Billions in Donor Aid: Where is the Value for Money?
Liberia is a low income country heavily reliant on donor aid. This tiny West African nation receives millions of dollars in donor funding every year. In 2010, for instance, Liberia was the 36th largest recipient of official humanitarian aid. The total official development assistance (ODA) for the year was US$488.1m, constituting an equivalent of 62.4% of the country’s Gross national Income (GNI).
Just last week, the outgoing Country Representative of the United Nations Children's Fund (UNICEF), Isabel Crowley disclosed that her agency had spent a total of US$30 million in 2012 on education, child protection and healthcare under its country program in Liberia and that another US$40 million would be spent in 2013.
In spite of all this donor assistance, an estimated 1.3 million of Liberia’s 3.5 million people are living in poverty. Nearly half of these people live in extreme poverty. This paper looks at the level of extreme poverty in Liberia amidst strong donor support and foreign aid between the period of 2006 and 2010.
Donor Aid in 2006-2010
Between 2006 and 2010, five years into President Ellen Johnson-Sirleaf’s first term, the Liberian Government reportedly received over US$2.5b in humanitarian aid and other official development assistance (ODA), excluding debt relief, from 16 government donors. The top ten government donors include the European Union (US$111.6m), the United States (US$77.8m), Germany (US$46.6m), Sweden (US$42.5m), Switzerland (US$29.8m), the United Kingdom (US$26.7m), and France (US$23.3m). Others are Ireland (US$20.1m), Netherlands (US$18m) and Saudi Arabia (US$17.4m).
During this period, donors reportedly channeled humanitarian aid and ODA through multilateral organizations (US$155.3m), NGOs and CSOs (US$143.5m), the Red Cross Movement (US$16m), the public sector (US$69.7m), and others (US$45.2m). Donors also reported that they spent US$381.6m on public service provision, US$426m on humanitarian aid, US$854.2m on governance, peace and security, US$440.1m on other programmable aid, and US$506.2m on other non-programmable aid.
In President Sirleaf’s first year in office in 2006, donors reported a total ODA of US$287.9m. The following year the ODA increased to US$709.5m. The ODA then fell slightly to US$668.4m in 2008 and US$388.4m in 2009. However, the ODA increased to US$488.1m in 2010. That year the ODA constituted an equivalent of 62.4% of Liberia’s Gross national Income (GNI), making the country the 36th largest recipient of official humanitarian aid at the time.
To date, there is no visible value for money in spite of the billions of dollars in donor aid. Sadly, Liberians continue to live in abject poverty!
In 2008, Liberia participated in the Heavily Indebted Poor Countries (HIPC) initiative and qualified for debt relief after reaching the completion point in 2010. Accordingly; in addition to providing humanitarian aid and other official development assistance (ODA), donors waived nearly $5 billion of the country’s international debt.
The United States became the first country to grant debt relief to Liberia, waiving the full $391 million owed to it by Liberia in early 2007. The G-8 headed by German Chancellor Angela Merkel provided $324.5 million to paying off 60% of Liberia's debt to the International Monetary Fund. The World Bank and IMF agreed to fund $1.5 billion in writing off the Liberia's multilateral debt. The Paris Club agreed to cancel $1.26 billion while independent bilateral creditors canceled an additional $107 million.
The Liberian government also wrote off an additional $1.2 billion in foreign commercial debt in 2009 in a deal that saw it buy back the debt at a 97% discounted rate through financing provided by the International Development Association, Germany, Norway, the United States and the United Kingdom.
Extreme Poverty amidst Strong Donor Support
In spite of all the debt relief and donor assistance, Liberia remains extremely poor and fragile with a high vulnerability index score. The country is one of ten Sub-Saharan African countries ranked as poorest in the world, according to the Multidimensional Poverty Index.
The 2007 Core Welfare Indicator Questionnaire (CWIQ) puts the percentage of people living in extreme poverty (living on less than a dollar a day) at 63.8%. In absolute terms, this means that the proportion of the population living below the poverty line is 1.7 million, with 1.3 million people or 48% living in extreme poverty.
The 2010 Millennium Development Goals Report states that Liberia is unlikely to achieve the targets set for eradicating extreme hunger and poverty by 2015 (Goal 1). Worse still, the American business magazine, Forbes ranks Liberia 13th among the saddest countries in the world.
Exacerbating the situation also is the very high rate of unemployment. The Ministry of Labor’s 2010 Annual Report places the country’s unemployment rate at more than 95%, with the private sector employing fewer than 70,000 people. Other sources indicate that about 32,000 people are employed in the public sector, bringing the total number of people employed in Liberia to less than 100,000.
One reason for the extreme poverty in the country amidst strong donor support is the institutionalization of corruption and misuse of fund as an accepted practice. Then there is also the issue of transparency and accountability. Donors and their chosen NGO recipients are guilty of this corrupt and unethical practice, as is the government itself.
One had thought that the availability of billions of dollars in donor aid and debt relief would contribute significantly to the reduction of poverty in Liberia. In spite of the billions of dollars in debt relief and donor assistance, the country remains extremely poor and fragile. The number of people living in extreme poverty presents a paradox of having massive donor aid in the tiny war-ravaged and under-development West African nation. Simply put, there is no value for money. For a country still recovering from the effects of a devastating civil conflict, this is totally unacceptable.
Liberians expect transparency and accountability from donor countries. Liberians also expect transparency and accountability from their president who, it must be said, is a former executive of a number of reputable donor institutions and whose parents were also born into poverty.