The Politics of Poverty

Ideas and analysis from Oxfam America's policy experts

Country-to-country cash and corruption: Differentiating CIA payments from poverty-reducing aid

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Not all government-to-government funds transfers are alike.

Tariq Sayed Ahmad is a Researcher with the Aid Effectiveness Team at Oxfam America.

The New York Times this week published an incriminating article about the CIA giving “wads of American dollars” directly to Afghan President Karzai to win influence over the palace and his network of leaders in Afghanistan. The article argues these funds have fueled corruption over the course of a decade, potentially undermining the prospects for development in a country long plagued with violence and conflict.

Photo: Creative Commons via Flickr
Photo: Creative Commons via Flickr

It’s unfortunate that corruption occurs in Afghanistan, where it is widely accepted as one of the major constraints to economic growth in a country plagued with violence and stuck in vicious cycles of poverty. According to Transparency International, Afghanistan ranks only above Somalia in their corruption perception index. And it’s more unfortunate that US policy is implicated in these corrupt practices.

This type of grand corruption is precisely the kind of thing that makes US policy makers’ skeptical of providing US foreign assistance directly to country governments. And rightly so. When a political corruption scandal such as this breaks, all government-to-government programs are implicated, including the type USAID is pursuing.

Of course not all government-to-government funds transfers are alike.

Helping domestic institutions deliver services to their citizens is one of the primary objectives of USAID’s new reform efforts. Through USAID’s local solutions efforts, the agency isn’t simply throwing money at corrupt regimes, rather, they are using a new range of analytical tools to intelligently invest in government systems. Oxfam’s inquiry last year found that USAID is investing in analytical tools such as the Public Financial Management Risk Assessment Framework (PFMRAF) and the Fixed Amount Reimbursement Agreement (FARA) to test and strengthen capacities of government institutions. Giving US officials new impetus and tools to appropriately manage the risks involved in using country systems maximizes the US’s ability to help strengthen partner governments’ institutions so that they can provide for their citizens accountably.

When the CIA provided money to Karzai, little, if any, of those funds were used to help the Afghan people hold their institutions in check. Yet when USAID helped build the capacity of the Afghan Ministry of Health, infant mortality decreased by 57%, child mortality by 62%, and maternal mortality dropped by 22% since 2002.

Oxfam recently conducted interviews in seven countries and found that policy reforms, like those that help the US more closely partner with accountable government institutions, are being well-received. 83% of people Oxfam surveyed said the US is becoming a better donor than they were 4-5 years ago. In addition, Oxfam uncovered a number of cases when using government systems resulted in some early indications of strengthened and more accountable institutions.

  • In Peru, for example, mayors are better able to deliver the types of services their citizens have demanded.
  • In Bangladesh, the US helped strengthen the financial system in the Ministry of Agriculture. Now the Ministry is able to leverage more resources from other donors.

At the same time, USAID, admittedly, still has a lot to learn and is still facing a number of challenges when it comes to building country systems appropriately. They are continuing to build their own expertise. This is precisely the premise behind USAID forums on country systems strengthening and utilizing ongoing research on institution building.

While USAID still has a long way to go to make sure citizens and their governments are at the helm of their own development, they are making progress. Unfortunately, the only way this progress will be protected and maintained is if members of the US congress are able to distinguish between types of foreign assistance. As with Karzai, we see that politically-motivated “wads of cash” within government-to-government partnerships actually fuel corruption and a lack of accountability.

But the US government is also capable of government-to-government partnerships that promote accountability, strengthen systems, and ultimately lead to promising developmental outcomes—a much more worthy investment of taxpayer dollars.

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