Canada’s Aid Budget: Doing less with less

“Protect the aid budget!”  This is the call to action in the recent  online petition and campaign from a group of concerned organizations including some of Canada’s most vibrant development, anti-poverty, and youth engagement groups.  By February 6th  –with less than a week to go until the federal government tables the 2014 budget – more than 20,000 Canadians signed on to support the message that Canada should stop cutting its foreign aid budget.  The petition argues to preserve aid spending to preserve Canada’s international reputation and to ensure our aid can do more to support development – more vaccinations, healthier mothers and newborns, and more poverty reduction for those most in need.  Sadly, their call is likely to go unheeded.

Next week’s 2014 budget will again cut federal spending in order to meet the federal government’s balanced budget target for 2015 – just in time for the next federal election. In the face of across-the-board cuts, the prospects for ring-fencing Canada’s aid budget and protecting it from further erosion are limited.  This is not to say ring-fencing has not worked elsewhere.  The UK, for instance, has pursued exactly this strategy under the present coalition government, even increasing aid budgets during period of fiscal constraint.

In contrast, with freezes to aid spending in the 2010 and 2011 budgets, and cuts in both 2012 and 2013, Canada has done little to protect the aid budget.  Indeed, beyond the projected cuts to the aid budget in 2012-2013 of nearly 7.5%, the reported lapsing of hundreds of millions of additional aid funds may have sharply reduced Canada’s aid budget more rapidly than expected.

Reversing this course for the aid budget, or even halting its downward tick, is going to be a challenge in 2014. By any of the usual internationally comparable metrics of aid spending (aid as percent of national income or the total volume of aid spending in US dollars), Canada will be hard-pressed not to show a marked decline in its aid spending this year.

First, even if Canada’s aid spending unexpectedly remains at current levels, the economy is projected by the IMF to grow at about 2.2% this year.  This means that any cut to actual aid spending levels will be reflected in an even greater reduction in aid spending as a percent of national income.  Leaving aid spending at current levels will still look like a cut on this metric.

Likewise, if the recent sharp decline of the Canadian dollar against its American counterpart persists through 2014-2015, we are bound to see yet lower levels of aid spending when converted to USD figures by the number-crunchers at the Organization for Economic Cooperation and Development (OECD).  It is the OECD that acts as the global clearinghouse for official aid spending, and they track these figures in USD. To put the potential exchange rate effect in context: when Budget 2013 was released on March 21 last year, the exchange rate was about $1.025 CAD per USD; this week, on February 4th – a week ahead of Budget 2014 – this rate stands at about $1.11 CAD per USD.   What effect will this 8% decline in the Canadian dollar have on the aid budget?  Beyond reducing the amount the OECD tallies at the end of the year, it also means our aid budget will be stretched thinner than anticipated.  Any foreign currency costs in USD will require more of the already diminished budget: our aid dollars will buy us less.

On top of economic growth and exchange rate challenges, it remains to be seen how the merger of CIDA and DFAIT will affect our ODA spending this year.  Less than a year into the merger process, many questions remain about the actual costs of the merger.  No figure has been released by the government estimating what it costs to forcibly unite two disparate departments and address the various growing pains that result.  Beyond those costs, it is a safe bet that the merger itself will have slowed Canada’s aid spending.  It is difficult to plan new programs and move aid money out the door if you are unsure who your boss is or whether that is, in fact, your door anymore.  In this way, the merger will likely lead more lapsed funds from the aid budget – a boon to Tory deficit cutting, but a cut to the aid budget by any other means.  Only time will tell what effect the merger has on aid spending now or in the future, but it is a question to which the foreign policy and aid communities in Canada should pay close attention.

Canadians are supportive of aid spending.  The 20,000 signing the petition to protect aid spending are not alone.  In fact, before the cuts began, a 2010 Environics poll showed that more than half (54%) of Canadians polled reported they believed Canada’s aid spending to be “just right” while an additional 24% reported that Canada spent “not enough.”  Still, the minority viewpoint has been indulged by recent budgets.

Aid has not been protected.  The coalition of groups behind the petition and its 20,000 supporters are deservedly concerned. In the face of deficit cutting, continued economic growth, unfavorable exchange rates, and the unknown effects of the merger, even maintaining the status quo will be difficult. In next week’s budget, I fear aid spending will again be the target of cutbacks. Only an about-face at the political level could avoid this and that seems unfathomable with the current government.  Rather than doing more for development and protecting the aid budget, it seems the new mantra for Canadian foreign aid is: do less with less.

This post originally appeared on the Ottawa Citizen Aid & Development Blog on 2014/02/06.

