Monterrey aid pledges fail to hit UN target

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Leaders of rich countries assembled in Monterrey, Mexico yesterday, promising to increase aid to the world's poorest nations. But their pledges were likely to fall well short of the doubling of assistance to $100bn which international agencies say is needed to make a serious start on tackling the problem.

"We live in one world, not two," Kofi Annan, the United Nations secretary general declared to the conference here, which is aimed at making good on a pledge to halve extreme poverty levels by 2015 as set out at a UN Millennium summit two years ago. Currently, 1.2bn people, a fifth of the world's population, are below this level, living on less than $1 a day.

That formal promise by the richest 22 countries has been given new urgency by the 11 September attacks in the United States, underlining for many the link between poverty and terrorism. No one, Mr Annan said, "can feel comfortable or safe while so many are suffering and deprived." Even the US President, George Bush, who was arriving at the meeting last night, made the same point as he announced last week a major increase in aid from the US – long criticised for the meagre level of its foreign aid, which is barely 0.1 per cent of GDP, or about a third of the level of Europe.

Indeed, continuing complaints by these critics, and the promise of an extra $7bn from the European Union, seems to have forced a last-minute spurt of generosity from Washington. The original plan was for a $5bn increase spread over three years, representing annual increases of $1.6bn from the current level of $10bn. The European Union, by contrast, gives a combined $25bn.

But amid some confusion, Mr Bush's aides appeared to have revised the sum upward sharply. The annual increase will be $1.6bn in fiscal 2004, $3.3bn in 2005, and $5bn in 2006 and subsequent years, assuming tough US criteria are met.

The aid will be granted from a so-called Millennium Challenge Fund only if countries meet specific targets and demonstrate that the new resources are not being wasted, or siphoned off by corrupt rulers.

"I'm not interested in funding corruption, period," Mr Bush said in an interview with Latin American journalists this week. "If a country's rulers are stealing money, they're not going to get it out of this fund, and hopefully not out of any fund." Even so the US move, though still considered inadequate by the development community, has been widely welcomed as a change of heart by Washington. The biggest impact has been made by Mr Bush's acknowledgement that terrorism draws many of its recruits from the vast pool of the world's poor, and that military, economic and diplomatic pressure will not alone succeed in stamping it out.

By contrast Japan, the world's largest aid donor – with current contributions of about $13bn a year – had yet to announced an increase in its assistance, pleading the chronic weakness of its own domestic economy.

There will be other arguments in Monterrey too. Washington wants money to be given as grants, in contrast to EU arguments that aid still take the form of loans, however soft their terms. Otherwise, the Europeans say, the World Bank and other donor agencies will become mere charity foundations, rather than the credit co-operative it is today.

Others, led by Michael Moore, the president of the World Trade Organization, are calling for further trade liberalisation as the best means of reducing poverty.