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CIAO DATE: 04/05/07
USAID Revisited
by Raj Kumar
A new political consensus has taken hold in Washington, with both major political parties, both houses of Congress, and the White House all in agreement that foreign assistance is critical to American foreign policy interests. As a result, foreign aid has tripled in the past several years. At the lowest point in the 1990s, less than $7 billion was allocated annually for foreign aid; in 2004 the number reached $19 billion, and 2005 and 2006 appropriations are set to continue the upward trend.
As U.S. foreign aid has grown, so too has fragmentation in the management and delivery of that aid. More dollars are increasingly spread across more programs, making coordination of U.S. foreign aid a growing challenge. Whereas the U.S. Agency for International Development (USAID) once managed nearly all aid funds, today at least forty foreign aid programs are administered in nearly every agency of the U.S. federal government. While USAID is still the main conduit for foreign aid, it is no longer the dominant force it once was.
The result of this proliferation of foreign aid programs and the fragmentation of U.S. foreign aid is difficult to measure because it is a relatively new phenomenon. Empirical evidence has shown that this fragmentation of foreign assistance in general creates inefficiencies and a lack of cohesive focus. Those in the international development and humanitarian relief fields have long understood that aid coming from many sources, each with its own priorities and requirements, can be counterproductive, increasing transaction costs and imperiling aid effectiveness.
The new pro-aid consensus in Washington may be fleeting if taxpayers do not see results from the increased spending. Thus, it is imperative to develop a coherent U.S. foreign aid policy that unifies the management of all aid funds, reduces the number of programs, lowers the transaction costs of aid, and ensures all aid works together to achieve the same strategic objectives set by Congress.
Raj Kumar is President and co-founder of The Development Executive Group.