XV. Official Development Assistance ^1/

Canada’s International Assistance Envelope (IAE) funds both traditional overseas development assistance (ODA) to low- and middle - income developing countries and aid initiatives for the transition economies of central and eastern Europe and the former Soviet Union (FSU). Historically Canada has maintained a diverse ODA program, with an emphasis on poverty reduction; 128 countries received some form of assistance in 1994-95. Since 1989, Canada has devoted roughly 5 percent of its total aid budget to the transition economies in the FSU and Europe, although many of these countries have higher per capita incomes than other recipients of Canadian aid.

Budget-wide austerity measures led to a 6 percent decline in traditional ODA expenditures (defined on an OECD Development Assistance Committee (DAC) basis), as funding dropped from US$2,515 million in 1992 to US$2,373 million in 1993 (see tabulation below). An additional US$113.4 million in aid was designated for transition economies. As a result of reduced appropriations, ODA as a share of GDP fell to 0.45 percent in 1993 (see tabulation below), down slightly from 0.46 percent in 1992 and from peak aid levels of 0.50 percent in 1988. The Government’s 1994/95 budget called for a further 2 percent nominal cut in the IAE (in Canadian dollars).

Official Development Assistance ^2/

Official Development Assistance ^2/

	1988	1989	1990	1991	1992	1993
	(In billions of U.S.dollars)
Total	2.3	2.3	2.5	2.6	2.5	2.4
Bilateral	1.6	1.6	1.7	1.8	1.7	1.6
Multilateral	0.7	0.7	0.8	0.8	0.8	0.8
	(In percent of GDP)
Total	0.50	0.44	0.44	0.45	0.46	0.45
Bilateral	0.34	0.30	0.30	0.31	0.31	0.30
Multilateral	0.16	0.14	0.14	0.14	0.15	0.15
	(In percent of total ODA)
Total	100	100	100	100	100	100
Bilateral	67	68	68	69	68	67
Multilateral	33	32	32	31	32	33

View Table

Official Development Assistance ^2/

	1988	1989	1990	1991	1992	1993
	(In billions of U.S.dollars)
Total	2.3	2.3	2.5	2.6	2.5	2.4
Bilateral	1.6	1.6	1.7	1.8	1.7	1.6
Multilateral	0.7	0.7	0.8	0.8	0.8	0.8
	(In percent of GDP)
Total	0.50	0.44	0.44	0.45	0.46	0.45
Bilateral	0.34	0.30	0.30	0.31	0.31	0.30
Multilateral	0.16	0.14	0.14	0.14	0.15	0.15
	(In percent of total ODA)
Total	100	100	100	100	100	100
Bilateral	67	68	68	69	68	67
Multilateral	33	32	32	31	32	33

The Government has reconsidered its aid priorities in the context of its commitment to achieve fiscal consolidation. The Government’s 1995/96 budget calls for a 15 percent nominal cut in the IAE in fiscal 1995/96 relative to the 1994/95 baseline (in Canadian dollars). Following a spending freeze in 1996/97, the budget recommends an additional 7 percent nominal cut in 1997/98. However, the Government continues to maintain a long-run goal of dedicating 0.7 percent of GDP to ODA, as agreed at the 1992 Rio Summit.

A joint Parliamentary committee, which was given the task of reviewing Canada’s foreign policy, recently reaffirmed the focus of Canadian foreign aid on poverty reduction and basic human needs and recommended that Parliament adopt legislation defining the guiding principles for international assistance. ^1/ The committee also recommended maintaining the level of Canadian ODA at 0.4 percent of GDP until the fiscal situation improved. Further recommendations included increasing the support for basic human needs from less than 20 percent to at least 25 percent of ODA; reducing the share of Canadian tied aid in tandem with other donors toward a goal of 20 percent of ODA in 2000; and focussing Canadian aid on a smaller number of countries, with continued emphasis on Africa. The committee proposed to improve the effectiveness of ODA outlays by moving from an all-grant aid program to a mixture of grants and loans and by extending the Generalized Preferential Tariff (GPT), under which goods from developing countries enter Canada duty-free or at rates one-third below MFN rates. ^2/

Canada recently has devoted an increasing share of its traditional ODA funds to multilateral aid, while reducing bilateral assistance; in 1993, 33 percent of Canada’s ODA budget went to multilateral organizations, slightly above the OECD average. Simultaneously, the regional allocation of Canada’s bilateral aid has shifted from its historically strong focus on sub-Saharan Africa and Asia (which both typically received 40 percent of bilateral funds) toward a greater emphasis on countries in the Caribbean and Latin America.

Bilateral aid, administered by the Canadian International Development Agency (CIDA), has concentrated increasingly on supporting economic reform through balance of payments support, poverty alleviation programs, and policy development assistance. Canada currently requires that 50 percent of aid to sub-Saharan Africa and 66 percent of aid to other developing countries be tied to purchases of Canadian goods in the form of lines of credit for fertilizer, oil, industrial goods or food, as compared to a DAC average share of tied aid of 41 percent. Another notable trend in Canada’s bilateral aid is the rising share channeled through nongovernmental aid organizations (NGOs).

Canada treats aid to transition economies as distinct from traditional ODA, both because the major recipients have relatively high incomes compared to other beneficiaries of Canadian aid and because the aid typically focuses on institutional reform rather than humanitarian objectives. Canada has defined three objectives for its funding to these countries: promoting transition to market economies, supporting democratic development, and increasing Canadian trade and investment links. The largest share of the aid goes to Russia and the Ukraine, with Poland, Hungary, and the Czech Republic receiving substantial technical assistance. Smaller components of the aid program for transition economies include humanitarian aid; multilateral programs administered by the EBRD, IBRD, and OECD; the Canadian Nuclear Safety Initiative; and Renaissance Eastern Europe, a cost-sharing program to help Canadian firms develop trade and investment opportunities in transition economies.