ODA is not limited to funds spent by Australia’s aid agency, AusAID. You may be surprised to learn that Australian aid figures are inflated by including spending on:

  • controlling ‘irregular’ immigration and upgrading of detention facilities in Indonesia;[2]
  • training Burmese intelligence officers and counter-terrorism workshops;[3]
  • cancellation of debt, which is contrary to international agreements.[4]


Debt cancellation:

  • Is a crucial step forward for developing countries;
  • Releases them from unfair repayments, many of which were accrued by undemocratically elected dictators or through irresponsible lending by donors;
  • Repayments divert much needed government funds away from programs addressing social problems affecting health, education and local infrastructure;


Debt cancellation should not be regarded as official development aid. Wealthy countries must take responsibility for their complicity in generating the global debt program through unscrupulous trade policies.


Australia‘s Debt Cancellation

Debt cancellation is usually counted as an expense for the Department of Foreign Affairs. However, in the 2008-09 budget $238.2 million in debt cancellation for Iraq was included as ODA. An additional $668 million had been included in the previous two financial years. Australia’s 2010 contribution to the Multilateral Debt Relief Initiative (MDRI) is also included in the budget and amounts to $22.6 million.[5]

Many countries, particularly in Scandinavia, do not include debt cancellation as part of their ODA. In fact, Norway has gone a step further, accepting shared responsibility for having played a role in the global debt problem due to irresponsible lending policies.


The hypocrisy of Iraq’s “debt” to Australia

  • Australia sold wheat on loan to Saddam Hussein’s regime – 95% of Iraq’s debt to Australia was related to these purchases.[6] 
  • Australia then invaded Iraq on the premise that Saddam Husseins dictatorial regime was an ‘immense burden of terror’ on the Iraqi people.[7]
  • The Australian government still considers the debt made through its own corrupt dealings with Saddam to be the responsibility of the Iraqi people.

Result = aid budget diverted from poverty reduction to Iraqi “debt cancellation”.

 Counting debt cancelation as part of Australia’s aid program artificially inflates the size of our aid budget.



Aid figures are also inflated through the inclusion of scholarships supporting students from developing countries to study in Australia.[8]


  • Bring financial benefits to Australian institutions:[9]
  • Are funded through the Australian Scholarships Initiative to the tune of $1.4 Billion of aid money every 5 years:[10]

There is little evidence to suggest that scholarships deliver any significant benefit (in terms of poverty alleviation or otherwise) to the students’ home countries.

By contrast, significant evidence exists that direct spending to national education within recipient countries leads to poverty alleviation[11]; yet Australia’s aid initiative for national education receives only $540 million over 5 years[12]one third of the amount spent on scholarships!


Aid funding in grants or loans?

Half of Australia’s 2005 tsunami aid package to Indonesia took the form of an interest-free loan requiring repayment[13]. Although the conditions of loans provided as aid are more lenient than those in private capital markets, the obligation to pay them is no less a burden.

In addition, the decision of where the loan money is spent is made by Australia and the governing elite in developing countries, yet the people who will pay back the loan are the children of the poor majority of those countries.

According to James K. Boyce the “default setting is for aid to flow to those who wield power” rather than directly to the people who need it most.[14]


To change this, donors have to make a conscious effort in determining where their aid money goes, paying close attention to inequalities which exist across income classes as well as racial, ethnic, linguistic, religious, and cultural divides.  Donor nations must consider not only which countries, but who within those countries, receive and control aid. 

Find out more about AID/WATCH’s priorities for aid and the policy changes which we would like the Australian Government to take.


Last Updated November 15 2010        Next page


1 Reality of Aid, 2006, Online http://www.realityofaid.org/roareport.php?table=roa2006&id=5 accessed
June 2008

[2] Australian Government, Budget 2010-2011, Budget Paper No. 2, Immigration and Citizenship. http://www.budget.gov.au/2010-11/content/bp2/html/bp2_expense-15.htm

[3] Goodman, J. (2007) The Australian aid program: Aiding the Burmese Intelligence systems. AID/WATCH, Sydney.

[4] United Nations (2003) Monterrey Consensus of the International Conference on Financing for Development, p10. http://www.un.org/esa/ffd/monterrey/MonterreyConsensus.pdf

[5] AusAid 2010-11 Budget Summary p.60

[6] Doran, C. (2007) Determining Their National Interest: Australia’s Economic Intervention in Iraq, AID/WATCH, Sydney, p.12.

[7] PM commits nation to war March 20, 2003


[8] AusAid, Scholarships Overview, http://www.ausaid.gov.au/scholar/pdf/overview.pdf

[9] EURODAD, 2006, ActionAid, 2006, Reality of AID, 2006 Op Cit.

[10] 2007-08 Federal aid budget statement,p25

[11] Simon Appleton, Education, Incomes and Poverty in Uganda in the 1990s, Centre for Research in Economic Development and International Trade, University of Nottingham, United Kingdom, P.5.


Servaas van der Berg, Poverty and Education, International Academy of Education, p.1.


[12] 2007-08 Federal aid budget statement,p25

[13] AID/WATCH, International Response to the Indian Ocean Disaster: a donor analysis focus on Australia, 2005  

[14] James K. Boyce, ‘Unpacking aid’, Development and Change, 2002, 33(2), pp. 239-246