CCCI - CCIC
ACCUEIL RECHERCHE PLAN DU SITE CONTACT ENGLISH

Resources

Find out more. Do more. Stay connected.

About us What we do Working Groups Media RESSOURCES Members
CCIC Publications
Employment
Archives
Links


IMPRIMER

The Federal Budget Plan 2000
CCIC’s Analysis of International Commitments

Highlights

  • Canadian ODA, at 0.25% of GNP for 2000/2001, continues on a downward trend despite very modest increases to the International Assistance Envelope.
  • Only very modest new resources are available to CIDA for new program spending in the next three years.
  • Canada joins the UK and the United States in promising to cancel 100% of bilateral debts to the highly indebted poor countries (HIPC) and makes a substantial contribution to the IMF / World Bank Trust Funds for multilateral debt cancellation

Canadian ODA Continues on a Declining Trend

Despite the Prime Minister’s pledge to increase Canadian foreign aid, made during his visit to Senegal this past November, Budget 2000 does nothing to reverse the declining trend in Canadian Official Development Assistance (ODA). In Senegal, the PM suggested that "we are a fortunate nation, and we have to share with others" and that foreign aid should increase as fast or faster than the economy grows. Budget 2000 reneges on this commitment and demonstrates the narrow vision that this government has for Canada’s international role in the 21st Century.

The international measure of Canada’s generosity is the proportion of our Gross National Product that we commit to ODA each year. Budget 2000 drops any mention of the internationally agreed target of 0.7% of GNP devoted to ODA. From a high of 0.5% in the early 1990s, Canada’s ratio reached a low of 0.30% in 1998 and is projected to fall to 0.25% in 2000/01 and to 0.24% by 2002/03.

Canadian NGOs have been seeking a planned re-investment in human development for poverty reduction with a growing ODA budget reaching 0.35% of GNP by 2005/06. Not only has this government not reversed the declining trend of the 90s, the proportion of our economy that we are prepared to share with developing countries will continue to decline, despite an economy that according to the Minister of Finance "is among the strongest of the Group of Seven (G7) nations" (Budget Speech 2000).

Internationally Canada is positioned no longer among the most generous donors, dropping from 7th position among 21 donors in the early 1990s to 11th position in 1998. The recently released 1999 annual Report of the OECD’s Development Assistance Committee (DAC) analyzes the overall drop in donor ODA effort since 1992. Up until 1998, the cumulative drop in Canadian aid efforts has been more than US$5 billion. Only Italy, Finland, Sweden and France have made cuts proportionately deeper than those made by Canada. Budget 2000 will only accentuate this "Development Deficit" for Canada in the coming years.

Canada has been a rhetorical leader among donors in supporting DAC specific targets in basic education, primary health, and cutting by half the proportion of people living in absolute poverty by the year 2015. Budget 2000 gives every indication that Canada, in the lead-up to the 5-year review of the UN Summit on Social Development, will renege on its share of resources to meet these targets. For example, OXFAM International suggests that donors need to contribute an additional US$8 billion annually over the next 15 years if the global community is to achieve the stated goal of basic education for all by 2015. Canada’s share of this target would have been 4% or $325 million at the beginning of the 1990s. Less than half of what was cut between 1992 and 1998 would have met this goal. Budget 2000 may provide CIDA with a mere $57 million in resources for all new program initiatives in 2000/01.

What are the projections for CIDA and ODA for the next three years?

For the first time, Budget 2000 gives projections for the next three years (up to 2002/03) for Canadian ODA (see Table 1 below). According to the Department of Finance, CIDA’s budget will increase by $100 million in 2000/2001, $145 million in 2001/02, and $190 million in 2002/03. These amounts are in addition to the commitments made in the 1999 Federal Budget for the International Assistance Envelope.

