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Building Back Better: Four Commitments Canada Should Make on International Development

By Aniket Bhushan

Published: Oct 16, 2020

Canada should make four commitments on international development immediately. This analysis provides an updated state-of-play, and makes the case for Canada to do the following:

  1. Preserve and codify recent additions in the IAE base: it is vital that Canada codify its recent historic additions to the IAE to support international COVID response into the IAE base, and reflect the same in the upcoming Fall Fiscal Economic Statement.
  2. Lead support for the IMF’s Mobilizing with Africa 2 deliverables: now is the time to go beyond current FfD debates and lead on creative solutions to resource mobilization required to support economic recovery in the poorest countries.
  3. Enhance transparency by committing to publish a comprehensive accountability report: a consolidated report on Canada’s international COVID response can only come from GAC and is a prerequisite to assess the efficacy of response.
  4. Assess risks from a gender-lens SDG perspective: there is clear evidence of the imbalanced nature of COVID’s gender impact and emerging evidence of regression on every SDG indicator; both ought to be reflected in an updated development portfolio risk assessment.

Canada’s response so far has been exemplary

Canada’s total international COVID response commitments as of Oct 2020 stood at $1.14billion. We estimate about 65% of this comprises new and additional resources to the International Assistance Envelope (IAE). Canada’s international response is approx. 0.47% of its domestic response, almost half-way to the 1% target NGOs were calling for. These are some of the largest one-time additions to the IAE Canada has ever undertaken.

Highlights: Canada’s International COVID Response Commitments

  • $120million towards the ACT Accelerator to better coordinate COVID response in developing countries
  • $220million towards COVAX vaccine procurement for developing countries
  • $400million towards financing for development during COVID and beyond

These and other commitments have positioned Canada as one of the leading global donors to international COVID response. In this regard Canada is punching above its weight relative to its pre-crisis foreign aid levels.

Success is anything but guaranteed: Key data to keep in perspective

100-150 million: the IMF and World Bank expect global extreme poverty (those living below $1.90/day) to rise for the first time after decades of sustained progress.

5x historical average growth rates: The World Bank target of bringing extreme poverty down to 3% globally by 2030 was already significantly off-track pre-COVID.[1] Progress on extreme poverty has been set back by about 6-7 years. Sub Saharan Africa now needs growth rates 5 times its historical average to get back on track on poverty reduction.

Over $100 billion per year: despite fiscal adjustments, targeted fast track concessional support (from the IMF, World Bank, and regional development banks), and debt service suspension, over 2020-23 Africa is facing cumulative gross external financing needs of approx. $1.2trillion. This includes an external financing gap of $345billion in African low-income countries. Clearly donors will be urged to step up further.

Developments within foreign aid delivery and development finance architecture to keep in view

  • Emerging evidence of changes within aid channels: Since the start of 2020 new bilateral donor commitments have been down (about 25%, compared to 2019, Jan-July), but multilateral commitments made up for this. It would not be surprising if multilaterals require more firepower if effects persist well beyond March 2021.
  • Emerging evidence of changes at the sector level: new donor commitments to the health sector have increased, understandably, significantly. However, in other related areas (e.g. water and sanitation) commitments have declined (Jan-July 2020). Some donors, e.g. UK’s DFID, responded to COVID by pausing all “non-lifesaving” aid. Other programming areas (e.g. longer-term economic development) could face pressure if health demands increase.

The current focus, as it should be, is on the macro level both in terms of COVID specific health response (e.g. ensuring vaccine procurement via COVAX), and aggregate level contributions to and via the multilateral development financing system. However, donors will need to pivot quickly to longer term development goals and economic recovery.

These developments are yet to work through the aid system. The picture will not be clear soon. Aid data for 2020 from the OECD-DAC will be significantly affected and may be unreliable at a high-level.[2] This is precisely the reason why donor’s like Canada need to commit to a greater level of transparency.

Four things Canada can do now

  1. Preserve and reflect additions in the IAE base

It is vital that Canada codify COVID response additions into the IAE base and reflect this in the upcoming Fall Fiscal Economic Statement. It is important that Canada’s international COVID response contribution is clearly reflected in the statement. Codifying additions into the IAE base means recent additions would not be a one-off, but rather would increase the IAE base level. This is important if Canada is to avoid the often-repeated dynamic of robbing Peter to pay Paul and preserve other areas of programming.

  1. Lead support for the IMF’s “Mobilizing with Africa 2” deliverables

Now is the time to go beyond current financing for development (FfD) debates and lead global donors on resource mobilization. Canada can use its voice as a board member at each of the major multilateral development finance institutions to mobilize support for the 4 deliverables outlined in the IMF’s “Mobilizing with Africa 2”. This includes extending debt service relief, increasing multilateral concessional lending capacity, and bilateral grants. Canada could go further and push for debt cancellation (which will be inevitable in some cases). Approx. $68.5bn in debt service payments are owed by the poorest countries in the coming years which very directly squeezes their already limited fiscal space to respond to COVID and stimulate economic recovery.[3]

  1. Commit to publishing a consolidated and comprehensive accountability report

Canada can lead donors on enhancing transparency by committing to publish a consolidated and comprehensive accountability report outlining and showcasing its international COVID response. Currently information on COVID response is patchy. Specifically, data and information on changes within existing programming (in some cases ongoing project focus has been changed, understandably, drastically, to focus on supporting immediate COVID related needs) is missing. Only GAC can fill his gap. Lack of information undermines analysis of the efficacy of programming.

  1. Assess programming portfolio risk from a gender-lens SDG perspective

GAC should commission and publish an independent risk assessment of its programming portfolio that assesses the impact of COVID, not only on existing but planned programming, from the perspective of the SDGs. Our past analysis has shown Canada has effectively prioritized across the SDG framework by focusing on gender. Yet we know that COVID has, is and will continue to have highly imbalanced effects in terms of its impact on women. Furthermore, there is emerging evidence of across the board regression on just about every SDG indicator.

 

 

[1] Best pre-COVID estimates indicate global extreme poverty by 2030 would be about double the target around 6%. It is now projected to be closer to 7%.

[2] For e.g. ODA/GNI ratios could very well rise. Both owning to immediate response affecting the numerator but also significant declines in the denominator.

[3] Canada likely has limited direct influence in debt sustainability discussions. Of the approx. $68.5billion in debt service payments owed in the coming years (out to 2022) by developing countries that have already availed of the G20 debt service suspension initiative (DSSI) a mere 0.36% is owed to Canada, by far the majority is owed to China ($42.5billion or 62%).

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