Why is Ottawa Accelerating its International Aid Budget Cuts by Stealth?

by Bruce Montador

The Harper government started two years ago to cut back on official development assistance (ODA), announcing in 2012 a three-year series of cuts (even if Canada is among the donor countries least under fiscal pressure to cut ODA). However, it is accelerating those cuts by stealth: specifically, by not spending large amounts of the money that it had budgeted for ODA. The unspent money is allowed to “lapse” and is returned to the government’s general revenues.

The government has the right to cut spending if it so chooses. However, it is inconsistent with democratic governance to pass budgets saying one thing and then to operate differently.

Only time will tell if even more money is lapsed– and whether we will witness yet another ‘stealth’ cut to Canada’s aid budget.

In 2012-13, the Canadian International Development Agency (which has since been folded into the new Department of Foreign Affairs, Trade and Development) lapsed nearly $300 million. That’s six times the $49 million that CIDA lapsed in the previous year. In addition, the International Development Research Centre – an arm’s length agency, also funded by Canada’s aid budget – lapsed more than $85 million in 2012-13, which represents more than a third of its budget. Together with other lapses, the total amount of money that the government left unspent in 2012-13 was nearly 10 percent of the announced Canadian ODA budget.

It is worth noting that the ODA lapses were only a part of large-scale federal underspending.  Across the entire Government of Canada, nearly $11 billion out of $300 billion of forecast 2012-13 expenditures (or more than 3.5 percent) was allowed to lapse, presumably reflecting an unannounced decision to speed up deficit reduction. However, while development assistance was not the only target, it was an easy one for a government with little interest in the area.

A key concern is whether even more cuts are coming. The Estimates for 2013-14 (the second of the three years of cuts) imply an ODA level similar to what was actually spent in 2012-13, but only time will tell if even more money is lapsed– and whether we will witness yet another ‘stealth’ cut to Canada’s aid budget.

It also remains to be seen how the government, including the recently appointed Minister of International Development within DFATD, Christian Paradis, will treat development. A few weeks ago, the Conservatives announced that the international trade agenda would be treated as a priority within DFATD. This raised speculation that the government might link development spending to Canadian trade and investment interests. But its next big development announcement was a 30% increase in Canada’s three-year pledge to the Global Fund against AIDS, TB and Malaria.

Moreover, although the Conservatives have been skeptical about multilateralism (notably the United Nations), the government has used organizations such as the World Bank to deliver significant parts of the development budget. For example, it expanded ODA loans to such international financial institutions in order to facilitate mitigation of and adaptation to climate change.

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One indicator of where the government is going with development will be its participation in the replenishments of the African Development Fund (AfDF) at the African Development Bank (AfDB), and of International Development Association (IDA) at the World Bank. The negotiations are complete for both AfDF and IDA, but the government has not yet announced the Canadian contributions.

The Conservatives have also taken some other positive steps on development:  completely untying our ODA, including food aid, and providing innovative support to the capital resources of the Inter-American and African Development Banks during the financial crisis.

The publication of the 2012-13 Statistical Report on International Assistance next spring will give some indication of how the lapses affected ODA choices. The Estimates for 2014-15 and the Budget will also give an indication of where Canadian ODA is going. They may make it clearer if and how development spending will be affected by the increased economic orientation of foreign policy. (Such links do not have to be bad, but they can also lead to wasted resources that do little or nothing to reduce poverty.) However, continuing lapses could mean cuts beyond any announced reductions, and make the estimates a very poor guide for parliament to be passing judgement on.

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