 

A Remarkable Year for Canadian Foreign Aid

It is beyond clichéd to reflect back on the year just past when we reach the tail end of December.  In most years, Canada’s foreign aid programs would not merit the attention of a year-end review; however, looking back on 2013, such reflection seems warranted.  After all, we have gone from being up in arms about swanky hotels and $16 orange juice to eliminating Canada’s aid agency altogether.  Indeed, it was a year encompassing deep cuts, an ill-planned merger, naked commercial self-interest, and a worsening lack of vision for how Canada can best contribute to global development.  For all these reasons and despite the cliché, I want to take stock of what made 2013 such a remarkable and disappointing year for Canadian foreign aid.

Let’s start with the cuts. It was not long into 2013 that it became clear that announced budget cuts to Canada’s aid program were going to be deeper than anticipated.  Aside from announced cuts of 7.5 percent to the aid program in the 2012 budget, reports surfaced that CIDA was going to lapse hundreds of millions of aid dollars during the 2012-2013 fiscal year. Described as “cutting through inaction”, “cutting by other means”, or “massive cuts without any transparency” by various aid experts, the previously budgeted aid funds projected to lapse in FY2013 implied a much more significant funding cut to Canada’s aid than expected.  By November 2013, updated reports suggested that about $300 million had been lapsed in this manner, representing almost 10 percent of the CIDA aid budget in 2012-2013.

The lapsed funding issue is of concern because it reflects the loss of Canadian contribution to combating poverty, promoting human rights, and generally contributing to development internationally.  By not approving new initiatives, allowing proposed programs to pile up on the Minister’s desk, CIDA ended up doing less than was budgeted.  To some, this simply sounds like a cost savings.  To others, it looks like children missing vaccinations, less clean water for communities, or fewer girls in schools.  Had a domestically-focused social program simply decided not to spend nearly 10 percent of its budget in a given year over and above existing cutbacks without any public consultation, heads would roll.  Yet, because it was only foreign aid funding, a few development experts and reporters took notice, and the cuts continued.  The fact that the year-on-year cut to spending at CIDA from FY2012 to FY2013 was closer to 12 percent – nearly $500 million – suggests the strategy of cutting through other means was sadly efficient.

In retrospect, these deep cuts to CIDA foreshadowed that the Agency’s days were numbered.  It was not much further into 2013 that we learned about the merger of CIDA and DFAIT into the new Department of Foreign Affairs, Trade, and Development (DFATD).  With little notice to senior CIDA management, and seemingly less advanced planning about how the merger would play out, the government announced its plans to remodel how Canada’s diplomacy, trade, and development efforts would look moving forward.  Rather than a relatively autonomous and specialized aid agency like it had since 1968, Canada’s aid will now be delivered by various pieces of an unwieldy DFATD, with the Minister for International Development simply one of three within the new mega-department.  The merger was announced with accolades for how it would make Canadian aid more efficient, more coherent, and more in keeping with Canadian interests.  With a new Minister and Deputy Minister for International Development appointed soon after the amalgamation, the dust has yet to settle on the merger almost six months since DFATD was created in law.  Only a few leaks of information have shed any light on how the merger has proceeded (or stalled) to this point – including the controversial appointment of a Canadian mining industry CEO to the “External Advisory Group” working to shape the new department’s vision and structure.  What is clear is that the integration of the aid function into a common department with trade and diplomacy has spelled out the direction in which the current government is steering our aid efforts: towards Canadian self-interest.

Aside from the use of aid to achieve diplomatic objectives (sharp focused upticks and subsequent reductions in aid to Afghanistan, Iraq, or Pakistan in the past decade when it was deemed politically expedient to achieve Canadian security objectives), we have also seen Canadian aid used in the past to bolster our trade and investment interests. The difference in the current context is how explicit this naked commercial self-interest has become.  Apart from the much maligned NGO/private sector pilot initiatives featuring three Canadian mining sector heavyweights (Rio Tinto Alcan, Barrick Gold, and IAMGOLD) under the guise of supporting greater corporate social responsibility, we have since witnessed a sharp turn towards Canadian aid being used as a tool to promote our commercial interests abroad.  The November 2013 release of the Global Markets Action Plan as a new direction for ‘economic diplomacy’ in Canadian foreign policy cements this aid-trade linkage further arguing that DFATD will “leverage development programming to advance Canada’s trade interests” (p. 14).  Aiming to use aid as just another tool to promote our own commercial gain, it is not surprising that CIDA was disappeared so rapidly following the merger.

There are no reasons why our aid cannot support benefits for Canada.  The entire notion of enlightened self-interest in the developing assistance context suggests that donor countries also benefit from fighting poverty and promoting peace and security elsewhere.  Still, the blatant linking of our aid programs to directly building Canada’s trade and investment profits goes far beyond this and smacks of a new era of ‘tied aid’ where the donor benefits just as much or more so than the aid recipient.  If under this new economic diplomacy aid becomes more about ensuring that Canadian private sector firms have better access to world markets than it is about fighting poverty globally, then Canadians will lose no matter the profits or jobs that come to us because of increased trade.

