Development and Global Health Aid Cuts Would Be Cruelest of All
from Campaign 2008 and Global Economy in Crisis

Development and Global Health Aid Cuts Would Be Cruelest of All

CFR Senior Fellow Laurie Garrett writes that the United States cannot afford to reduce its foreign assistance spending, even though it faces its toughest budgetary challenge since the Great Depression.

November 19, 2008 2:54 pm (EST)

Expert Brief
CFR scholars provide expert analysis and commentary on international issues.

The election of Barack Obama has raised expectations throughout the world that America will now turn its attention and support towards the needs of the world’s poorest citizens. Though it faces its toughest budgetary and economic challenge since the Great Depression, the United States cannot afford to eliminate, or even reduce, its foreign assistance spending. For reasons of political influence, national security, global stability, and humanitarian concern, the United States must, at a minimum, stay the course in its commitments, meeting prior promises to double aid to global health and development, as well as basic humanitarian relief.

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The Bush administration sought not only to increase foreign assistance, targeting key countries (Iraq and Afghanistan) and specific health issues (AIDS and malaria), but also executed a vast array of programmatic and structural changes in U.S. aid efforts. Europe, Japan, Canada, Australia, and several other wealthy nations mounted a similar drive to improve conditions for the poorest world citizens over the last decade. Between 2000 and 2006, estimated donor commitments, from all sources, on global health efforts alone, rose from $15 billion to $45 billion. Estimated total Official Development Assistance (ODA) rose from $53.7 billion in 2000 to $103.7 billion in 2007. On average, sub-Saharan African governments also increased spending on the health of their population. According to the World Bank, in 1990, the average sub-Saharan government spent $6 per capita annually on health, with spending ranging across the region from a low of $2.27 per capita to a high of $21 per capita.

Since 2000, these efforts have led to great achievements despite the shortfall in committed dollars versus real dollars for health and development. The Global Fund for AIDS, Tuberculosis and Malaria was launched in 2003, and by October 2008 had dispersed $6.4 billion in grants for country-designed programs. According to Global Fund data (PDF), its dispersement mechanism is both without precedent and empirically successful in achieving its targets some 80 percent of the time. PEPFAR, the U.S. President’s Emergency Plan for AIDS Relief, had by March 31, 2008 started 1.73 million people on antiretroviral treatment for HIV infection, and provided antiretroviral prophylaxis for women in more than 1 million pregnancies to prevent infant in utero infection. By the end of 2008, the combined donor, Global Fund, and UN efforts to tackle malaria had pushed down deaths due to malaria (PDF) by 50 percent in key African and Asian countries, according to World Health Organization (WHO) figures, in large part due to insecticide spraying campaigns and the dispersal of pesticide-treated mosquito nets.

But in September 2008, the UN Secretary-General’s office concluded that both funding and program development were falling far short of what was needed to reach the 2015 Millennium Development Goals (MDGs), and at least six of the eight targets were on course to fail. MDG 5--maternal survival--has not shown significant improvement in any poor countries, or most emerging market countries. Well before the impact of the financial meltdown was felt, donor support had declined: Aid dropped 8.4 percent in 2007, after a 4.7 percent drop in 2006. The Group of Eight (G8) industrialized nations pledged in 2005 to donate more than $25 billion to Africa by 2010, but just $4 billion has actually been delivered. "We are running out of time," UN Secretary-General Ban Ki-moon warned.

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Concerns about the ’Knock-on Effect’

Since the credit crisis of 2008 unfolded, countries and small companies in the developing world have found it more difficult to obtain loans for programs such as road construction and business development, and governments also have found it difficult to offset declining revenue streams to cover the costs of essential public goods. In October 2008, World Bank President Robert Zoellick warned, "While people in the developed world are focused on the financial crisis, many forget that a human crisis is rapidly unfolding in developing countries. It is pushing poor people to the brink of survival." World Bank statistics show the number of malnourished people globally will grow by 44 million, to 967 million in 2008, as several countries experience double-digit food inflation.

Africans often say, "When Washington catches a cold, we get pneumonia." Since mid-2008, the credit crisis and financial meltdown have put Washington metaphorically in an intensive care unit, which means Africa and other very poor regions of the world are heading to hospice. It is a sad truism of foreign assistance that the very times that cry out most loudly for help for the poor are those during which the wealthy world is itself suffering. To put it bluntly, in the face of catastrophic levels of necessary spending on the banking bailout and mortgage crisis, it might seem reasonable to hack at the modest $36-billion foreign assistance budget, as was suggested in the presidential campaign. Yet in so doing Congress risks not only reversing all that has been achieved with U.S. tax dollars since 1990, but endangering the lives of millions of people. Furthermore, any backpedaling in U.S. support risks undermining disease surveillance and response capabilities, thereby directly threatening American security.

