Japan Mulls More Overseas Aid During Time Of Fiscal Restraint
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TOKYO (Nikkei)–The Japanese government is trying to find a balance between obliging requests for an increase in foreign aid and putting its own fiscal house in order.
The World Bank group’s International Development Association, which provides assistance to the world’s poorest countries, has asked the Japanese government for about 600 billion yen in funding for a capital increase scheduled in 2008, about double the figure previously contributed by Japan. The IDA conducts capital increases about once every three years and aims to raise a total 40 billion dollars, or around 4.7 trillion yen next year.
Japan was the third largest contributor after the U.S. and the U.K during the previous capital increase. This time around, the IDA is asking an amount equivalent to slightly more than 12% of the total capital increase — roughly proportional to Japan’s previous contributions.
Based on the request, the Japanese government will solidify an amount and submit pertinent legislation to the 2008 ordinary Diet session.
But the government and ruling coalition may experience difficulty obtaining approval for the expenditure. The government would need to issue new bonds to cobble together the funds, a factor that creates an additional fiscal burden.
At a time when the government is focused on shoring up its finances, a sharp increase in the amount earmarked for foreign aid may be difficult. Also, a large increase could affect the how much can be given to other international organizations.
At one point, the U.S. contributed 20% of IDA funding, but due to increased pressure from the Congress for spending curbs, the percentage has since declined to the 13% level.
But if the Japanese government limits its financial assistance to what it gave last time, its share would fall into the single-digits — a factor that would reduce Japan’s say in the IDA’s operations.
With Japan scheduled to host the Group of Eight summit next summer, some ruling coalition lawmakers are advocating support for development initiatives in Africa and anti-global warming measures pursued by the World Bank. Opposition parties, however, hold a majority in the upper house, and the ruling parties will need their cooperation to pass legislation for IDA funding.
Filed by Amadeus Domaradzki under Development