Foreign aid for development projects is cut as African economies grow

Over the decades rich nations have poured trillions of dollars into African development projects, but the global economic meltdown and Africa's booming growth are turning off that tap.

Last year Western aid to sub-Saharan Africa quite literally decimated. Rich countries making up the Organisation for Economic Co-operation and Development (OCED) reduced assistance to the region by 10 per cent, the largest drop in 16 years.

Under pressure, many European chancelleries cut, slashed and snipped aid budgets as part of broader austerity measures. Spain alone cut its development budget in half. Some US$26 billion still flowed south, but the message was clear: aid is on the chopping block.

Austerity was a large part of the story, but cuts were also pushed along by a deeper current, one that has been flowing away from development assistance for some time.

Much has changed in Africa's relationship with the West in the 50 years since development aid helped newly-independent nations overcome colonial injustices. Most notably, African economies are now coming into their own.

"The old category of 'developing country' is now meaningless," said Paul Collier, head of Oxford University's Centre for the Study of African Economies. "Emerging market economies do not need aid. This reduced need has coincided with OECD budget tightening."

When donors recently froze aid amounting to 11 per cent of Rwanda's budget, the country simply raised US$3.5 billion through the issuance of sovereign bonds.