Debt Relief

Balancing aid with needs

Tsunami funds could mean less elsewhere.

As pledges from the world’s governments neared the $4 billion mark yesterday for countries battered by the Indian Ocean tsunami, international aid officials and development experts voiced concern that the outpouring of generosity may deplete resources for other pressing needs in much poorer countries.

Despite the immense loss of life, economists widely agree that the tsunami’s economic toll appears modest and will not significantly affect growth, even in hard-hit countries such as Indonesia, because industrial areas, ports, and other major infrastructure were largely spared.

But the images of devastation have sparked an unprecedented amount of donations by governments and people – including million-dollar checks written by multinational corporations, gifts from rock groups such as Linkin Park and a benefit show being planned by Irish comedians. Heartening as that response may be, aid experts worry, the contributions will divert donor funds from lower-visibility but lethal problems such as the malaria, diarrhea and other preventable diseases that kill an estimated 6,500 Africans each day.

“There’s this enormous tendency to focus on the specific crisis at hand,” said Jamie Drummond, executive director of DATA, a group founded by rock star Bono to mobilize help for impoverished African nations. “There’s no moral difference between the extreme, day-in-day-out poverty in Africa and the situation in Asia. If we’re not careful, one will carry away from the other.”

With Australia announcing a $764 million package for tsunami-stricken countries yesterday and Germany increasing its pledge to $674 million, Jan Egeland, the United Nations emergency relief coordinator, sounded almost overwhelmed at the amount of aid coming in, which he could only estimate at somewhere between $3 billion and $4 billion. The International Monetary Fund also said yesterday that it would lend up to $1 billion to the affected countries, and some European officials have proposed giving those countries debt relief.

“At the moment, we are not able, really, to record all the generous contributions that we are getting,” Egeland said at a news conference. “They are coming so often, and they are so big that you really have to reconfirm many times to be sure that you’ve heard right, that the number of zeros were right.”

The current amount committed for tsunami relief and reconstruction is about 4 to 5 percent of the $70 billion that was spent on all foreign aid last year by governments and multilateral agencies such as the World Bank, noted Steven Radelet, a senior fellow at the Center for Global Development, a Washington think tank.

“That’s pretty big, so I think there is reason to believe that maybe at least some of this money could be productively used elsewhere,” said Radelet, who warned that “there is a real potential here for [the tsunami donations] to squeeze other aid, particularly in the U.S. foreign aid budget.”

Nobody knows how much money will be needed to provide emergency food and shelter for the tidal wave’s survivors and to rebuild roads, ports, buildings, power stations and other infrastructure that was destroyed. That question will be a prime topic at a summit underway this week in Jakarta, Indonesia’s capital.

But the consensus view among economists was reflected in a Jan. 3 analysis by Morgan Stanley, which noted that the damage is “largely confined to rural areas rather than the key economic and densely populated urban centers and industrial hubs.”

While the loss of life in Indonesia was the highest – the death toll there is estimated at 94,200 – the coast of Sumatra, where the wave inflicted its worst damage, is an area of mostly small-scale fishing and agriculture, accounting for just one or two percentage points of Indonesia’s annual economic output. Likewise, the national economies of Sri Lanka, India and Thailand are not expected to falter much, even though millions of people lost their livelihoods and areas such as the Thai resort Phuket have been ravaged.

Other natural disasters have set back nations’ economies to a far greater extent, such asthe widespread destruction of farmland in Honduras and Nicaragua caused by Hurricane Mitch in 1998.

The financial response to the tsunami nonetheless looks set to outstrip other such events, in part because of the scenes broadcast around the world of whole families being wiped out in a flash. “It’s what we see on our TV screens which is the driving force,” Egeland said, adding that in western countries, particularly Scandinavian nations, “it means also a lot that they have lost many of their own citizens.”

Egeland expressed gratitude for the international community’s generosity. But he noted that last year, only about $5.8 billion was spent on humanitarian crises in 100 countries such as Sudan, Congo, and Guinea – many of which are “tsunami-style emergencies, really.”

So while he was pleased that many donor countries have promised to add their tsunami relief funds to existing humanitarian contributions, if they fail to follow through, “it will be destruction for programs in Africa,” he said.

The pattern in many previous disasters is not encouraging in that regard, aid experts said. Governments often pledge huge amounts when crises are in the headlines and then fail to deliver anywhere near those sums, they said. An example is the 2003 earthquake in Bam, Iran, where officials report that only a small fraction of the more than $1 billion pledged was sent.

In an apparent reference to that pattern, Louis Michel, the European Union’s commissioner for development and humanitarian aid, yesterday warned at a news conference, “We have to be careful and not participate in a beauty contest where we are competing to give higher figures.”

Although the Bush administration has repeatedly said new aid donations and programs will notsiphon funds from existing U.S. assistance, the money given for tsunami relief will almost certainly add to pressure on Congress to trim the aid budget, said Radelet, who until recently worked in the Treasury Department.

Existing aid programs already face a severe pinch because of administration commitments to increase reconstruction funding for Iraq, provide more money for HIV/AIDS programs and create a program to reward poor countries that maintain good economic policies. “Congress will cut what’s left, and if on top of these other things, we get many hundreds of millions of dollars for disaster relief, what’s left is going to be cut even more,” Radelet said.

One possibility, said DATA’s Drummond hopefully, is that the sympathy generated for tsunami victims will spill over and help boost support for aid elsewhere.

“It’s a terrible tragedy, but it has helped explain to people in the West what happens when you live on the margins,” he said. “We can say, ‘There are a lot of other people living on the edge in Africa and Asia, and they need our assistance, too.’ ”

Paul Blustein, Washington Post, January 6, 2005

Categories: Debt Relief, Odious Debts

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