Where Does German Foreign Aid Go?

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SEATTLE — As West Germany recovered from the Second World War with help from the Marshall Plan, it decided it was time to give back. Slowly Germany began to offer and give foreign aid around the world. The idea was that this new German foreign aid would be seen as altruistic, the right thing to do after the war. Germany wanted to be careful, however, that this aid was not seen as a way to influence other nations, but only as funding to help countries recover or grow.

This was decided before Germany helped found the European Union, and to this day the country is still a large independent donor. In 2015, the European Commission reported German foreign aid spending at $24.7 billion. In 2016, Germany was the world’s third-largest supplier of foreign aid.

One way German foreign aid is distributed around the world is through the German Federal Ministry for Economic Cooperation and Development, or BMZ. In 2017, the BMZ had a budget of €8.541 billion. Like many countries, Germany works with international organizations such as the World Bank, which received 7.7 percent of the BMZ’s budget in 2017. The largest portion of the budget (48.3 percent) was spent on Germany’s bilateral agreements.

Known as “the direct approach”, German bilateral aid programs encourage economic growth with the help of monetary and professional assistance. The program is defined by two pillars. The first is when the project is defined and carried out by the German government along with the participating country. The second part is when private organizations and a participating country draw up a contract and submit it to the BMZ. If the contract is approved, the entire project is funded by the BMZ.

German foreign aid through bilateral agreements is often provided in the form of a soft loan. The Economic Times defines a soft loan as “a loan on comparatively lenient terms and conditions as compared to other loans available in the market. These easier conditions might be in the form of lower interest rates, prolonged repayment duration, etc.” The BMZ has a 12-step program for implementation, evaluation and repayment of their loans. Technical assistance provided by these relations is considered non-repayable. The BMZ defines technical assistance as any assistance rendered to the partner country by the German government or aid organization. The costs that attach themselves to this are considered the cost of doing business and seen as beneficial both for Germany and its partner.

But where does German foreign aid go? One place is Africa. In 2017, Germany and other European nations once again turned their attention to Africa, this time to encourage economic growth, political stability and the protection of human rights. Germany has dubbed their plan as “The Marshall Plan for Africa” and it will be executed by the BMZ. According to the BMZ, Africa contains roughly half of the world’s 20 fastest growing economies and by 2035 will have the largest workforce population on the planet. Germany already works with 27 African nations and the African Union through bilateral relations, but their Marshal Plan aims to encompass as many African nations as possible.

German foreign aid is distributed to 57 other countries around the world through its bilateral relations program. These countries include six European countries (Bosnia and Herzegovina, Kosovo, Moldova, Albania, Serbia and Ukraine). Many of these countries are ex-communist republics attempting to gain closer ties to the West by joining the European Union. Germany supports most of these countries’ accession to the EU but also is concerned about the stability of Europe as a whole.

Although Germany does not want to become the leader of “Western liberalism”, it may be its de facto title for a few years. U.S President Donald Trump plans to cut some U.S foreign aid, while the United Kingdom has no plans to increase its foreign aid budget. Angela Merkel plans to continue to increase German foreign aid in spite of opposition. Many people in Germany are critical of this spending while Germany continues to take in and support refugees. Some want this money spent at home on the refugees and others want it cut. Others want accountability. Hopefully, Germany will ignore its critics and demonstrate that long-term investment in foreign aid is more useful than an increase in economic protectionism and military spending.

– Nick DeMarco

Photo: Flickr

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