The Ghost of 0.7%: Origins and Relevance of the International Aid Target

Organization: Center for Global Development
Authors: Todd Moss, Michael Clemens

Foreign aid target of 0.7% of GDP is based on a discredited theory, using the wrong data; it should be scrapped – new report.

A Center for Global Development report republished today in a British edition by International Policy Network (opens PDF) demolishes the idea behind such a target. Key points of the report:

• The 0.7% target was formulated as a lobbying tool in the late ‘60s.

• The justification for the 0.7% “need” (so called “financing gap theory”) has lost all credibility.

• Even if the justification were sound, the figures on which it relies are forty years out of date. Recalculating with up-to-date statistics shows the “capital need” in poor countries has fallen to below 0.05% of national income in rich countries – less than 10 per cent of the aid that is currently being spent under the Labour government.

• The UK’s development policy should adapt to the changing circumstances. Tying spending to a discredited 40-year old target dreamt up by lobbyists makes no sense.

• Decreeing any aid spending target is backwards. Development aid should be focused on outcomes, not inputs.