Renewing Canadian Action Against Global Poverty

By Kerry Max

When the Canadian government announced the 1998 Federal Budget, it ignored the appeals of the development community and proceeded with a previously announced cut of $150 million from the International Assistance Envelope (IAE). While the cut was partially offset by a package of special payments and changes to accounting procedures, the combined effect was the continued decline of ODA/GNP (Overseas Development Assistance to Gross National Product) ratio to 0.27%--its lowest level since 1968-69 (see table below).

Canadian ODA 1991/92 to 1998/99 (Cdn $ millions)

Program	1998/99	1997/98	1996/97	1993/94	1991/92	Change 91/92 to 98/99
International Assistance Envelope	1,972.9	2,173.1	2,236.7	2,641.3	2,778.8	-29.0%
ODA (commitment basis) *	2,359.9	2,567.1	2,676.5	2,972.2	3,181.8	-25.8% *
ODA to GNP ratio	0.27%	0.31%	0.34%	0.44%	0.49%
ODA (without refugees) to GNP ratio	0.25%	0.29%	0.32%	0.41%	0.49%

Note: * In 1993/94 Canada began to include first year refugee costs in Canadian ODA. This adds approximately $150 million per year to ODA. Comparisons with years prior to 1993/94 should be adjusted to remove these expenditures from Canadian ODA (commitment basis).
Sources: CCIC, 1998 Federal Budget Report; CIDA, Statistical Report on ODA, various years; and, Government of Canada, Canadian International Development Agency, 1998/99 Estimates, Part III, Report on Plans and Priorities.

However, there is some faint hope that the precipitous decline experienced by Canadian aid budgets during the past few years, in both dollar and GNP terms, is at last coming to an end. In addition to the cuts, the budget also contained three surprise announcements that may hint at some renewed support for ODA funding.

• First, by pre-paying 1998 dues owed to United Nations organizations, $90 million was freed up for additional spending by the Canadian International Development Agency (CIDA). This was allocated to CIDA environment, health, governance, and youth programs.
• Second, a one-time special payment of $50 million was allocated to the International Monetary Fund's Enhanced Structural Adjustment Facility. This money would normally have been extracted from the dwindling aid budget.¹
• Third, Canada introduced new accrual accounting procedures to its dealings with International Financial Institutions (IFIs). Beginning in 1998-99, accrual commitments to IFIs (promissory notes issued by Canada), will be treated as payable in the fiscal year in which they are issued. Previously, IFI allocations were based on the anticipated value of commitments from previous years that were to be encashed (as opposed to issued) in the current fiscal year. The new accounting procedures will result in the payment of more than $1 billion in outstanding promissory notes, outside the annual budget process. This will reduce IFI allocations by $120 million in 1998-99.

Shifting political climate
There are signs that the political climate may also be shifting. Prime Minister Jean Chrétien is said to be a strong aid advocate. Following a special Cabinet session in June, Chrétien was quoted as saying that "Canada has always been a contributor to foreign aid more than it is at this time."²
Perhaps Canada will now choose to follow Britain's path. In November 1997, the British government published a groundbreaking White Paper, Eliminating World Poverty: A Challenge for the 21st Century. In addition to setting out development targets, the paper highlights the importance of ensuring that foreign policies affecting the South are consistent with anti-poverty objectives of development. The paper also outlines the political means through which the British government intends to achieve its development targets. Subsequently, the British government announced that the Department for International Development (DFID) would see its budget increase from £2.3 billion (more than $5 billion) in 1998-99 to over £3.2 billion by 2001-02, bringing Britain's ODA/GNP ratio up from 0.26% in 1997 to 0.30% by 2001.

Political will in Canada appears to be shifting towards the revitalization of development funding.

As the political will in Canada shifts toward revitalizing development funding, it now appears that the necessary financial resources have become available. Calculations by the Canadian Council for International Co-operation (CCIC) show that by increasing the annual ODA budget by an average of $200 million each year, the federal government could raise Canada's ODA/GNP ratio to 0.35% in seven years. Even better, an additional $400 million each year would raise the Canadian ODA/GNP ratio to 0.37% by 2001 and 0.47% after seven years, signaling real progress toward the target of 0.7%, set in 1970.

New initiatives
Regardless of the speed at which the Canadian government decides to increase the aid budget, a commitment to the stability of development assistance funding is essential. This will allow governmental and nongovernmental actors the freedom to stop reacting to cuts, and turn their full attention to effective poverty alleviation and development efforts. In anticipation of this change in direction, The North-South Institute is examining how Canadian foreign policy tools can assist CIDA's and others' efforts to alleviate poverty in developing countries.
With the support of CIDA and the International Development Research Centre, the Institute has begun a study of how best to integrate poverty alleviation objectives into the increasingly broad range of Canadian foreign policy instruments (i.e., trade, investment, immigration, and others as well as aid). The "Poverty and Policy Coherence" project will investigate issues of coherence in policy-making and policy implementation both in Canada and the South, to assess their impact on poverty in developing countries. The tools and recommendations generated by the study should help government, business, and civil society organizations ensure that their activities in developing countries ideally complement--and at the very least do not hinder--existing efforts to alleviate poverty.
The Institute is also working with CCIC to guide the future orientation, scope, and organization of Canada's development program. A joint CCIC/NSI working paper, entitled Canadian Development Assistance and Poverty Eradication, will review best practices of poverty-focused development assistance programs and explore Canadian experiences with these approaches. This study will also generate recommendations for CIDA in the areas of strategic and operational change, increasing their effectiveness as an institutional vehicle for promoting international development.
Both the Poverty and Policy Coherence project and the CCIC/NSI working paper will contribute new, concrete suggestions to discussions about how Canada works to eliminate global poverty through its aid program, other foreign policies, and a judicious combination of the two.

¹ As discussed by Andrew Clark in "Problems ahead? Commitments to the IFIs and UN agencies pressure the aid budget," Review, vol.1, no.1, 1997.
² Rosemary Speirs, "We should be No. 1 for our generosity, too," The Toronto Star, June 30, 1998, page A-15.

Return to: Vol.2, No.2 1998 Contents or Review Home Page