Global Development: Views from the Center
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March 27, 2006
U.S. aid skyrocketed in 2005--at least in Iraq
Posted by David Roodman at 12:38 PM
The U.S. Agency for International Development just released its initial estimates of how much foreign aid the U.S. government gave to developing countries in 2005. It submitted the figures as part of normal reporting processes to the Paris-based Development Assistance Committee. The overall figure is a stunner: U.S. Official Development Assistance spiked to $27.5 billion in 2005, from $19.7 billion the year before and $11.4 billion in 2001. Adjusting for inflation, that may match or exceed Marshall Plan giving levels, though it is still far less as a share of the U.S. economy--0.22% instead of some 1.1% in 1948–52 [see Clemens and Radelet (2003) The Millennium Challenge Account: How Much is Too Much, How Long is Long Enough?- Working Paper 23].
Iraq unsurprisingly accounts for the lion's share of the increase, receiving $10.2 billion, up from $3.0 billion the year before. That probably constitutes the largest one-year aid transfer between any two countries ever. And U.S. aid to Afghanistan nearly doubled, from $778 million in 2004 to $1.5 billion in 2005.
But aid to the rest of the world was essentially unchanged, from $15.9 billion in 2004 to $15.7 billion a year later. Sub-Saharan Africa did see a notable increase in the “Year of Africa,” from $3.5 billion in 2004 to $4.1 billion in 2005, much of it explained by increases to Ethiopia, probably in food aid, and to Sudan, as support for the new peace process there.
Does this make the U.S. generous? The figure of $27.5 billion for 2005 works out to 26 cents per American per day. Compare that to the United Kingdom, at 29 cents, and the Danes, at 89 cents (2004 figures). Though the United States will move up on the foreign aid component of the Commitment to Development Index in the years ahead, it still won't lead the board. Moreover, aid to Iraq could plummet as fast as it has risen. Only time will tell what happens there.
Download a detailed table (PDF).
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Comments
Thanks to the CGD for, as usual, fascinating and valuable information. One query however; in the PDF some countries are listed as having _negative_ inflows (and thus, potentially, outflows?) of aid over the 5 years - Brazil, Chile and Costa Rica being just three examples. Any chance of shedding light on what appears to be an anomaly?
Posted by: Stewart Parkinson at March 27, 2006 06:25 PM
Could not find the ODA extended to Israel during 2001-2005. Shouldn't it be listed in the same table?
Posted by: Sergio Trindade at March 28, 2006 09:59 AM
Stewart, thanks for your comment and your diligence. These figures are for "Net Overseas Development Assistance." The "Net" means that they are net of repayments on old aid loans. Brazil, for example, received $29 million gross from the U.S. last year, but paid back $51 million on old loans. Note that all three countries you mention are relatively well-off, or in Brazil's case, so big that the aid amounts hard matter, and so are not receiving much aid from the U.S.
This reminds me of an afterthought I had about the post. $3.9 billion of the $10.2 billion to Iraq was cancellation of old Saddam-era loans as part of the larger debt relief deal for Iraq. The loans were not consider aid when disbursed, but were probably credit to buy American exports or even weapons. However, it seems unlikely that much of that debt would ever have been repaid anyway, so the true economic value to Iraq was probably far less--perhaps only 10%-20% of face value. In other words, $10.2 billion didn't actually flow into Iraq--more like 10.2-3.9=6.3 billion. Something similar happened with the Democratic Republic of Congo, which formally received $5 billion in aid from all donors in 2003--but really (and more appropriately) only a few hundred million flowed in, the rest being debt cancellation.
Examples like these motivated me to develop an alternative measure of aid that takes out cancellation of old non-aid loans, called "Net Aid Transfers." See http://www.cgdev.org/content/publications/detail/5492.
Posted by: David Roodman at March 28, 2006 11:38 AM
RE Israel, I hadn't noticed until now that these preliminary data are for "Part I" countries only. The Development Assistance Committee, which is the donor-backed agency in Paris that compiles all these statistics from the governments, distinguishes between Part I countries, which are most developing countries, and Part II countries, which are former Soviet bloc states as well as a handful of not-so-poor countries such as Israel and Singapore.
Technically, for what it is worth, Israel does not receive "ODA" (Official Development Assistance). Rather, as a Part II country, it receives "OA" (Official Assistance). (Got that?) This means the standard figures one hears about how much donors give exclude aid to Israel. However, data on aid to Israel are collected and available at the DAC statistics web site, currently through 2004.
Posted by: David Roodman at March 28, 2006 12:03 PM
The return on investment in Iraq is estimated at 50 cents on the dollar!
See: http://crgp.stanford.edu/news/global_projects_real_news_178.html
Posted by: Ryan Orr at April 9, 2006 08:16 PM