Economy & Development

Jumble of Figures: How much money came out of Tokyo?


The Tokyo conference on Afghanistan is over. The participating donors came up with pledges of US$16 billion in development aid (1) – but pledges not always translate into money transfers (and aid effectiveness is another issue). My AAN colleague, Kate Clark, has already rightly pointed out in her 8 July blog that money alone cannot stabilize a country(2). With this caveat registered, Thomas Ruttig, a senior analyst at AAN, tries to make sense of the amount of money (apparently) on the table.

Four billion US Dollar annually (or, more precisely, 3.9 billion, according to some sources) for the first three years of what his government describes as a period of transformation from 2015 to 2025’ – that is the sum that President Hamed Karzai said he would be asking for at the Tokyo conference. This money is supposed to help minimising Afghanistan’s expected post-2014 ‘financing gap’. This gap, according to the World Bank, is likely to be 25 per cent of GDP by 2021/22 and may be even higher in some of the intervening years.
After the conference concluded yesterday it was announced that Afghanistan got the pledges – 16 billion in development aid over four (not three) years. This is said to be separate from military aid that already had been pledged at the Chicago NATO summit in May this year.

But the press reports, such as by the AP and the BBC, sound vague. They leave it unclear which four years the US$16 billion is supposed to cover. Checking the conference’s main document, the Tokyo Declaration, particular its clause 12, seems to indicate that these four years have already begun. The pledges seem to be meant for 2012-2016, not for the first years of the transformation period (2015-25) as originally intended by the Afghan government.(3) It also cannot be excluded that pledges from Chicago have made it into the Tokyo statistics again. This would not be the first time. Already in the past some donor country governments have pledged the same sum twice, including not yet disbursed parts of earlier pledges into new ones.

One reason for this is that most parties involved are interested in telling a success story about aid. The Afghan government wants to show its population how successful it has been in raising funds to address some of the most urgent social and economic needs that still make Afghanistan one of the poorest countries of the world.(4) For the donors, pledging impressive sums has traditionally been presented as a sign of progress, both to aid recipients and to the own voters in their own countries. But this emphasises input over output.

The urge to put some lipstick on the statistics also has to do with the pressure that the US government is known to put on its smaller NATO allies to come up with new contributions. As the Afghan government’s main partner (and guarantor of survival), it is now keen to withdraw most of its troops and minimize costs, and therefore also needs to project to its voters and to Congress that some measures have been taken to prevent Afghanistan from collapsing after 2014, both militarily and financially. (There is less attention to the political side.)

Apart from the valid question of how much actual new money has been pledged in Tokyo, there are at least two other questions: how much of it will be really transferred to Afghanistan? And how much will that contribute to an improvement of Afghan livelihoods, particularly those who have not profited from Afghanistan’s impressive growth rate of around 9 per cent since 2002.(5)

That there is, and has been from the beginning, a gap between pledges and disbursements of money even escapes the quality media. So the AP informs us that, ‘Afghanistan has received nearly $60 billion in […] aid since 2002’. No, it hasn’t. The 60 billion is just the sum of all pledges from 2002 to 2013; overall disbursement, including 2011, has been far lower, 42.4 billion.(6)

According to the report by Global Humanitarian Assistance (quoted already in footnote 6), ‘at the end of 2009 the United States and India had yet to deliver 60% of the amounts that they pledged for the whole period up to 2013’. (To add something positive, according to the same source the EU, Germany, Sweden and the Netherlands had ‘disbursed more than they pledged’ at the end of 2009.)

Not only that far less money is really spent than pledged, the aid money transferred to Afghanistan also is spent rather ineffectively. Already in 2008, Oxfam had warned about this:

‘An estimated 40% of the money spent has returned to rich donor countries such as the US through corporate profits, consultant salaries and other costs, vastly pushing up expenditure.’

In its last report before Tokyo, the World Bank confirmed this trend. It states that the ‘overall local impact from donor aid’ to Afghanistan is ‘38 per cent’ (p 38, quoted from a 2008 study by the Peace Dividend Trust).