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It is a cruel formula. Inflating seed, fertilizer, energy, and food costs mean that 2009 promises to be a brutal year. Yet provision of tied food aid, food that is supplied by the donor country rather than purchased locally, means the United States and other wealthy nations have not built serious agricultural development programs that can sustain millions of farms and lives worldwide. Provision of anti-HIV drugs cannot cease, as countries lack the capacity to purchase these medicines on their own, and treated individuals will almost certainly die within weeks, at best months, of cessation of their medication. Amid a global crisis in the emergence of drug-resistant microbes--especially untreatable forms of tuberculosis--the United States cannot afford to reduce efforts to control and treat bacterial diseases properly. As bird flu continues its evolution and spread, the United States must continue to sustain influenza surveillance and control measures or face the dire possibility of being caught off guard by a virulent pandemic. As the costs and risks of the business of humanitarian aid increase, so must U.S. financial support; otherwise, the American people face the continued dangers posed by alienation and anti-American anger in unstable, impoverished parts of the world.

"It is a sad truism of foreign assistance that the very times that cry out most loudly for help for the poor are those during which the wealthy world is, itself, suffering."

Nobody at the World Bank is very happy with this situation. Seven months ago, Zoellick was warning that the food crisis was forcing hundreds of millions of people--especially in southern Asia and sub-Saharan Africa--into desperate poverty. Now Zoellick’s hair is on fire. "We need a Facebook for multilateral economic diplomacy," he said in October 2008, referring to the successful social networking website, declaring that the G8 is nonfunctional, and that global financial leaders are not communicating with one another to stave off this crisis.

He also warned, "The events of September could be a tipping point for many developing countries.  A drop in exports, as well as capital inflow, will trigger a falloff in investments.  Deceleration of growth and deteriorating financing conditions, combined with monetary tightening, will trigger business failures and possibly banking emergencies.  Some countries will slip toward balance of payments crises.  As is always the case, the most poor are the most defenseless."

Though the wealthy nations’ economies are just now officially entering recessions, financial events that started unfolding a year ago have already had devastating impacts in poor countries. For example:

  • A Minnesota organization assists the Tanzania Child Survival Project. Over the last twelve months, the value of the U.S. dollar against the Tanzania shilling has declined 16 percent, and the costs for fuel, transport, food, and supplies have increased. Fuel prices alone have soared more than 20 percent. Overall, the project has seen an approximately 30 percent decrease in grant value.
  • Another American-run program, the Health Alliance International project in Timor-Leste, is struggling to meet its maternal and child health targets because food and fuel costs have risen 10 percent this year, far outstripping the tightly budgeted program’s capacity to meet the cost of living for local employees.
  • According to World Bank estimates released in mid-October 2008, twenty-eight countries are highly vulnerable to continued financial shocks in food and fuel costs, risking acute malnutrition for 44 million people. Already the financial crisis is slowing economic growth in the developing world, from a previous 2009 bank estimate of 6 percent, now down to 4 percent and falling.
  • The International Monetary Fund (IMF) forecasts slowed growth across sub-Saharan Africa, where gross domestic product (GDP) grew 7 percent in 2007, but will only grow 6.1 percent in 2008. The powerhouse of the continent, South Africa, saw GDP growth of 5 percent in 2007, which plummeted to 3.5 percent for 2008-2009, according to the IMF.
  • Inflation in sub-Saharan Africa nearly doubled in 2008, now reaching just over 12 percent across the region, according to the IMF. Key drivers are food and fuel costs.
  • The Haitian Health Foundation serves the needs of 250,000 residents of rural Haiti. The cost of fueling its ambulances has risen 50 percent during 2008; food inflation has driven some 40 percent of the target population into malnutrition; and cuts in U.S. government support have reduced funding by 40 percent.
  • Two immediate concerns arise for global health: credit and donations/foreign assistance.

    Poor nations will have no choice but to seek loans from the IMF and the World Bank, as bank credit is frozen. As happened during the financial crisis of the 1980s, nations will discover that the terms of loans extended, particularly by the IMF, are often egregious, as they may compel drastic cuts in public goods spending, including for hospitals, healthcare worker salaries, clinics, and medical supplies. From 1980 to 2004, sub-Saharan Africa’s share of global GDP plummeted from about 15 percent to just 9.7 percent. This decline occurred despite billions of dollars worth of donations and loans extended to African nations over that time.

