How have Swedish partner countries fared over time? Rather well, but peace is a precondition for economic development

It is largely the same old countries that continue receiving Swedish support, remaining as aid dependent and poor as ever. It is time for big change. I assume you have come across this argument in recent aid debates.

The argument echoes the debate in the early 1990s which followed Bo Karlstr?m’s book “Det Om?jliga Bist?ndet” ("The Impossible Aid”). In his, in Swedish debates, highly influential book, published in 1991 and republished in 1996, he pointed out the dismal growth performance of the main Swedish partner countries at the time, highlighting their policy failures and excessive aid dependency. This aid dependency created uncoordinated “project islands”, perverse incentives and a whole range of negative systemic effects. It is a book full of valid observations and arguments but also with a highly pessimistic outlook, arguing that the whole idea of aid has to be questioned as it was contributing to the very same problem that it tried to solve.

The arguments in his book have Sweden’s, at the time, seventeen partner countries as the starting point (p 19). A majority of them had aid dependency ratios (ODA/GNI) above ten per cent and quite a few even above twenty per cent. In 1991 Swedish partner countries were easy to identify, as their annual allocations as “program countries” were defined by the Swedish Parliament in the state budget. (It turns out that the Swedish Parliament was far more disciplined in keeping the country portfolio focused; today, when it is the Government who defines the country portfolio based on Ministry for Foreign Affairs’ inputs, there are 38 countries on the list.[1])

With the privilege of hindsight, by now, thirty years later, we can check the validity of Bo Karlstr?m’s pessimistic outlook.

The table above, next to Bo Karlstr?m's book, compares were these seventeen countries were in 1991 with the latest data available as of today in terms of relative growth performance and aid dependency. The relative growth performance is assessed by using the world league table on Gross National Income per capita (GNI per capita), but counting from the bottom. In the table countries are ranked based on how many positions they have earned, or lost, between 1991 and 2022. (So if a country was number 5 from the bottom in 1991, and 8 from the bottom in 2022, then it gets a 3.) Aid dependency is measured the traditional way, as the ratio of net ODA relative to GNI. All data is from World Bank development indicators.

So how have the historical Swedish partner countries fared over the past thirty years?

• Most of the 17 countries have done surprisingly well. The star performers in Asia (Vietnam, Lao, Bangladesh, Sri Lanka, India) have earned 20 positions or more in the GNP/capita world league table (Vietnam 63 positions!). Tanzania and Kenya are the star performers in Africa, also advancing more than twenty positions. Only four countries have lost positions in the league table since 1991: Angola, Lesotho, Zambia and Zimbabwe. ???
• As for aid dependency, there has been a drastic reduction in the ODA/GNI ratio in all countries. A country like Tanzania has gone from ODA/GNI at 22 per cent to 4 per cent and Zambia from 29 to 5 per cent. Only two countries remain with a ODA/GNI ratio above 10 per cent (Mozambique and Guinea-Bissau), but still with enormous reductions in aid dependency over this period. It is worth noting that in most cases this reduction is not the result of a reduction in aid; it has proven possible to grow out of aid dependency while aid levels are kept high in absolute terms. If it is true that high aid dependency distorts an economy and that aid runs into diminishing returns to scale above a certain threshold, then this reduction in aid dependency is really worth celebrating for those who have concerns about aid efficiency.
• In 1991 all of these countries were classified as low-income, with the exception of Botswana, Angola and Zimbabwe. Today all of them the except Mozambique, Guinea-Bissau and Ethiopia are classified as middle-income, with Tanzania the latest country to join the ranks of middle-income economies (World Bank classification FY2024). In 1991 eight of the seventeen countries were on the list of the world’s twenty poorest countries in terms of GNI per capita; today only three countries remain there: Mozambique, Guinea-Bissau and Ethiopia (Ethiopia in place 20 from the bottom). ?
• In quite a few of the countries with less impressive relative growth performance over the past thirty years, devastating civil wars are part of the explanation (Angola, Mozambique, Guinea Bissau, Ethiopia).

What is the role of Swedish aid, or aid in general, in explaining this performance? No claim on that matter is made here; it is the topic of another article. And what about other aspects of development than income? That is also the topic of another article.

So if these countries largely have left the GNI/capita bottom twenty list, which countries have taken their places? There we now find countries such as Somalia, DRC, Central African Republic, Sudan, South Sudan, Afghanistan, Mali, Burkina Faso, Liberia, Sierra Leone, Uganda. Many of them now with Swedish aid engagements. We recognize them from the media headlines on devastating civil wars over the past decades.

Peace appears hence to be, and clearly so, a fundamental precondition for economic development. It is then bewildering to take part of this recent note by OECD/DAC, announcing that Official Development Assistance (ODA) for peace in fragile countries and regions just plummeted to a 15-year low. And this in a world which now appears to be heading towards violent conflicts - at an all-time high!

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[1] Countries with a specific strategy or a “bilateral window” under a regional strategy.