The Lean Years: Austerity’s Challenges and Opportunities for Development

The Lean Years: Austerity’s Challenges and Opportunities for Development

With economic turmoil in Europe and concerns over budget deficits and debt in the United States, public spending is receiving heightened scrutiny in major foreign assistance donor countries. Austerity has become the preferred route for many of them, leading the development community to wonder how austerity will affect development and how long this period will last.

Austerity in donor countries is already affecting development in a number of critical ways. It is reducing levels of foreign assistance overall and prompting many donors to re-evaluate their aid programs and development strategies. This period will also likely see greater importance for the role of nontraditional and emerging donors as well as a reliance on the private sector as an engine of growth. With both the quantity and quality of aid under pressure, it is more important than ever for both donors and recipients to find new ways of operating.

While austerity poses challenges for donors and recipients alike, it also creates opportunities. Decreased funding will challenge donors to increase aid effectiveness, cooperate with existing and new donors, and find new approaches. At the same time, it offers opportunities to improve the quality of aid and to deepen the spirit of partnership that is emerging among donor and recipient countries. It could also result in developing countries further taking the reins of their own development.

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