‘In other words, only 38 cents of every aid dollar spent in Afghanistan actually reaches the economy through direct salary payments, household transfers, or purchase of local goods and services. […] Much [aid] either never comes in or flows directly out through contracting international providers of goods and services, imports, and the expatriation of profits.’

And it is even getting worse, again according to the World Bank report (p 39):

‘This study [by the Peace Dividend Trust], however, did not consider security spending. It is estimated that the domestic content of aggregated aid flows is only about 14–25 per cent.’

The ‘domestic economic content’ (ie the amount which is spent and stays in Afghanistan) of ‘security-related’ aid in 2010/12 (such as that channelled through PRTs which is now to be phased out) was below that of civilian aid – lower by more than 30 per cent. The ‘domestic economic content’ of aid, both military and civilian, when channelled through the Afghan government’s budget, however was far higher (90-95% and 55-60%).

There are three main conclusions from all this. First, as our guest author Anja de Beer had already predicted in her 7 July blog, we still are not sure what the figures that came out of Tokyo mean in real new money. Governments should very quickly put details on the table about what they really have pledged, and for which periods. Second, the history of the pledge/disbursement gap makes it unlikely that the promises from Tokyo will be fully made good on. This calls for pressure on donor governments, particularly by Afghans, both government and non-government, and their real allies abroad, first of all civil society actors who have been engaged in Afghanistan for a long time and will continue to do so. Third, if this pressure can be built up, it also needs to address the effectiveness ratio of the aid. That aid channelled through the Afghan government’s budget has had a higher effect so far, is theoretically a strong argument for Karzai’s demand to have more money go directly into Kabul’s coffer.

But there is also the counter-argument: the so far dismal performance of many Afghan ministries in spending their development budgets (read about this in our earlier blog here). It is Afghans, too, who play a role in the poor delivery of aid, by accepting dodgy sub-contracts, setting up quasi-NGOs that are nothing more than façades for for-profit companies, by condoning and being involved in networks of nepotism etc. As the Afghan proverb goes, when you point your finger at someone, four fingers always point at yourself – and that is true in all directions.

(1) That is more or less what was expected before the conference started: ‘Donors to pledge $15 billion at Tokyo Afghan meet’, AFP had reported, referring to the Japanese news agency Kyodo which, surely, had been briefed by the host government.

(2) Read this blog here.

(3) This might have to do with domestic requirements in some donor countries. In Germany, for example, the government does not allow to make pledges beyond 2016. Afghan Finance MInister Omar Zakhilwal confirmed that the pledges are for 2012-15.

(4) According to the Afghan government’s draft paper for the Tokyo conference, ‘7.4 million Afghans cannot get enough food (…) and an additional 8.5 million are on the borderline of food insecurity.’ That’s more than half the population. And in its position paper for the recent Rio +20 summit (dated 16 June), you can read: ‘Only 10 per cent [of the] rural and 30 per cent [of the] urban populace have access to regular energy supplies’, that ‘Afghanistan has the lowest access to safe drinking water (27%) and sanitation (5%) in the world’ and that on the gender-related development index its is the ‘second-lowest in the world’.

(5) Growth rates are average figures, anyway, and, in Afghanistan’s case, do not reflect the growing social gap between, let’s say, those who have purchased cottages on Palm Jumeirah, Dubai and those 43 per cent of returnees who, according to an IRC report (p 2), had not reintegrated into their former communities in Afghanistan by 2011 ‘and had difficulty making a living, obtaining land and shelter, or accessing basic services’.

(6) Between 2002 and 2009, just US$26.7 billion had been disbursed, according to Lydia Poole, Afghanistan: Tracking major resource flows 2002-2010, Global Humanitarian Assistance, January 2011, p 3, a report also quoted in the World Bank’s pre-Tokyo report. According to the same World Bank report, in (the Afghan financial year) 2010/11 disbursements of 15.7 billion were added (p 28).

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Thematic Category: Economy & Development