Foreign Aid for Disasters: Never Enough

AIDThe destruction was colossal, the after-shocks harrowing. Nepal’s April 25th earthquake, measuring 7.8 on the Richter scale, leveled large parts of the country, reduced ancient city centers and mud-brick villages to rubble, and left much of the nation in chaos. More than 5,000 people died, more than 10,000 were injured, and  tens of thousands lost their homes. Nations from around the world rushed in search-and-rescue and medical response teams. The United States released $10 million in emergency funds; the UN, $15 million. But as survivors poured into relief encampments or huddled under plastic sheeting by the roadsides, there were reasons to question the aid response. Would it reach remote villages? Would it be enough?  And would it allow the nation to rebuild towards a sustainable recovery?

History is not encouraging. Between January 1970 and June 2008, there were 6,530 extreme events around the world, including floods, storms and earthquakes,  according to the data base  at  Belgium’s Catholic University of Louvain. If the international response to those catastrophes was often unpredictable and inconsistent,  it also tended to be meager, especially compared to the level of destruction. A review of 98 cases found that median aid flows to nations the year of a disaster increased 18% compared to the previous two years.  That amounted to a mere 0.25% of GDP and less than 3% of total estimated damages. Moreover, some of that assistance was not  new. It was simply reallocated by the donors from other sectors like infrastructure.

Many research papers in the past have focused on how U.S. aid generally (though not disaster aid specifically) favors nations where the United States has geo-strategic or political interests. In fact, there is little evidence to suggest that post-disaster giving by the US or other donor nations reflects such considerations. Nor is disaster relief offered  more to wealthy countries. Nations with large GDPs and large stocks of foreign reserves are less likely to receive help. But aid can be extremely limited. Donors do not significantly increase their official development assistance or reassign it from normal recipients to disaster-afflicted ones in the wake of a calamity. They do not rally their resources. And if countries expect large surges in giving after an earthquake, flood or storm, they are very often disappointed.

Equally problematic are the dramatic differences between aid commitments and    disbursement. The January 2010 earthquake in Haiti, for example, killed more than 220,000 and moved governments and multilateral organizations at a New York donor’s conference to pledge unprecedented amounts in relief. Haiti, the donors said, would “turn a corner” and “build back better” despite the immense loss of life.  But at the end of 2012, according to the office of the UN Special Envoy to Haiti, only 62% of the aid promised at the conference had been disbursed. Moreover, the nation had yet to recover.  Earthquake debris remained in the streets. Thousands of people continued to eke out an existence in tent cities, and the lingering effects of a cholera epidemic introduced into Haiti by UN forces were still being felt.

Gauging the efficacy of foreign assistance after a disaster is a tricky endeavor.  There is little documentation, for example, on whether it reaches the intended recipients and whether it supports the most promising projects. Uncertainties also exist about how to distribute it.  Should it be quickly handed over for rebuilding? Or should it be sequenced over time to avoid inflation? Should it rebuild what existed before? Or should it focus on technological innovations that reduce vulnerabilities and create more resilient communities? All these areas are ripe for research.

In the meantime, countries would be wise not to bank on the international community to rescue it after nature has struck.  The aid that does arrive is generally insufficient. It cannot substitute for the accumulated savings that can be spent on reconstruction when the world is upended. Nor can it replace disaster-reduction measures, like early warning systems and retrofitted infrastructure; effective insurance,  and carefully considered disaster management plans.

As the Nepalese pick through the piles of brick and wood that remain of their homes and try to imagine rebuilding the magnificent Buddhist and Hindu monuments and plazas that toppled in the earthquake and its aftershocks, they will look for the international community for respite.  Inevitably, however, they will be faced with a sober reality. International aid will arrive, and it may very well help.   But it will almost surely not be enough.

For more information: Foreign Aid in the Aftermath of Large Natural Disasters 

By: @eduardocavallo

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The Author

Eduardo Cavallo

Eduardo Cavallo

Eduardo Cavallo is currently a Lead Economist at the Research Department of the Inter-American Development Bank (IDB) in Washington DC. Prior to re-joining the IDB, Eduardo was a Vice-President and Senior Latin American Economist for Goldman Sachs in New York. Eduardo had already worked at the IDB as a Research Economist between 2006 and 2010. Before that he served as a research fellow at the Center for International Development (CID), a visiting scholar at the Federal Reserve Bank of Atlanta, and a member of the faculty at the Kennedy School of Government's Summer Program. In Argentina he co-founded Fundación Grupo Innova. Eduardo’s research interests are in the fields of international finance and macroeconomics with a focus on Latin America. He has published in several academic journals, and is the co-editor of the IDB book Dealing with an International Credit Crunch: Policy Responses to Sudden Stops in Latin America. He holds a Ph.D. in Public Policy and an MPP from Harvard University, and a B.A. in Economics from Universidad de San Andres (UdeSA) in Buenos Aires, Argentina.

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