McLeod Group Blog

Smoke and Mirrors: Understanding Canada’s 2018 Foreign Aid Increase

Smoke and Mirrors: Understanding Canada’s 2018 Foreign Aid Increase

McLeod Group blog, June 3, 2019

The OECD Development Assistance Committee (DAC) has released its preliminary report on member countries’ development assistance expenditures in 2018. It makes for interesting, if discouraging, reading. Overall, global official development assistance (ODA) decreased by 2.7% from 2017, with a smaller share going to the poorest countries.

When it comes to Canada’s performance, the report looks at both the quantity and quality of aid. Despite its claims of leadership in international development, Canada has been in steady decline as a donor for many years, with its ratio of ODA to gross national income (GNI) dropping from 0.31% in 2012, to 0.26% in 2017, at the time of the last DAC peer review.

Thus, it was at first encouraging to see that that in 2018 Canada’s expenditure increased to 0.28% of GNI. However, a closer reading reveals that:

  • The government is counting things that are technically allowed but which are not really part of the aid program.
  • Canadian aid spending went up in 2018, but is worse in quality than in previous years, as it further departs from the 2008 ODA Accountability Act’s definition of the purpose of Canadian aid: contributing to poverty reduction, taking into account the perspectives of the poor and being consistent with international human rights standards.
  • The long-term trend is that Canadian aid is falling, when it should be increasing to finance its commitments to the Feminist International Assistance Policy.

One important change was the increase in counting in-country refugee costs, that is the public expenditure – federal and provincial – supporting refugees during their first year of asylum in Canada. While many other DAC countries reported lower expenditures in this category, Canada increased the amount claimed to the level of 11% of ODA ($656 million), reflecting increased numbers of refugee acceptance in Canada. While this is a laudable move, this is money spent in Canada, and not all of it from the federal budget, as provincial social service costs have also been claimed.

Classifying these expenditures as ODA is entirely optional, not mandatory, under DAC rules. Among DAC member countries, Australia, Luxembourg and Japan do not claim these expenses. If these refugee costs had not been counted, Canada’s ODA would actually have been 3.8% lower than in 2017, representing 0.24-0.25% of GNI.

So if this money is staying in Canada, rather than going to developing countries, particularly the poorest where it is needed most and whose share of ODA is dropping, why is the government including it in the report to the DAC? Seems misleading.

The other controversial item included in Canada’s 2018 report was the initial capitalization of the new development finance institution FinDev Canada. This expenditure of $100 million is reportable under the DAC’s provisional new rules for private sector investment instruments. But again, this is money that has not yet been spent in developing countries. In fact, most has not been spent at all but only moved from one pocket to another.

There is no evidence that the government is heeding the DAC’s 2018 peer review recommendation that “Canada should introduce an ambitious target for increasing its share of ODA in gross national income and set out a path to meet the target”.

If the government is truly serious about development assistance, why does it not increase the expenditures on direct assistance to developing countries? It seems to prefer taking advantage of loopholes and statistical tricks, rather than seriously addressing ODA volume and where it is directed.