The report, which can be downloaded at http://www.actionaidusa.org/Action Aid Real Aid.pdf says that some two-thirds of the money donated by the world’s wealthiest countries is in actuality “phantom aid” that is not genuinely available for poverty reduction in developing countries.

Phantom Aid is aid that is diverted from poor nations for other purposes within bureaucratic aid systems. This includes aid that is, among all G7 donations:

• not targeted for poverty reduction, estimated to be worth US$4.9 billion double counted as debt relief, totaling US$9.4 billion
• overpriced and ineffective- Technical Assistance, estimated at US$13.8 billion
• tied to goods and services from the donor country, estimated at US$2.7 billion
• poorly coordinated and with high transaction costs, estimated at US$9 billion
• too unpredictable to be useful to the recipient – lack of data prevents an estimate
• spent on immigration-related costs in the donor country; totaling US$1.5 billion
• spent on excess administration costs; totaling US$0.4 billion.

In total, says the study, at least 61% of all donor assistance from G7 nations is phantom aid, with real aid in 2003 accounting for just US$27 billion, or only 0.1% of combined donor income. Nearly 90% of all contributions coming from the United States and France are considered phantom aid.

Says ActionAid International USA Policy Analyst, Rick Rowden, “what this comes down to is that the US government is spending the tax dollars of well meaning Americans on bloated, inefficient, and manipulative programs that do little to help the poor. This is inexcusable when you consider that a child dies every two seconds from hunger somewhere in the world.”

The report argues that the share of real aid is unlikely to increase unless a system of genuine accountability, which balances the interests of donors, recipients, and the poor, can be put in place.

In addition, the report calls for a new International Aid Agreement that will hold donor countries accountable. This Agreement should include clear policies from developing countries on the criteria for accepting aid; mutual commitments from donor and recipient countries; national and international review forums; and new mechanisms for increasing the amount and predictability of aid to the world’s poorest countries.

Every day, 800 million people go to bed hungry, 30,000 children die of preventable disease, 100 million children are denied education. Three children a minute die due to unsafe water and sanitation. Approximately 30 children die a minute of hunger.

NOTES TO EDITORS

ActionAid International is a nonprofit organization bringing relief to some 13 million people in Africa, Asia, Latin America, and the Caribbean every year. Working hand-in-hand with 2,000 civil society partners, 90% of ActionAid's employees herald from developing countries.