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Buddy, can you spare $20 billion?

Shanta Devarajan's picture

How much additional foreign aid will it take to prevent the global financial crisis from becoming an economic, social, political and human crisis in Africa?

As my co-authors and I tried to point out in an earlier study of the additional aid needed to reach the Millennium Development Goals, this is not the most important question. Much more important are: (i) what developing country governments can do, and (ii) how the additional resources will be spent. Nevertheless, as world leaders gather for the G-20 summit outside London, the magnitude of additional resources to the world’s poorest continent will be discussed.

Let me suggest a specific answer: $20 billion. As with the earlier study on the costs of reaching the MDGs, we can arrive at this estimate using different methods. Such an approach avoids the accusation of double-counting.  First, the IMF estimates that the balance of payments needs of low-income countries will be about $25 billion this year. Inasmuch as most of those countries are in Africa, $20 billion for Africa would seem a reasonable number. Second, if we put aside balance of payments considerations and look just at Africa’s infrastructure needs, a recent estimate puts these at $20 billion additional also, taking into account the gap that can be filled by better pricing and efficiency gains. Third, $20 billion is the shortfall in the commitments made at Gleneagles in 2005 by the G-8 to double aid to Africa by 2010. In other words, this is not a new need: it is what the world leaders in 2005 thought would be needed for Africa to have a reasonable chance of reaching the MDGs. And if there ever was a time when those additional resources are needed, it is now.

Comments

Submitted by Dion on
The IMF's estimate of a $25 billion balance of payment financing need for low income countries is grossly inflated. If you recreate their methodology, around $15 billion comes from Angola and Sudan. Pakistan is another big chunk. Not exactly the type of governments that donors should be looking to support.

Submitted by fred on
what does world bank do differently from IMF? How about IFAD? Imean how do all these institutions work in tandem?

Submitted by Anonymous on
Thank you, Shanta for your concern for Africa. I totally agree with you on the conclusion that now is the time in history when Africa greatly needs additional resources. However, the greatest problem in Africa is how what is given is being utilized. If this money ends up in private pockets then Africa will never change and the global financial crisis will turn to economic, political, social and human crisis. The level of corruption in Africa needs to be checked out for any meaningful development to take place. The rich or ‘haves’ get richer everyday while the poor or the ‘have-nots’ gets poorer on a daily basis. I will like to suggest that the IMF should be very strict on how the money is being used. If it does not target the poor in order to improve on their living conditions then the IMF is just wasting time. Also, priority should be given to important sectors like education and agriculture. Education should be sustainable for us to experience a change when all the countries in the world will be coming out of this financial crunch. More money should be used to review our educational programs. Things are changing everyday the world over but our programs are not changing. Africa is cut in a web and needs something more than money for it to come out. The youths need quality education that will make them more competitive and productive. This can only be done by giving more scholarships to students to acquire new knowledge in emerging fields like Information technology and biotechnology. In conclusion, people should not only focus on how much money is needed but on how this money is being spent to better the lives of mankind. Once more thank you Kibinkiri Eric Cameroon

Submitted by goranga on
Most African countries are ready to repeat and improve their achievements, but they require more extensive and more qualified, official development assistance to finance public expenditure to achieve the MDGs. During the first few years of the XXI century aid to African countries located south of the Sahara has increased, but since 2004, its volume remained almost the same level, apart from the cases of debt relief and humanitarian assistance. Despite the lack of progress on the MDGs the achievement of goals is feasible for the majority of African countries. But the time for the necessary practical measures uses to be less and less.

I think you are right. But you should cover more on this topic.

thanks for the post i think there should be more people like bill gates out there, soon enough the would would be a better place if only everyone was as giving

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