Iraq: NCCI's Weekly Highlight - 23 Oct 2008

News and Press Release
Originally published



Impact of the Global Financial Crisis on Humanitarian Funding

With far over a trillion dollars worldwide going to various bailout packages, the money will have to come from somewhere. (Theoretically, at least.) Though it would be nice if humanitarian and development spending were immune from such cut-backs, history shows quite the opposite.

The Center for Global Development offers by far the best analysis of how the financial crisis will affect humanitarian (and development) funding. It's not a pretty picture. According to their most recent article, History Says Financial Crisis Will Suppress Aid: "After each previous financial crisis in a donor country since 1970, the country's aid has declined."

(Even better for the financially illiterate such as myself, the article includes easy-to-follow charts and tables.)

Just to review the figures involved - the various US bailout packages, including the $700 billion economic bailout plan as well as additional assistance to Fannie Mae and Freddie Mac and AIG, total almost a trillion dollars. The UK bailout package is at least £400 billion, or just under $700 million dollars. Some estimate that the total amount spent worldwide on various bailouts is nearing $3 trillion.

To put this in perspective, Oxfam has estimated that $700 billion dollars would be enough money to: "clear the accumulated debt of the 49 poorest countries in the world twice over...[or] eradicate all world poverty for over two years."

The impact of the bailouts is already being felt. In the US, the Democrats are now saying that even if they win the election, they will not be able to increase foreign assistance spending as promised.

It's not only an issue that funding will not increase, but that it might be reduced. According to Steve Radelet of the Centre for Global Development, the US will be under severe pressure to cut its international aid budget. (Some experts are warning of possible reductions in US spending on AIDS.)

Fears about similar cuts in Europe led Louis Michel, the European Commissioner for Humanitarian and Development Aid, to declare: "The credibility of the donor community as a reliable partner is clearly at stake. This is already self-evident when the fledgling pace with which aid for the poorest is increased is compared with the speed with which aid for the richest is mobilized."

Private donations - which in the US alone totaled $34.8 billion in 2006 - will also probably be affected. According to Tom Arnold, the Chief Executive of Concern Worldwide: "Undoubtedly, overall funding - from business, private individuals and government sources - will come under pressure. The world has changed in the past week, and we're really in uncharted waters. Just this week at headquarters we were having a very tough conversation about some difficult choices in 2009."

Other aid agencies are also reacting. Oxfam is contemplating budget cuts of 10-15% next year, while even UN agencies and the International Federation of Red Cross and Red Crescent Societies are making contingency plans.

Michael Kleinman
Humanitarian Relief -