Fearing a Drought of Aid

Flood victims in Haiti carried sacks of rice from international aid organization CARE. Bush has argued against cutting such aid amid the global financial crisis. (By Ariana Cubillos -- Associated Press)

Years of global plenty ushered in a period of generosity in the early 2000s, with wealthy countries forgiving billions of dollars worth of debt in poor countries and scaling up direct foreign assistance. Yet those increases had begun to level off even before the crisis erupted. Excluding debt relief, aid from the world's 22 richest countries edged up only 2.4 percent in 2007, to $94 billion.

If history is any guide, poor nations could be hit hard as wealthy countries cope with financial bailouts and potential downturns. Stung by a stock market and real estate crash, Japan slashed aid by some 44 percent between 1990 and 1996. Although Tokyo ramped up assistance in subsequent years, it still is spending less on foreign aid now than it did in 1990, according to David Roodman, a researcher at the Washington-based Center for Global Development.

After a financial crisis struck a number of Nordic countries in 1991, Norway slashed foreign aid by 10 percent and Sweden by 17 percent. Finland, which underwent a harsher economic contraction than its neighbors, cut foreign aid about 62 percent.

"I would not be surprised to see global aid flows fall by a quarter or a third," Roodman said.

Aid to countries Washington sees as less strategically important, and whose needs are relatively less dire, is perhaps most vulnerable. Few think, for instance, that financial assistance to Iraq and Afghanistan will suffer. Funds to fight AIDS in Africa may also be relatively safe, given bipartisan support for the recent legislation that gave those programs $50 billion over the next five years.

But a host of recipient nations that have made strides to improve their economies and strengthen their political systems may fall victim to their success, with wealthy countries now seeing them as better able to withstand cuts. In July, the Senate appropriations committee voted to dramatically scale back a funding request for new programs at the Millennium Challenge Corp., established in 2004 by the Bush administration to reward countries meeting strict requirements of transparency, sound economic policy and good governance.

But the agency has faced criticism for disbursing less than 10 percent of the $6.3 billion it has received to fund projects in 18 countries. John Danilovich, who leads the agency, defended it, saying the crisis has made it "even more important" that foreign aid not be disbursed haphazardly. "I think the global financial crisis will force governments to look at the effectiveness of their aid," he said, "as well as the amount of aid."