Foreign Assistance in a Time of Austerity

April 17, 2012

In 2013, the new administration will face an immense strain on the foreign assistance budget. The ongoing budgetary impact of the 2008 financial crisis and the competition among debt, entitlements, and defense will take priority over the “150 Account,” which funds diplomacy and development.

The next administration will have to make difficult choices with the U.S. foreign assistance budget while developing creative ways to reposition increasingly limited aid dollars. Several countries will find themselves targets of this increased attention. These “countries of interest” have outgrown or are outgrowing the conditions that allowed traditional foreign assistance to be effective. Some like China and Brazil have developed their own bilateral aid programs, manage sovereign wealth funds, and possess operational satellites in outer space. Confronted with increasingly limited resources, the administration will be forced to reexamine how it can most efficiently and effectively support continued growth and prosperity in middle- income countries (MICs) while simultaneously maintaining influence and positive relationships.