ANNEX A
CF245/224/010
NOTES ON THE AID PROGRAMME STRATEGY 1978-79
1980-81
The underlying philosophy and objectives of the aid programme strategy, and the main considerations to be followed in executing that strategy, are set out in the Minister's statement (TT5 of 28 January 1977). These notes complement that statement.
2.
The Present Strategy
Ir. 1975 Ministers accepted the need to change our aid policies to enable HMG to respond more readily and more effectively to the long term problems of the developing world. The White Paper: "The Changing Emphasis in British Aid Policies" (Cmnd 6270) described the three legs of the new development aid strategy as(a) giving an increasing emphasis in our bilateral aid towards the poorest countries, (b) giving a special emphasis to programmes directed towards the poorest groups within those countries, and (c) promoting situations best likely to stimulate matching contributions of concessional aid from other donors. At the same time the White Paper recognised that there are other political and economic factors which need to be taken into account and that we have a special responsibility for the dependent territories and the West Indian Associated States.
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3. The allocations which had been agreed for 1977-78 1979-80 showed a significant shift towards the poorest countries. The proportion of bilateral allocations going to the countries with a 1972 GNP per capita of less than $200 was planned to increase from 65.2% this year to 75.1% in 1979-80, and the under-$200's estimated share of the whole gross aid programme was planned to increase from 46.7% this year to 48.2% in 1979-80. With multilateral aid we are having some success in encouraging other donors to help in furthering our policies. We have played a leading part in discussions with our Community partners and among all donors on common positions on aid volume, distribution and terms; but prospects for some specific and important international agreements such as the replenishment of IDA and the World Bank capital increase remain uncertain.
4. Two major factors affected the aid programme adversely in 1976. First, the depreciation of sterling imposed additional costs which have required more cash than had been foreseen to meet our obligation to maintain the value of many of our multilateral liabilities; also the costs of some of our bilateral programmes has increased, particularly in those areas where the local currency has appreciated against sterling. Second, inflation in the UK has continued at a higher rate than was allowed for in the calculations of a cash figure for the net aid programme in 1976-77; as a result our cash provision for that year is compensating us inadequately for higher costs. These factors together with the public expenditure cuts for 1977-78 and 1978-79 (which in 1977-78 will actually reduce the value of the Aid Programme by some £22m in real terms against that for 1976-77) suggest that over the next two years we may find it difficult to make as great a shift in real resources towards the poorest as we had intended.
5. For several reasons it is likely that multilateral action will assume an increasing weight in our aid policies. Far more can be achieved towards the fulfilment of our development aid objectives by generating momentum towards them in the international community as a whole than can ever be achieved from our own resources.
Since our entry into the European Community, a substantial part of our aid funds has been channelled through the EDF, but we have not so far achieved much success in extending the flow of resources from the Community budget to the non-associates. It is increasingly necessary to have regard to the more positive role which the OPEC countries are playing. There are circumstances where we need to harness our aid effort to theirs so as to bring in the substantial funds they can provide as aid for the poorer developing countries. Most significant of all, if we are to play a positive part in the North/ South dialogue, whether in UNCTAD or in CIEC, we must recognise that there will be important implications for the way we transfer resources to the developing world, and in particular for our aid policies.
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1.