Should aid continue to flow to middle-income countries, or should the world’s poorest countries receive a greater share? It is a debate that has intensified since world leaders set the millennium development goals (MDGs) 15 years ago, during which time more than 30 countries have moved from low- to middle-income status.
MDG8, which aims to “develop a global partnership for development”, includes a target to increase aid to the world’s 48 least developed countries (LDCs). Some campaigners argue this should be the priority, while others insist the world would fail most of the world’s poor if aid to middle-income countries (MICs) was cut.
We asked two experts to share their thoughts on where the priorities should lie.
Sarah Harcourt: ‘We must support the countries furthest behind’
The case for giving more aid to the least developed countries is clear. The eighth – and often overlooked – millennium development goal sought to improve financing and policies to support development, particularly for countries facing special challenges, such as the LDCs.
While overall aid has increased to its highest ever level, aid to the LDCs – the world’s poorest countries – has been in decline. Since 2010, aid to LDCs has fallen by 6%, and as global aid has continued to rise that means the share going to LDCs has fallen, to 30.3% of total aid in 2014.
Yet these are the countries generally the furthest behind in meeting the MDGs and the countries with the fewest resources. A staggering 43% of people in LDCs live on less than $1.25 a day, as compared with 13% across other developing countries. By 2030, half of the people living in extreme poverty are projected to live in one of the 48 current LDCs.
Women in LDCs also get a rough deal. Nine out of 10 countries with the highest rates of child marriage are LDCs. A woman in Sierra Leone is 183 times more likely to die bringing a new life into the world than a woman in Switzerland.
Addressing these inequities won’t be easy. Among LDCs, the average level of public revenues in 2013 was just $123 (£78) per person – a level at which it is impossible to provide basic services such as health and education. Private investment in these countries is nominal. At least in the medium term, development assistance is a lifeline for these countries. Yet, when you assess levels of aid per poor person in LDCs, it averages just $139 per year – lower than in other developing countries.
While there’s been a lot of criticism around allocating aid based on income categories alone, the LDCs encompass the most vulnerable nations across all country groupings. The LDC category is based on criteria of poor socio-economic and human development, along with measures of national income and the vulnerability of the economy. The majority of LDCs are low-income countries, but about one-third are extremely vulnerable middle-income countries.
Two-thirds of the fragile states are LDCs. Tackling the even more ambitious sustainable development goals will require the effective use of all financial resources. If we are really to leave no one behind in the new development agenda, we must allocate half of overall aid to the LDCs, which need it the most.
- Sara Harcourt is policy director of research and publications at the advocacy organisation One.
Judith Tyson: ‘Aid to middle-income countries should continue’
What is the purpose of aid? For some, it is just about stopping the worst human suffering – to help people devastated by conflict, hunger or disease in very poor countries. But such aid – even when it is worthy and effective – changes little for the world’s poorest in the long term.
What is needed to end poverty permanently is economic growth. This includes a need – as stated by the UK development secretary, Justine Greening – for “trade, not aid” for middle-income countries. They need to assume their responsibility for this agenda and many are now fully able to do so. Aid to them is not justified.
However, to withdraw aid from all countries as they cross the threshold from low- to middle-income status is too simplistic.
First, economic transformation needs to be permanent. Too often – as documented by economists such as Dani Rodrik – growth spurts peter out before true prosperity is achieved. Aid can help to ensure that economic gains are long-lasting – in development jargon, “catalytic” – for middle-income countries.
However, it needs to take a different form from low-income countries. It needs to include technical assistance, loans rather than grants, and co-financing with private capital. Such forms of aid can assist in achieving permanent economic strength through building the private sector, eradicating corruption and creating the tax systems that enable government to deliver public infrastructure and services themselves.
Second, while some middle-income countries – for example, India, China and Brazil – are now strong and an end to aid is justified, others remain vulnerable. This includes those countries that have only marginally crossed the threshold from low to lower-middle income, such as Congo-Brazzaville, Senegal and Sudan. It includes those that are vulnerable because of their small size – such as Vanuatu, where a cyclone caused chaos – and states that are politically and economically fragile , such as Pakistan and Egypt. Aid to these countries should continue so that their progress is not reversed.
Finally, those in rich countries should serve their own self-interest – and that means continued aid to selected middle-income countries. Shared economic and political links – which are built and deepened by aid – with strong and stable states can contribute to tackling our shared problems, such as climate change, migration and political instability.
This brave new world needs aid to – as well as trade with – middle-income countries to cease being a fantasy and become reality.
- Judith Tyson is a research fellow at the Overseas Development Institute