Could US budget cuts mean slashing aid to Africa?

When it comes to structural adjustment, the US government generally plays the role of the donor nation, setting conditions on debtor nations in order to get their fiscal houses in order.

This year, the US government, having reached its self-imposed limit for how much money it can borrow, is scrambling to pay its bills and keep its creditors at bay.

With President Obama's administration and the Republican-controlled Congress debating how to cut back government spending, everything is on the table, including America’s $50 billion overseas programs, including foreign aid.

Republicans rejected a measure this week to raise the US government’s $14.3 trillion debt ceiling, the knives will almost certainly come out. The implications for African aid recipients – many of whom rely heavily on US foreign development aid – could be dramatic.

But a number of high-level US State Department and aid officials, on a recent visit to South Africa, said that foreign aid programs such as former President George Bush’s ongoing President’s Emergency Program for AIDS Relief (PEPFAR) enjoy bipartisan support. And the US government is both changing the way it gives out foreign aid, empowering local governments to take on their own development, and remaining engaged with a developing world that increasingly has choices of whom it does business with.

“The logo of USAID says, ‘from the American people,’ but I think the American people increasingly understand that our development commitments in Africa also generate outcomes for the American people,” says Raj Shah, the chief administrator for the US Agency for International Development (USAID), which handles most of the US government’s foreign development assistance.

“It’s an expression of our moral values when we are able to save lives on this continent and protect young children from starving or protect people with HIV from dying when they don’t need to die,” Mr. Shah says. “But we also know these outcomes keep us safe and lay the groundwork for economic stability and growth.”

Foreign aid to Africa may have bipartisan support in Congress, but ordinary American voters often see foreign aid as a colossal waste of taxpayer money – while also vastly overestimating the US government's foreign aid budget. In a November 2010 poll conducted by WorldPublicOpinion.org and Knowledge Networks, Americans were asked what percentage of the US federal budget was spent on foreign aid; the median answer was 25 percent. When asked what would be the “appropriate” percentage of the budget spent on foreign aid; the median answer was a much more parsimonious 10 percent figure. The US actually spends only 1 percent of its federal budget on foreign aid.

If budget cutters were to go after giant projects, then the six-year-old initiative PEPFAR would present an attractive project. At $7.2 billion in the Fiscal 2012 budget, it is the largest single foreign aid program of its kind, not only in the US federal budget, but also in the world. In South Africa alone, 917,000 men, women, and children are able to receive Anti-Retro Viral (ARV) treatment each year because of the PEPFAR program, and doctors estimate that some 114,000 babies worldwide have been born HIV-free because of ARV treatments made available to their HIV-positive parents.

Yet like a Wal-Mart that keeps costs low by buying in bulk, PEPFAR’s very size may actually give it an advantage in bringing down the costs of its programs. In the past year, PEPFAR has negotiated with drug companies to reduce the cost of ARVs by 50 percent, thereby allowing it to increase its global reach to 3.2 million HIV patients. In addition, because PEPFAR was designed to help recipient countries manage their own HIV crisis response efforts, PEPFAR is doing what few aid projects do. It is putting itself, slowly, steadily, out of business. Here in South Africa, for instance, all purchase of ARVs is done with South African tax money, but purchased through the PEPFAR’s bulk-buying system.

This makes PEPFAR a possible model for other US aid programs, USAID Deputy Secretary of State Thomas Nides said in a recent meeting with reporters in Johannesburg.

“As someone who has now probably in the last 72 hours gone to four or five sites where these dollars are spent … they’re fantastic dollars spent,” said Mr. Nides. But “this program was always set up to transition this program to allow the country to take on more and more of the responsibility of the program, not only for it to execute the program, to manage the clinics distribution centers, but to take on more of what we believe is their responsibility. We’re well aware this cannot happen overnight but I think if you talk to the South Africans, as I have, they’re very much desirous to do this.”

Some economists see the current budget crisis as an opportunity to change entirely the way in which US foreign aid is spent, while others like former World Bank economist and Zambian native Dambisa Moyo favor discarding all foreign aid altogether.

“Millions in Africa are poorer today because of aid; misery and poverty have not ended but have increased,” Ms. Moyo wrote in her provocative 2009 book “Dead Aid.” Because foreign aid generally ends up being administered by incompetent or corrupt local government officials, it often ends up enriching the few while destroying economic opportunities for the poorer majority, Moyo argues. “Aid has been, and continues to be, an unmitigated political, economic, and humanitarian disaster for most parts of the developing world.”

Yet such critiques of foreign aid are misapplied, says Shah, the USAID administrator. Today’s foreign aid now looks for ways to stimulate private-sector solutions that will be sustainable over the long term, he says, and the programs that work with host governments are designed to require local governments to take on aid responsibility.

“South Korea had a lower food production per capita, a higher degree of malnutrition and hunger, and a lower economic growth rate than Kenya in the early 1960s, and USAID partnered with South Korea over a number of decades and today South Korea is a donor country,” says Shah. “President Obama believes that African leaders and entrepreneurs who make the right decisions can achieve that kind of success and has asked us to make sure we’re good partners in that process.”

As for the budget, it’s not over yet, Shah says. The budget “is a real fight for us. But I would point out that members of both parties have fought for our development commitments to Africa.”