aid

Financial or other assistance given or lent, on favourable terms, by richer, usually industrialized, countries to war-damaged or developing states. It may be given for political, commercial, or humanitarian reasons, or a combination of all three. A distinction may be made between short-term aid (usually food and medicine), which is given to relieve conditions in emergencies such as famine, and long-term aid, or development aid, which is intended to promote economic activity and improve the quality of life – for example, by funding irrigation, education, and communications programmes.

In 1970, all industrialized United Nations (UN) member countries committed to giving at least 0.7% of their gross national product (GNP). However, by 2000 only five had reached this target: Denmark, the Netherlands, Norway, Sweden, and Luxembourg; the actual average among the industrial countries in the same year was around 0.32%. The four largest donors to poor countries in 2000 were Japan, which spent $13 billion on official development assistance, the USA ($9.6 billion), Germany ($5 billion), and the UK ($4.5 billion/£2.94 billion). Each country spends more than half its contribution on direct bilateral (by agreement with another country) assistance to countries with which they have historical or military links, hope to encourage trade, or regard as strategically important – Russia or Indonesia, for example. The rest goes to international organizations such as UN and World Bank agencies, which distribute aid multilaterally. The World Bank is the largest dispenser of aid.

In 1990, Israel and Egypt were among the principal beneficiaries of the US development-aid budget; Turkey, Pakistan, and the Philippines are also major beneficiaries. The United States Agency for International Development (USAID) is the State Department body responsible for bilateral aid. The USA is the largest contributor to, and thus the most powerful member of, the International Development Association.

In the USA foreign aid has become an increasingly contentious domestic issue. With severe budget deficits and a large part of the foreign aid budget allocated by treaty to a very few countries, calls have grown for reform.

In 1996 the International Development Agency (IDA) received project aid amounting to $37,472 million, the largest share of which went to Africa, with 45% of the project portfolio and 35% of committed funds, followed by South Asia, with 15% of the portfolio and 32% of the funds). Eastern Europe and Central Asia received 15% of the project portfolio and 6% of the funds.

In 1996, the IMF and World Bank launched the Heavily Indebted Poor Countries (HIPC) initiative to provide debt relief for low-income member countries, in order to release funds from servicing debts (paying the interest on loans) for development and schemes to fight poverty. The Cologne Debt Initiative, or HIPC2, agreed by members of the Group of Eight (G8) industrialized nations in 1999, sought to expand and speed up the process. By April 2001, 22 such countries were benefiting from debt relief of about $20 billion provided by the IMF, World Bank, and other creditors.