    In fiscal year 2008, the total U.S. foreign assistance budget was about $36 billion, including development support for Iraq and Afghanistan. The largest increases in federal spending on ODA were the result of initiatives from President George W. Bush, including PEPFAR, PMI (the President’s Malaria Initiative), and others. The relative success of PEPFAR moved Congress this summer to reauthorize the program for another five years, starting in fiscal year 2009, at a total of $48 billion--$18 billion more than the White House had requested.

    But authorizations do not equal appropriations. Just because Congress budgets something at a given amount does not mean that anything close to that total will ever reach the bank accounts of those awaiting support. A few weeks before the Great Financial Meltdown commenced, Congressional staffers familiar with the appropriations process were warning global health advocates that it was highly unlikely PEPFAR would be funded at the authorized levels.

    The U.S. foreign assistance budget, which includes support for the Global Fund to Fight AIDS, Tuberculosis and Malaria and the entire UN system, is 100 percent unprotected money.

    One of the strongest supporters of foreign assistance over the years has been Senator Joe Biden, a liberal Democrat and vice president-elect of the United States. As the financial crisis spun out of control on October 2, Biden said in the campaign debate, "The one thing we might have to slow down is a commitment we made to double foreign assistance. We’ll probably have to slow that down."

    Economic Gloom and Global Health

    Well before this autumn’s horror show unfolded on Wall Street, the global economy was in trouble--especially for its poorest citizens. Food prices, and the costs of seeds and fertilizers, soared. Energy, in all forms, increased in cost. And with that, transport costs went up all over the world, both for freight and personal movement.

    The resilience of fragile societies is being put to the test. Ethiopia, for example, is facing the dual challenge of drought and soaring food costs. In September, the United Nations said Ethiopia needed $460 million in emergency relief, or 10 million people may die. The additional economic woes will undoubtedly affect everything from the cost of antibiotics for the Rwandan Ministry of Health to the petrol prices for vaccinators funded by the Global Alliance for Vaccines and Immunization (GAVI) trying to meet UNICEF child immunization targets in Cambodia. Health is a business, and the cost of doing business is soaring.

    Making matters worse, the declining value of the U.S. dollar has an impact on everything the United Nations and its agencies try to do. Because donations are stated in dollars, the true value of current ODA is lower than the true value of the same dollar sum two years ago.

    "While people in the developed world are focused on the financial crisis, many forget that a human crisis is rapidly unfolding in developing countries. It is pushing poor people to the brink of survival." —World Bank President Robert Zoellick

    The challenge for global health advocates will be in defending ongoing U.S. investment in foreign assistance, writ large, and health programs, specifically. This will require a full court press--a unified effort--not only on Capitol Hill in January 2009, but also at the White House. Smart advocates will need to invoke the wisdom of "soft power," diplomacy, and anti-poverty efforts to win back America’s former friends in the world, and to keep support in Africa. And it’s worth reminding Congress and a new president that all foreign assistance, combined, comes to less than 0.5 percent of the national budget--including nonmilitary reconstruction aid for Afghanistan and Iraq.

    A new U.S. president is going to need help to come up with smarter, more efficient ways to set foreign aid priorities and move the money out the door. The combination of an enormous national debt, a trade deficit, and inflation in essential food, pharmaceutical, and energy sectors will greatly limit both the scope and efficacy of U.S. generosity. The various agencies that carry out foreign aid programs are going to have to find more coherent ways to integrate what are now largely stand-alone operations, such as malaria prevention, tuberculosis treatment, water filtration, and HIV prevention.  Further, just as Melinda Gates described in her remarks at the 2008 Council on Foreign Relations National Conference, the U.S. government is going to have to find ways to partner with other institutions, such as major philanthropies and corporations.

    Worldwide expectations run high, particularly for what an Obama presidency might accomplish-- probably excessively so. The argument that global health advocates are making right now, especially to the transition teams, is that foreign aid is a miniscule expenditure, and its impact--if properly executed--is tremendous. The "bigger bang for the buck" argument will only work on Capitol Hill, however, if its advocates provide a clear, unified proposal.

    It is heartening that top leadership in foreign assistance has, indeed, gelled. Several proposals for funding and reorganizing U.S. aid are on the table. (See, for example, the Modernizing Foreign Assistance Network website.) The global health and development communities are asking the Obama transition team and the incoming 111th Congress to meet prior commitments to double foreign assistance (to about $72 billion), and promising in return to improve the efficiency and accountability of overseas programs through consolidation of leadership and coherence. This is a rapidly unfolding situation: Watch for announcement of President-Elect Obama’s appointment of a pro-development secretary of state, and a newly-created deputy National Security Council director slot dedicated to overseas development and global health programs.


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