilateral aid as these forms a huge percentage of development aid internationally — a proportion of about 70% bilateral and 30% multilateral, also about 80–85% of development aid comes from government sources as Official Development Assistance (‘ODA’), the remaining 15–20% comes from non-governmental organizations, foundations and other developmental charities (Thapa, 2020) — with a centric look at international organizations active in development like the World Bank, the United Nations (‘UN’) and the International Monetary Fund (‘IMF’).

RELATING DEVELOPMENT AID TO DEVELOPMENT

Benefits of Development Aid

The work of Nobel Price Lauret, Jan Tinbergen in 1970 formed the basis of the policy instituted by the United Nations stating that ‘economically advanced nations’ should provide development assistance to developing or poor countries to the tune of 0.7% of their gross national income (GNI) (Wells, 2015). If every developed country stuck with this policy, some of the most pressing problems facing the world today like extreme poverty — with over 7 billion people in our world today, and an even growing population projected to be over 8 billion, the gains recorded in poverty reduction especially in Sub-Saharan Africa and Latin America are laudable, the OECD shows that ‘globally the percentage of people living in extreme poverty (less than $1.25 a day) reduced from 47% in 1990 to 22% in 2014 and the absolute number of people living in extreme poverty has declined from 1.92 billion in 1990 to 1.01 billion in 2010’ (Wells, 2015) — will be almost eliminated.

But with a growing number of countries not operating with these lines, with some countries cutting down their aid owing to shrinking economies caused by the COVID-19 pandemic, it is hard to achieve these set out objectives.

Let me equally draw your attention to the often-overlooked importance of development aid to the donor country themselves. A lot of people view development aid from a one-sided perspective, which is the benefits gained by the recipient country. But an editorial by the George W. Bush Institute drives home this point by saying that development assistance is not just charity but is an essential modern tool of national-security. That when the United States (‘U.S.’) invests in foreign aid abroad, it greatly benefits its citizens at home and abroad, in the sense that it engenders goodwill, stronger diplomatic ties, favor etc. Even peace and stability within a recipient country, is favorable to the U.S. as it reduces the need to put members of U.S. families on the battle field (Kuzmich, 2017).

With all said and done, the effectiveness of foreign aid is one of the most contentious issues talked about today in the international development sphere, with several publications lending voices to the debate. According to (Edwards, 2015), there are distinct camps, the ones who maintain a strong view that development assistance is ineffective and has done more harm than good to developing countries over the years, while some others believe that development assistance is necessary for the growth of developing countries, and in fact stress the need to increase development assistance to these countries as it has been historically too low.

With an increased pressure on the budget of developing countries budget especially during and after the COVID — 19 pandemic, debt relief has been put forward as a form of development assistance. To buttress this point, the joint International Monetary Fund — World Bank comprehensive approach saw the need to reduce the debt burden in over 37 countries, with a view to ensure that no poor country faces a debt burden it cannot manage. This approach provided $76 billion in debt-service (IMF Factsheet, 2021).

Now we may ask, why is it important it talk about debt burden, firstly with the economic crunch of 2020 owing to the pandemic, many world economies have experienced a slowdown in their growth, some others negative growth. This statistic is pertinent to both developed and developing countries, both donor and recipient countries. It is even worse for recipient countries who are already saddled with rising debt burdens and now have to face an economic crunch.

Furthermore, debt burden that come in the form of loans are becoming increasingly important in the discourse on country budgeting and development in general, especially within the OECD which has embarked on major reviews to modernize its statistical system in order to improve on its accuracy so as to better assess the true value of official development assistance. The OECD adopted in 2018 the “grants equivalent” methodology, a new method of measuring official development assistance which seeks to distinguish grants from loans during the evaluation process of development assistance as opposed to the former system that records actual flow of cash between lender and borrower. This new system reflects actual efforts by donor countries — “the more generous the loan the higher the ODA value” — (OECD,2021) and also buttresses the point stressed here, which is the importance of debt in the discourse.

Decline in ODA over the years

While 2020 was a year that justified an increase in aid for recipient countries, it also justified a cut down on aid by donor countries, this is because the economic crunch that the Covid-19 pandemic brought was wide spread. Although some researchers like (Wood, 2021) argue that contrary to public perception development aid increased in 2020, but an in-dept look at his analysis which covers only OECD countries — which China is not a part of nor some other countries like Turkey which exceeded the United Nations’ recommended development assistance country target of 0.7% of gross national income — shows that actual aid did not rise in the true sense of the word, but the rise was due to the new system of valuing ODA through grants equivalent where suspended loan repayments are incorporated in the evaluation. Otherwise, there has been a continuous decline in development aid since 2015 (Wood, 2021).

To evaluate the implications of budget cuts on development aid by donor countries, it is important to get an overview of how much the largest donors contributed in 2020, and then work back to get a better understanding of the implications of these aid budget cuts.

Figure 1: Largest donors of humanitarian aid worldwide in 2020, by country

Source: Statista 2021

The above graph shows the commitments of these countries to development aid. Although there are countries like China — with reported development aid of about 38 billion dollars — that are not taken into account here owing to Chinas veiled approach to disclosing its development aid figures, therefore their figures cannot be verified.

This paper takes a closer look at UK, firstly highlighting the amount of budget cuts she has announced recently and secondly how these cuts have impacted on Yemen which is one of the highest beneficiaries of UK aid related activities. The primary reason for zooming in on UK is because the government announced the largest percentage decrease in the development aid budgets recently.

