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Wednesday, 20 July 2016

The best Brexit for aid

A little more than two weeks after the United Kingdom voted to leave the European Union, the economic and development impacts of the referendum are beginning to take shape. The instability caused by the referendum sent the British pound plummeting in the greatest one-day loss since the beginning of the Bretton Woods system. The currency now hovers at a 12 percent loss against the dollar, with knock-on effects for the U.K. aid budget. Currently valued at about $19 billion, British aid has lost $1.9 billion in value since the pound dropped. The aid budget, experts warned, is now under even greater threat. Spending is tied by law to 0.7 percent of gross national income, but growth of gross domestic product will drop by an estimated 3 percent for 2016. The accompanying decline in GNI will cause a net reduction in aid. Aid-recipient countries will also be hit with an estimated $1.4 billion loss in value of U.K.-sourced remittances. Those most dependent on U.K. remittances include Uganda, Kenya and South Africa, among others. Authors of a briefing paper compiled by the Overseas Development Institute estimate the total net loss to developing countries as a result of the pound’s devaluation at around $3.8 billion. “By our calculations this means about 700 million more people in the developing world will be going to bed hungry,” Dr. Unni Krishna, director of the Emergency Health Unit for Asia and the Pacific at Save the Children told Devex.