04/20/2015 17:07 EDT | Updated 06/20/2015 01:12 EDT

Development minister Paradis pushing for new aid lending body to fight poverty

OTTAWA - Just before the federal budget, Canada's international development minister has been touting a new, relatively cheap initiative that could mask the fact that the government won't offer any new aid spending.Christian Paradis recently told a major international financing meeting that Canada lacks a public sector, profit-driven financial lending institution that would help generate growth and alleviate poverty in poor countries.Paradis told a gathering at the World Bank in Washington, D.C., last week that he's been pushing hard for the creation of a development finance institution, or DFI.Paradis said his officials have been working hard to create one, but he stopped short of saying whether it will be featured in this budget.The public-sector financing mechanism would partner with businesses to create projects that would stimulate economic growth, which could ultimately lift poor countries out of poverty.Aid agencies are leery of DFIs, even though they exist in many other Western countries, because they say their success relies on the benefits of private investment trickling down to the poorest of the poor.In a recent interview, Paradis brushed aside any need to rejuvenate aid spending after a recent OECD report said Canada's aid has fallen to 0.24 per cent of GDP, well below the United Nations target of 0.7 per cent.But in his World Bank speech, Paradis displayed enthusiasm for DFIs as a partner in the future of international development."I have to be blunt: in Canada we don't have a development-finance institution, yet," the minister said Friday in a well-attended speech in Washington."We are still back in the '60s. I've been working very hard — hopefully we'll have such an institution.A report presented last year to the Finance Department by the Centre for International Governance Innovation and Engineers Without Borders said the time has come for Canada to create such a body. It said the agency would be cheap for the government to set up, at $50 million over three to five years."We're the only G7 country that does not have a DFI, and that makes no sense," said Brett House, one of the report's co-authors.With aid spending likely to remain frozen, a DFI would also "leverage Canada's diaspora to help fight extreme poverty in the 50 or so poorest countries in the world more effectively" as well as generate profits for Canadian interests, he said.Ian Smillie, a long-time Canadian development specialist who led fight against so-called blood diamonds, dismissed public-private partnerships as a flavour of the year in international aid circles.Smillie said any announcement of a new Canadian DFI would simply be smoke and mirrors to obscure the fact that after five years of spending freezes and reductions there will be no new aid money in Tuesday's budget.Companies would be drawn to poor countries with gold, oil, diamonds or another valuable resource, but not to other poor countries "that don't have oil, don't have minerals, have fragile political systems or that are coming out of, or going into conflict," said Smillie.