Official Development Assistance or ‘phantom aid’

August 11th, 2006 at 12:43 Björn Hallberg

Global Issues: As much as half of Official Development Assistance aid may be considered “phantom aid”

Official foreign aid effectiveness is increasingly coming under scrutiny. It has long been criticized that much of foreign aid involves clever accounting, money that does not actually reach the poor, and less than optimal use of resource, such as expensive consultancy from donor countries when locals could do it better, for much less. Furthermore, aid is often tied to restrictive conditions and the interests of the donor, which do not necessarily reflect the agreed priorities of combating global poverty and achieving sustainable development. The international development agency, Action Aid, calculates that around a half of all foreign aid is such “phantom aid.” The foreign aid section on this site has been updated with a pie chart breaking down this foreign aid diversion, plus additional details.

And once again, the U.S. is leading the world by its bad example of course. The issue of “phantom aid” is worth remembering the next time someone argues that foreign aid is doing nothing to alleviate the problems of the developing world. Seems like classic problem-reaction-solution to me. Make sure foreign aid doesn’t work and then labour to cut it altogether.

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