UNDERSTANDING THE UK AID BUDGET CUTS

According to the (Statistics of International Development: Final UK Aid Spend, 2019), the UK government made a commitment in 2013 to spend 0.7 % of its GNI, as ODA. In 2015, the International Development Act legalized this commitment and in each subsequent year, it has lived up to this commitment. On the 2nd of September 2020, a new department called the Foreign, Commonwealth and Development Office (FCDO) was formed, a merger between the Department for International Development (DFID) and Foreign and Commonwealth Office (FCO), the departments responsible for drafting and executing UK Aid plans. Sequel to this, in 2021 the UK government announced that it will cut down on it ODA from the commitment of 0.7% GNI:ODA to 0.5% GNI:ODA, which is about £4 billion. The implications are dire for some of its programs as this cut is not evenly spread across these programs, with some programs get funding slashed by over 80%. A further downside to this development is that there is barely enough time given to these projects to seek alternative source of funding as this cut takes effect immediately. This has put a lot of aid projects in a quagmire especially those that are totally dependent on the UK for their livelihood.

Figure 2: UK ODA levels (£ billions) and ODA:GNI ratios (%), 1970–2019

Source: Statistics on International Development: Final UK Aid Spend 2019

A closer look into the UKs development aid expenses of 2019 shows that Africa accounted for 50% of UKs bilateral donations, making it the largest recipient by region, but the top three country recipients of bilateral donations were Pakistan (£305), Ethiopia (£300), Afghanistan (£292) and Yemen (£260) (Statistic on International Development: Final UK Aid Spend, 2019).

Impact Assessment: A Case of Yemen

Yemen has experienced civil war since 2015, this has exposed millions of its citizens to famine, drought and displacement. Yemen also suffered a flood in 2015 that lead to spikes in cholera, locust infestation and cholera. This has led to a 24.1 million in need of humanitarian aid and 3.7 million people displaced according to the United Nations Office for the Coordination of Humanitarian Affairs (UNOCHA). These events lead Yemen to receive the highest year-on-year increase in UK bilateral spending on ODA from £166 million in 2018 to £260 million in 2019. This increase in aid now accounted for over 80% of the humanitarian aid received by Yemen (Statistic on International Development: Final UK Aid Spend, 2019). Further increasing Yemen’s dependence on the UK.

Figure 3: UK Humanitarian Aid to Yemen

Source: Statistics on International Development: Final UK Aid Spend 2019

With Yemen’s dependence on UK aid to tackle some if its most pressing problems while housing one of the world’s worst humanitarian crisis, the UK government announced that it will cut over 60% of its aid to Yemen. This move was strongly criticized by the public as well as a plethora of development actors including Kevin Watkins, Head of Save the Children UK who voiced that “In September last year, the UK announced a global Call to Action to avert famine. Six months later, they slash aid to a country on the verge of the largest famine the world has seen in decades” (DEVEX, 2021). The UN Chief, Antonio Guterres further stressed this saying “Millions of Yemeni children, women and men desperately need aid to live. Cutting aid is a death sentence.” By cutting in half the number of people that it gives lifesaving food to, on a monthly basis in Yemen, the UK government is signing off on a death warrant for children already dying of starvation. (DEVEX, 2021).

To show how much Yemen benefitted from the UK, the Result estimates table for 2015–2020 released by the DFID shows that Yemen had the highest number of people reached with humanitarian assistance (food aid, cash and voucher transfers) through DFID support, with over 6.9million people — 3.5 million females and 3.4 million males making up over 21% of total aid in this category — the next closest was Somalia with about 3.6 million people reached. Also, the data shows that about 3.6 million children under 5 years, women (of childbearing age) and adolescent girls were reached by DFID through nutrition-related interventions, making Yemen the 4th highest recipient of the 32 countries in this category.

Other areas where Yemen has immensely benefitted for UK aid include the Water, Sanitation and Hygiene (WASH) program that makes for sustainable access to clean water and sanitation. This program also reached a total of 712 thousand people, despite the fact that it is an extremely fragile state. (DFID Results Estimates 2015 to 2020: Tables, gov.uk).

Furthermore, the UK aid has 19 currently active projects, ranging from the Corona Outbreak UK Project, to the CSSF Economic Stabilisation Project II, the Responding to the Nutrition Crisis in Yemen (R2N), Chevening Scholarships in Yemen and a host of 15 other projects, handled by several partners like the Norwegian Refugee Council, British Council, Save the Children UK, World Food Program amongst several others. Most of these projects have a span that goes beyond 2023 (Development Tracker, 2021).

With over 11 million people reached by the DFID and more still being reached and over 19 on- going projects, the magnitude of the UKs activities is better imagined than analyzed on paper. A 60% cut in aid will have very dire consequences — especially as it is not a gradual cut — for the present and the future of Yemen. To better understand this, for a hypothetical analysis, imagine a Yemen student that is in his first year at Cambridge, owing to the generous contribution of the Chevening Scholarship and is told in his second year that he will have to discontinue his education because there has been a UK aid cut and he can no longer be financed by the government.

The implications of budget aid cuts by the UK government are far reaching, and it is most difficult to quantify this owing to the governments refusal to disclose project specific details of aid cuts.

CONCLUSION

It is worrisome that the UK government having acknowledged the dire situation of countries like Yemen, Syria in need of extra humanitarian aid have gone ahead to cut aid to these countries, without carrying out an impact assessment. But analysts do not need an impact assessment to visualize the harsh implications for the people of these affected states. Decision of this scale can reverse achievements of previous years and erode taxpayers’ value-for-money.

It is important that the UK government revisits this decision, and take a gradual step in cutting aid since it has promised to return back to status-quo when its economy picks up in 2023 as predicted. An impact assessment should equally be carried out by the government to evaluate how these aid cuts are spread across several projects to ensure they are not cut short before they can achieve the aims for which they were set up.

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