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Whitehall focuses on business and aid for trade as it cuts budgets

Britain's new development plan links aid to market access but cuts funding to UN, IMF and World Bank programmes

Launching Britain's international development strategy paper this week, Foreign Secretary Liz Truss said the policies aimed to challenge 'malign actors' and bring more countries into the orbit of free-market economics. The new plan comes as living standards in developing economies are reeling after two years of pandemic-induced slowdown then rocketing food and fuel prices, worsened by Russia's war on Ukraine.

Referring to geopolitical pressures on British policy, Truss argues her plan will do more with less money by narrowing the policy focus and shifting resources to bilateral programmes instead of contributing to multilateral agencies.

Last year, citing financial pressures in the wake of the Covid-19 pandemic, Britain's Chancellor of the Exchequer Rishi Sunak cut £4 billion (US$4.9bn) from the aid budget last year. That meant abandoning Britain's target of setting aid spending at 0.7% of national income, a shibboleth in national politics (AC Vol 61 No 13, Retreating from the stage). Development spending, now around 0.5% of Britain's gross domestic product, won't reach the 0.7% target until the 2024-2025 financial year at the earliest, according to Sunak.

Britain's new development strategy means more work on trade and investment partnerships with a handful of states, most of them former colonies. The paper names South Africa, Nigeria, Ethiopia, Kenya and Ghana as 'key strategic partners' for Britain. 

Opposition politicians in Britain have criticised the strategy's ambitions as damaging to the country's international standing and to the interests of the poor. It aims to cut funding to multilateral organisations such as the UN and the World Bank: Britain's funding for multilateral agencies is set to fall to 25% from 40% as a percentage of the overall aid budget by 2025.

The 20-page strategy, the first public policy paper since Britain's Foreign & Commonwealth Office took over the highly-regarded Department for International Development in 2020. That initiative won mixed reviews: supporters said it would cut bureaucracy and focus policy more clearly; opponents, especially those in the development aid sector, said it would mean lower budgets, and weaken some of the country's most effective programmes. It also comes as other western economies are cutting back on development and humanitarian aid, some diverting substantive budgets to Ukraine.

The new strategy emphasises aid for trade. It wants to use British development finance to generate more private investment; it will hand more power to ambassadors and high commissioners to speed up projects in-country. It sets a target for 30% of new commitments over the next five years to be in climate finance, and to double Britain's International Climate Finance (ICF) contribution to at least £11.6bn between 2021-2026.

British Investment Partnerships (BIP) working with government and business will mobilise up to £8bn of financing a year by 2025 including from the private sector.

British International Investment, the country's leading development finance institution, aims to focus on 'high quality and sustainable investments' prioritising renewable energy and digital infrastructure. This will mean mobilising third party capital, such as sovereign wealth funds and pension funds. The paper also promises to expand economic partnership agreements and develop new Free Trade Agreements with African states covering goods and services.

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