Articles / Rubric: Global

The Crisis Is No Excuse Not To Pay
July - August 2013 | Global

The European Union countries for the second year in a row have reduced financial aid to the world’s poorest countries, due to the reduction of their own budgets. The UN fears that this means that the developed countries will not be able to fully meet their obligations to help those in need. However, experts are convinced that the Eurozone crisis is no reason to cut funding to low-income countries.

Over the past year, the European Union has reduced its aid to the poorest countries by 2.3 billion rubles. This is evidenced by the latest report of the Organization for Economic Cooperation and Development (OECD). This is the second year in a row of aid reduction, and it is causing some concern that EU countries cannot meet their obligations to the United Nations to allocate 0.7% of their gross national income (GNI) to aid.

During 2012, support for the poor countries declined overall by 4%, and in 2011, by 2%. Not surprisingly, the European countries that were “the least able to pay” were those implementing their own austerity measures. Spain reduced its aid grants by half, Italy by 35%, Greece by 17%, and Portugal by 13%. The United Kingdom and Germany, which also cut their aid to the poor, promised to turn over a new leaf this year.

The United States remains the leader in financial assistance. Although it cut support, $30.5 billion from the budget did go “for charity.” It is interesting to note, however, that the ratio of assistance to the U.S. GNI is near the bottom of the list of rankings: The country achieved 0.19% of GNI, whereas the average given by rich countries to poor ones is 0.43% of GNI.

According to the OECD, the total financial aid to needy countries last year was $125.7 billion. OECD Secretary General Jose Angel Gurria stressed that members of the organization “are worried that because of budget troubles at home, OECD member countries have provided less support.” The Secretary  General hopes that the trend will turn out to be short-term. According to OECD forecasts, in 2013 the total amount of grants from member countries will grow.

At the same time, the UN expects that by 2015, the developed countries will increase their aid to the poor to 0.7% of GNI. Up to now only five countries have exceeded this figure: Luxembourg, Sweden, Norway, Denmark, and the Netherlands. The United Kingdom, despite budget cuts at home, has promised to increase aid to 0.7% of GNI this year (last year it was 0.56%).

Only nine countries were able to increase payments to those in need, including Australia, Austria, Iceland, South Korea, and Luxembourg. But Turkey set a record, increasing financial assistance to countries by 98.7%. The country managed this through the assistance provided to refugees from Syria, as well as to countries where the “Arab Spring” revolution occurred.

Crisis or No Crisis, You Still Have To Pay
UN Secretary-General Ban Ki-moon noted immediately that the crisis should not be an excuse to cut development assistance and to “marginalize” poor countries, particularly the 49 countries classified as “least developed” – from Bhutan and Benin to Sierra Leone and the Solomon Islands.

Members of the UN participating in the Millennium Campaign and trying to eradicate extreme poverty and hunger worldwide, said that almost half a century ago, when the provision of development assistance began, donor countries provided a total of $2 trillion in assistance to the poor. Yet during the past year, states forked over $18 trillion to save the banks and other financial institutions.

As the head of the Millennium Campaign, Salil Shetty, said, the total amount of development assistance over the past 49 years is equivalent to only 11% of the amount that was allocated to financial institutions in just one year. The UN Secretary General shares that view.

With regard to the annual volume of assistance to those suffering from the crisis on the African continent, Bank Ki-moon stressed, “If countries could find $18 trillion to keep the financial sector afloat, they can certainly find a little more than $18 billion to meet their commitments to Africa.”

The United States remains the leader in financial assistance. Although it cut support, $30.5 billion from the budget did go “for charity”. The ratio of assistance to the U.S. GNI is near the bottom of the list of rankings. The UN issued a call for leaders of the G8 countries to make specific commitments and take practical steps to help the poor. The document says that the crisis that broke out first in the major financial centers of the planet, spread to the entire world economy, with devastating social, political, and economic consequences. Millions of people around the world are losing their jobs, incomes, savings, and the roof over their heads.

The UN also emphasizes that the global economic and financial crisis, which was no fault of the developing countries, nevertheless affects them most seriously. According to the UN Food and Agriculture Organization, the number of starving people in the world increased by 100 million because of the crisis and will exceed 1 billion this year.

Hope Lies with Developing Countries
The developing countries in the G20 have to try to convince their wealthy partners to respond to requests for assistance. Their growing economic weight, in particular that of China, is changing the extremely asymmetrical relationship of influence between rich and poor countries.

According to Salil Shetty, the main challenge today is to make sure that the BRICS countries, in particular Brazil, India, and China, even while reaching agreement with the rich nations about the best conditions for themselves, do not forget about the 49 least developed countries. In addition, the UN recommends that the new great powers give priority to achieving the “Millennium Goals in the area of development” at negotiations of the G8 in Italy and the G20 (in the United States in September).

Text: Valeriya Khamraeva

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