In the 1999 Budget the Minister of Finance added $75 million to the 1998/99 IAE base of $1,911.2 for 2000/2001 and promised that this would be the base IAE for subsequent years. The Minister also added $50 million to the IAE base for 1999/2000. According to the Department of Finance, the new uncommitted resources for IAE in each year are the following:

1998/99 $1,911.2 million

1999/2000 $1,911.2 + $50 = $1,961.2 million

2000/2001 $1,911.2 + $75 + $105 = $2,091 million (only $100 of the $105 is available to CIDA)

2001/2002 $1,991 + $145 = $2,136.0 million

2002/2003 $1,991 + $190 = $2,181.0 million

But despite an increase of $125 million, a significant Budget move this year dramatically affects the new resources available to CIDA for new programming. In the past two Budgets, the Minister of Finance "pre-paid" dues to UN agencies into the previous fiscal year, in effect freeing these resources for new program initiatives in the current year. In Budget 2000, the Minister of Finance did not pre-pay any UN payments coming due in 2000/01. Therefore CIDA will have to find approximately an additional $68 million for multilateral programs from new resources available for the coming fiscal year.

No "pre-payments" sharply reduces the impact of the increase for CIDA’s budget for the next three years. These payments will now come out of the increases for CIDA in Budget 2000 and CIDA’s portion (unknown) of the $25 million difference between the increase in 1999/2000 and 2000/2001 from the 1999 Budget. Therefore resources for new programs in each of the next three years (assuming no internal reallocations of existing programs) are the following:

2000/2001 $25 + $100 - $68 = $57 million

2001/2002 $45 million

2002/2003 $45 million

The cumulative three year total of new resources after accounting for UN dues is approximately $300 million [$125 + $170 + $215 – (68 X 3) = $306 million].

CCIC was seeking at least $300 million for the International Assistance Envelope for 2000/2001 and (in addition to any resources committed to debt cancellation) as an urgently needed investment to meet Canada’s international commitments to poverty-oriented human development. We were looking for a timetable that added $300 million to each of the next 5 years (on top of a revised base each year). Our proposal would have seen a total of $1.8 billion added to the IAE over three years; Budget 2000 added $605 million, a third of the resources we sought.

CCIC has been strongly promoting a change agenda for CIDA to sharpen the focus on poverty reduction and improve the impact of our aid program. In recent months we have been encouraged by the interest that new leadership in CIDA has shown in many of the issues of this agenda. While money is not the most important factor influencing the success of this change process, we fear that the very limited new resources available will make it exceptionally difficult to undertake new poverty-focused initiatives and pilot new approaches.

According to the Budget documents, CIDA will be administering new resources ($100 million over four years, including 1999/2000) that the government has committed internationally for the Environment Trust Fund and other initiatives to counter climate change. Fifteen ($15) million of these funds will be directed to the controversial World Bank Carbon Fund. This Fund will allow industrial countries to reduce their needed investments to lower carbon emissions by investing in (cheaper) carbon reducing projects in the South, thereby, as some would argue, turning the atmosphere as a global common into a marketable commodity. (See an analysis of the Carbon Fund on the web site of Sierra Club Canada, http://www.sierraclub.ca/national).

On a positive note, the Budget also allocated for the first time $10 million in each of the next two years to support the human security agenda at DFAIT. It is expected that this may reduce behind-the-scenes bureaucratic conflicts with CIDA for CIDA resources to support DFAIT-initiated activities for human security.

Dramatic Increases in Canadian Defence Spending

While Canada’s commitment to long-term human development for the poorest countries received very modest levels of increased support, Budget 2000 provides $2.3 billion to the Department of Defence (of which $400 million is for Kosovo in 1999/2000). A highly disproportionate investment in Canada’s response to international conflict (almost three times the investment in the IAE for human development) is compounded by no indication that the government is prepared to review current defence priorities and assumptions (i.e. that Canada requires multi-purpose combat ready land, sea and air defence forces). CCIC supports the call by Project Ploughshares for a thorough review of Canadian defence priorities in support of our foreign policy priority to human security. Before making substantial investments in equipment and military capabilities, we need to be clear about those that are required for military missions for peacekeeping and that are appropriate to support humanitarian interventions.

