Does aid to developing countries only flow one way? Or do Canada and other industrialized donor countries get return on their aid dollars? The tables illustrate aid is a two-way relationship. Industrialized donor countries such as Canada reap substantial returns through their trade and investment relations with the developing world.

Canadian loans to and investments in developing countries (Table 2) increased 10 percent, from $63 billion in 1996 to $69 billion in 1997. As in 1996, most of this increase is due to a growth (slightly more than $4 billion) in loans outstanding by the chartered banks to the developing countries. The income derived by Canadian agencies and investors grew proportionately. In 1997 the value of Canadian-owned foreign bonds and stocks rose 9 percent to a combined total of $10.95 billion, while the stock of Canadian direct investment abroad increased 15 percent to $18.4 billion.

A comparison of the “inflows” to Canada (imputed from the stock of debt and investments abroad) and the “outflows” represented by official development assistance (ODA) shows a continuing, and disturbing increase in the disparity between inflows and outflows. As ODA is expected to decrease during 1997-98 by approximately $130 million, the gap will likely widen further.

In other words, increasing loans and investments, combined with a stagnating (and declining) ODA budget, combined to provide Canada in 1997 with $1.86 for every $1 spent on aid. This represents an increase of 13 percent since 1996, and almost 50 percent since 1995. 

1 This includes debt at market rates of interest, to the Export Development Corporation and the Canadian Wheat Board. Debt to other agencies carrying soft or zero interest rates (such as loans from the Canadian International Development Agency (CIDA)) is excluded.
2 Statistics Canada: Canada's International Investment Position, 1997: Table 8: Portfolio Investment in Foreign Bonds, by Geographical Area.
3 Statistics Canada: Canada's International Investment Position, 1997: Table 9: Portfolio Investment in Foreign Bonds, by Geographical Area.
4 The following assumptions were used: yield on debt to public agencies, at around the London Inter-bank offer rate on US dollar deposits (6.08 percent); 6.76 percent yield on bonds, 6.42 percent yield to stocks, and 10 percent yields on foreign direct investment.