The estimation of financing needs is becoming a popular exercise in the development arena. Researchers, NGOs, and institutional players have been developing models to estimate costs of different outcomes, such as achieving the MDGs; saving a child’s life; or financing national and international poverty gaps. But, as much as these estimates provide a useful tool for policy makers and development professionals, they also pose some important questions.
First of all, these estimates are in many cases far from accurate: being used mainly for the purpose of public engagement. Values are usually symbolic, and the methodology for calculating them is not clear, nor public. In a recent campaign, one large INGO argued that £2 a month was enough to save a child; how does this compare to the $38 a month ($1.25 per day for 30 days) extreme poverty line, or the monthly plumpy’nut cost of $30 a month per child?
Secondly, when costs and targets become relevant and well known, it is then difficult to change them. The 0.7% target was based on an estimated development cost of poor countries, calculated in the 1970s, with economic structures very different from the current ones. Long-term use of this target, with consequent political consensus, makes it therefore difficult to revise this target, including the use of GDP and not GNI. Why do we still use these out-dated targets?
Thirdly, the quality of the numbers on which the analysis is based is extremely poor. GDP calculation for many African countries is extremely inaccurate and misleading. This is not bad just from a knowledge point of view but it most importantly means a waste of resources. For example, Least Developed Countries (a UN classification based on income and other socio-economic indicators) benefit from favourable trade rules and attention from aid donors. But are the numbers telling us the right story? Are we targeting the right countries?
Finally, and most importantly, most estimates refer to the additional financial resources required rather than considering the impact of systematic changes. For example, the cost of achieving the MDGs is estimated to require between $60 and $120 billion a year, of additional finance. Perhaps, adapting the current development system would cost less and benefit more . . . ?