Welcomed Support for Debt Cancellation but Short of the Jubilee Vision

The Budget 2000 document announces that Canada will cancel 100% of the debts owed to Canada (to the Export Development Corporation and the Canadian Wheat Board) for 19 of the highly indebted poorest countries (all that have debts outstanding to Canada). While not the full Jubilee list, this change in policy is a credit to the strong Jubilee Campaign launched a year ago by Canadian Churches and non-governmental organizations. It is a substantial improvement on the short list of countries that the Prime Minister announced in March 1999. However, these countries will have to continue to jump through many hoops before they realize the benefits of Canada’s debt cancellation. The primary hoop remains linked to the enhanced HIPC agreement reached at the IMF/World Bank meetings in September 1999 – i.e. three years of rigorous structural adjustment performance by the country seeking relief. These conditions may, in the end, undermine the long-term benefits of resources freed by cancelled debt to meet the basic education and primary health care needs of the poor.

Bilateral debt cancellation will not have any budgetary implications for the IAE; the full 100% will be written off against non-budgetary provisions (approximately $1 billion). The actual cancellation will take place in the year that the country reaches its completion point with HIPC. The full amount will be included in ODA in that year, thereby increasing net ODA and affecting the ratio of ODA to GNP (most likely in 2002 and beyond). Canada also made a substantial contribution ($175 million) to the HIPC Trust Funds at the IMF and World Bank. Canada had resisted until recently making these contributions arguing that the resources existed within the IMF/World Bank to cover much of the cost of multilateral debt cancellation. The $175 million is being charged against the 1999/2000 IAE and will have no impact on 2000/2001.

Internationally donors have been promising informally that debt cancellation will be additional to meeting their obligations for ODA for long-term development. In Canada’s case there is much to commend in the Budget for bilateral debt cancellation, but is it only coincidence that money for HIPC Trusts Funds(and $$35 million for the Environment) is found in 1999/2000, but there is no money to pre-pay UN dues for CIDA?

Table 1: CCIC Projections for ODA
(Based on Information from the Department of Finance)

1999/2000

2000/01

2001/02

2002/03

Millions of Cdn $

       
Base IAE 1,961.0 1,991.0 1,991.0 1,991.0
Increase to CIDA      100.0    145.0    190.0
Sub-Total: Revised IAE 1,961.0 2,091.0 2,136.0 2,181.0
 
Debt Reduction Facility in IMF and World Bank    175.0      
 
Environment Trust Fund and Climate Change     35.0     10.0     25.0     30.0
 
Human Security (DFAIT) *       10.0     10.0     10.0
 
Total 2,171.0 2,111.0 2,171.0 2,221.0
 
Adjustments to the IAE * 302.0 278.0 287.0 278.0
 
Estimated ODA 2,473.0 2,388.0 2,448.0 2,498.0
 
Estimated GNP 912,800.0 964,100.0 1,011,500.0 1,062,100.0
 
ODA to GNP Ratio 0.27% 0.25% 0.24% 0.24%

* The International Assistance Envelope needs to be adjusted to take account of bilateral debt relief, support for refugees for their first year in Canada (in 1999/2000 an estimated $20 million has been added for Kosovo refugees in Canada), imputed costs for students from the South studying in Canada, and removing countries in transition that are not recognized as eligible for ODA (Russia etc.). The allocation to DFAIT for Human Security has been counted for ODA at 50% as it is not clear the purposes of these allocations

 

TOP
 
  • FLASH
  • Employment
  • 10-point agenda
  • Istanbul Principles
  • Code of Ethics
  • Become a Member
  • Who's who
  • MEMBERS SPACE
  • CCIC Publications
  • Employment