Financing for Development to Reach the MDGs; the Experience in the Arab Region

Article excerpt

Across the Arab region, progress in achieving the Millennium Development Goals (MDGs) has been uneven. Arab countries with higher income per capita stand with better prospects for achieving the Goals than their low-income counterparts. Overall, progress has been achieved in youth literacy, gender equality and child mortality. However, poverty is still widespread, especially in the rural areas of Djibouti, Mauritania and Yemen. Hunger is a continuous threat in countries such as Somalia, where malaria and tuberculosis are still prevalent, as well as in Comoros, Djibouti, Mauritania and Sudan.

The modest progress recorded by many Arab countries on the MDGs is mainly attributed to the absence of good national policies and to the insufficiency of resources allocated to these programmes, while other nations, such as Iraq, Palestine and Somalia, are hardly making any progress due to armed conflicts.

Domestic resources. Arab countries also rely on domestic resources, mainly taxes and oil revenues, to finance the increasing demand for public services and to enlarge the scope of the social security net. Their Governments dedicate, on average, about 32 per cent of their spending to social programmes and 18 per cent to public services. Some have made remarkable achievements in realizing the MDGs, thanks to targeted government expenditure in the form of subsidies, cash and in-kind transfers to the poor, including the direct provision of public services, such as safe drinking water, sanitation, education, health care and housing.

Public-sector employment has also been used as a tool to redistribute income to the needy and as a means of alleviating unemployment that is directly linked to poverty and social exclusion. These programmes, however, are straining the resources of many low-income Arab countries. In many cases, great inefficiency and poor administration are causes of failure in achieving declared targets. This is especially true for food and energy subsidies that tend to be diverted to those who do not need them.

There are informal channels of social protection that are widely used in the Arab countries, including charitable foundations and non-governmental organizations (NGOs). These institutions have, to a large extent, contributed to the fight against poverty. However, they need to shift from short-term income support tools to the creation of productive and sustainable jobs for the vulnerable people in society.

International development aid. Official development assistance (ODA) is vital to the economic and social development of poor countries, especially when it can be targeted towards the achievement of the MDGs. Aid to the region has not, however, been sufficient since most middle-income Arab countries are not considered a priority in the allocation of international development assistance. On the other hand, this allocation has often been based on the political priorities of donors, which excludes many disadvantaged countries.

Development aid to the region in 2005 totalled about $29 billion, representing some 27 per cent of the net ODA flowing to all developing countries. Historically, Egypt, Jordan, Morocco, Palestine, Sudan and Yemen have been the biggest ODA recipients--although these figures are blurred by the substantial amounts of ODA dedicated to the reconstruction of Iraq. During most of the 1990s and until 2004, the net annual ODA to the Arab region ranged between $5 billion and $11 billion. Arab intra-regional aid contributed a high percentage of the total.

Intra-regional development aid. The cumulative net ODA provided by Arab donors (individual countries and financial institutions) since 1970 through the end of 2006 amounts to $128 billion. During the period 2000-2006, the average annual net disbursed ODA was estimated at over $2 billion. In 2006, the region's share in the total amount of financial resources committed by Arab donors was about 65 per cent. …