October 24, 2011

Donors have promised, and largely failed, to truly untie aid. International development spending continues not to go to those who need it the most. But an experiment in Afghanistan is showing that aid money spent locally is a highly effective way to create jobs.

As the Guardian has reported, tied aid remains a stubbornly persistent component of international assistance. According to the European Network on Debt and Development (Eurodad), a network of 54 NGOs from 19 countries, at least 20% of all bilateral aid remains formally tied.

But that number masks the larger amount of aid that is informally tied. Even when development agencies are free to spend their money wherever they want, they rarely spend it in the country that is being assisted. It is not spent in Liberia or Timor-Leste, but rather in international logistics hubs like Brindisi and Singapore.

In Afghanistan, donors have disbursed more than $36bn in aid over the last 10 years. But recent economic research, conducted by the Peace Dividend Trust on behalf of the British government, revealed that even when the aid was technically untied, only 37% of it entered the local economy. Most of the aid spending went elsewhere: to fly in foreign experts, or provide bottled water and building materials. The money might have been spent on Afghanistan, but it was not spent in Afghanistan.

Read full report here

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