Researchers report 'surprisingly little' evidence that economic downturns are associated with deep development aid cuts

Mar 1 2011

Despite concerns expressed by the World Bank and the WHO that the current economic climate would lead donor countries to scale back development assistance, a study (.pdf) published online Friday in the WHO Bulletin finds what the authors "described as 'surprisingly little' evidence that economic downturns are associated with deep cuts in aid, at least in the first few years of a financial crisis," Reuters reports (Kelland, 2/25).

"In order to achieve a sustainable economic recovery, governments must first take care of people's most basic health needs," David Stuckler of the Harvard School of Public Health, who was the lead author on the study, said, according to a university press release. "Our findings remind us that there are alternative ways to finance recovery than by cutting vital health services to the world's poorest and most vulnerable groups," he added (2/25).

"[A]ccording to 2009 reports of global aid budgets, Italy and Ireland have reduced development aid by 56 percent and 10 percent, respectively. … On the other hand, Britain has protected its aid budget from cuts and Australia, Germany, and the United States have all made commitments to increasing their support to protect vulnerable groups from the impact of the crisis," according to the researchers, Reuters reports (2/25).

For the study, researchers analyzed data on "health aid and economic downturns from 15 European Union (EU) countries covering the past three decades, from 1975 to 2007. The study investigated the relationship of health aid to recessions, measured in three ways: episodes of recession, percentage changes in per capita gross domestic product, and changes in unemployment rates in donor countries," according to the press release. "Similar to present circumstances, they found that some countries appeared to reduce aid, while others increased it in a manner that did not seem to depend on the scale of the financial crisis they faced," the release states (2/25).

"There isn't a simple one-to-one relationship where if a country faces economic problems then it cuts back on aid. If it does cut back, then it's doing so for ideological and political reasons," study co-author Martin McKee of the European Center on Health of Societies in Transition at the London School of Hygiene and Tropical Medicine, said, Reuters adds (2/25). 

"One contemporary risk is that donor agencies will behave in response to a political climate calling for generalized austerity that fosters the erroneous belief that a reduction in aid is the inevitable consequence of recession," the authors write in the study. "Our evidence is consistent with a potential mimetic effect, whereby donors' aid decisions are influenced by those of other donors. Thus, we may be facing a self-fulfilling prophecy," they add, before calling for additional research to examine factors influencing aid allocations (Stuckler et al., 2/25).

The Harvard Crimson notes that the study was published one day after U.S. House Majority Leader Eric Cantor (R-Va.) defended foreign aid cuts while delivering an address at Harvard. The article includes comments by several Harvard students on the study's findings and Cantor's remarks (Zavadski, 2/28).

New Lending Initiative Aims To 'Streamline Foreign Assistance Disbursement'

Fast Company describes a new lending initiative backed by the U.N. Foundation that's enlisting banks and other private sector groups "to help make financial loans to governments when they need re-stocking of [health] supplies and when their next shipments are months away" (Nerenberg, 2/25).

The Pledge Guarantee for Health (PGH) initiative provides "a promising new financial tool developed to speed and streamline foreign assistance disbursement and make global health supplies more affordable for recipient countries," according to a U.N. Foundation press release. The release describes a recent meeting of global health experts in Washington, D.C., to discuss the strategy (2/23).

"What makes this innovative is we are banking aid contracts, risk-sharing with the private sector, building a guarantee pool designed to increase health impact and procurement efficiency, and doing risk analysis on financing processes that have never been done before," U.N. Foundation Executive Director Kevin Starace said, according to Fast Money. The article elaborates on how PGH helped reduce the time it took 800,000 insecticide-treated bed nets to reach Zambia and includes quotes by Amie Batson, deputy assistant administrator for Global Health at USAID, who delivered an address to the meeting in D.C., and Eva Jarawan, health manager for the World Bank's Africa Region (2/25).