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Knowing where the aid money goes


The Australian government are about to announce the findings of their review into foreign aid. The UK has just released theirs. Both have focused on aid transparency - making sure that the public, officials and poor country government and citizens can know where the money has come from and where it's going. In this blog, we look at what's happening in the world of aid transparency.

Recently a new standard was agreed to for the publication of aid to developing countries. This may not sound too interesting, or effective but it has lasting implications for the aid sector. Working just like resource transparency legislation that the British government announced that it would be supporting, a uniform aid standard makes it far easier to trace where money is being spent, because with an increased level of accountability citizens are empowered with a vital source of information with which to hold their governments to account.

Currently, there is no mandatory standard outlining what to publish, how to publish it and what form that takes.

Such an outcome has been the result of the International Aid Transparency Initiative (IATI). Launched on September 4, 2008, IATI is a coalition of donor governments, governments of developing countries and NGOs whose aim is to make information about aid spending ‘easier to access, use and understand.’ Currently there are 18 donors who are IATI signatories including the World Bank, United Nations Development Programme and countries such as Sweden to Australia. In addition 19 developing countries have endorsed IATI from across the world Honduras to Ghana and Papua New Guinea.

So what do the standards require?

The new standards establish universal definitions setting out how much money is being provided, when it was, or is, due to be paid out and how funds are expected to be used. They are part of the broader movement for aid transparency that aims to benefit recipient governments, donors and aid agencies and southern citizens and their representatives.

With the IATI, participating donors will publish their aid information in one place and one format. For recipient governments this greater aid transparency means that they are able to know how much aid is invested, from whom and where it being spent. Having the information available in one place is essential for their budget planning for two reasons; first, a lack of funds means that a government cannot implement it’s plans and second, a lack of predictability means that government’s are unable to effectively plan in the first place.

This problem has real world implications. For example, in 2007 the Sierra Leone government received $US 26 million less than it had budgeted – money that had already been budgeted for spending on poverty reduction.

For donors such as governments, aid agencies and private foundations, aid transparency ensures that their efforts will be most effective reducing the likelihood of overlap. An example of this occurred in 2000 when the United Nations Development Programme undertook a review of the aid spent on the Palestinian territories – most aid projects were focused on urban areas while rural and refugee camps –in the direst need of aid – were neglected. And it’s for cases like these that the IATI is focused.

For citizens in recipient countries greater levels of aid information benefit civil society as they provide another vital source of information enabling them to hold their governments to account. With another avenue that can potentially be abused for corruption no longer available civil society organisations can track and challenge the discrepancies between aid received and aid spent.

Lastly, aid transparency challenges existing misconceptions that currently exist in donor countries. As we blogged last week, many in America think that up to one-fifth of their budget is sent overseas as aid. And it’s a similar story in the UK. Here, people estimated that government spending on overseas aid was 18.55% when the actual figure is only 1.3%.

It’s these misunderstandings that drive people’s cynicism towards aid - because they don’t know how much is spent, or where the money goes, they are overestimating the amount and underestimating the effectiveness of aid.

That’s why the Global Poverty Project supports the IATI. As another mechanism for increasing transparency and accountability it empowers citizens of aid recipient countries to hold their governments to account. And, in the process, it dispels common myths surrounding aid and the real progress being made.  


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