With the deeper than expected cuts, the ill-planned merger, and the commercial self-interest that has emerged as the new core of Canada’s foreign policy, 2013 was truly remarkable in terms of the evolution of our foreign aid programs.  Only a few short years ago, Canadian aid was trending upwards in both absolute and relative terms, Canada had a standalone aid agency with a strong legal mandate derived from the ODA Accountability Act, and commercial interests were at the periphery rather than the core of our aid policy.

As 2013 draws to a close, those among us with firm belief that Canada has the potential, and indeed the duty, to do more to promote development globally must surely be disappointed by the developments of the past twelve months.  The most disappointing fact about it all is that – for once – aid is receiving significant government and public attention, as many dollars and more hours are spent trying to mold the existing aid program into something new.  Yet, despite all these efforts, the results appear quite bleak.

Aid critics and supporters of the merger may disagree, but rather than an aid program to take pride in – governed by principles of accountability, transparency, and rigor – Canadians now find themselves having to stomach an approach to aid and development driven by ad hoc planning, Ministerial whim, and blatant self-interest.   2013 has, indeed, been a remarkable year as far as Canadian foreign aid is concerned.  It is hard to imagine that 2014 could bring more momentous developments in this respect, but then again, at the end of 2012 we were still recovering from the shock of $16 orange juice.

This post originally appeared on the Ottawa Citizen Aid & Development Blog on 2013/12/27.

A Forced Marriage: DFAIT and CIDA for better or for worse

Recently Canadians have witnessed a forced marriage with the merger of CIDA and DFAIT into the new Department of Foreign Affairs, Trade, and Development (DFATD).  This union was forced, in a sense, because at least one of the ‘partners’ in the merger appears to have been forced into it unwillingly.  It is of course the government’s prerogative to shuffle the deck in the bureaucracy as it sees fit; but it does not mean that those departments swallowed up or forced into a union with another are any more willing.  The hasty departure of CIDA’s former President following the merger likely indicates some of the reticence of the Agency and its leadership regarding the process.

After witnessing the announcement of this marriage in spring 2013, it is clear that it is still far from being consummated.  Yes, the CIDA moniker has been obliterated from signs out front of 200 promenade du Portage.  Yes, the CIDA website has been mostly absorbed into the new DFATD site.  Yet, more than six months on, very little has changed outwardly in terms of how the two organizations function together.

As witnesses to this wedding, the Canadian development community, taxpayers, and the public at large have been asked to accept the union of the two departments for the sake of greater coherence, efficiency, and support for Canadian values and interests.  Some former diplomats and foreign affairs experts have responded optimistically to the union, cheering on the new couple because it means that Canada’s aid can finally walk in lockstep with our trade and diplomatic interests.  Others, mostly from Canada’s community of development practitioners and experts, have reacted more like Benjamin Braddock, banging loudly on the glass at the back of the church in the penultimate scene of The Graduate. Much to their dismay, it seems there is no stopping this wedding.

Those hoping for a quickie divorce of CIDA and DFAIT following elections in 2015 are also likely to find themselves disappointed.  The time, energy, and money invested in dissecting CIDA into its constituent parts and carefully stitching them onto the former-DFAIT org chart are unlikely to be easily reversed.   To be sure, this merger will turn out to be an expensive process – the projected costs of which the Government has been silent about to this point.  Though from the outside it has not looked like a lavish wedding, a reorganization of this scale will certainly incur significant upfront costs that, at least for the short term, will outweigh any cost savings or efficiencies that result from the merger.  These costs are borne by the Canadian taxpayers and might well have gone towards promoting poverty reduction and economic development abroad, but have instead been channeled into an opaque and weakly justified exercise in bureaucratic bricolage.

The good news is that the Government has brought in wedding planners to help.  Usually couples engage such help before the wedding occurs – but in this case we are seeing the planning happen after the fact.  Media reports from last week cite an internal DFATD memo that identifies the members of an External Advisory Group (EAG) consisting of a foreign affairs expert, three current or former Canadian and UN diplomats, and the head of a Canadian mining company.  With a couple of EAG members previously declared as supporters of the merger (see here and here), it is difficult to see how the post-hoc planning of the new DFATD will proceed with a critical eye that incorporates the concerns that the merger will lead to an aid program more skewed toward promoting Canada’s commercial and political interests than development and poverty reduction abroad.

CIDA and DFAIT are embroiled in the slow process of becoming one entity.  A costly endeavor with real implications for Canada’s role on the global stage, it appears that six months into the merger process we are no closer to having a transparent account of how DFATD will act to deliver Canadian aid moving forward.  To this point, only media reports on the leaks of internal memos and e-mails have shed light on how the merger is progressing.  The question of how the forced marriage of CIDA and DFAIT will affect Canada’s contributions to poverty reduction and development are still very much up in the air. Canadians can only hope that by the time of the first anniversary of the merger we will have a better sense of how this forced marriage has reshaped Canada’s aid for better or for worse.

This post originally appeared on the Ottawa Citizen Aid & Development Blog on 2013/10/23.