UK pauses overseas aid payments amid overspend concerns

THE UK temporarily paused overseas development aid that is not deemed critical because of concerns about rising pressure on government budgets, people familiar with the matter said.

The Foreign Office informed some staff a freeze is necessary because crises including Russia's war in Ukraine have led to additional expenditure that means the government is in danger of overspending, according to the people, who spoke on condition of anonymity.

Any payments above £1 million (US$1.2 million) are barred unless critical to life or unless their blockage leads to additional costs, the people said. New contracts and activity linked to agreements that have yet to start are also being paused, they said.

The government said in a statement that it's "currently prioritising essential overseas aid funding such as providing humanitarian support to the people of Ukraine."

The new rules are in place until the fall when a new prime minister will be able to take decisions on whether to stop or resume some aid payments and activities, 1 of the people said. The pause essentially means that the UK is all but halting overseas aid payments for now, the person said.

The move is a blow to Britain's aid recipients, who are already reeling from the country's decision to slash its aid budget to 0.5 per cent of gross national income from 0.7 per cent to help repair the budget deficit in the wake of the Covid pandemic. The cut, pushed through by the then Chancellor of the Exchequer, Rishi Sunak, was estimated to be worth about £4 billion at the time.

Sunak is now vying with Foreign Secretary Liz Truss to succeed Boris Johnson as UK prime minister and Conservative Party Leader. The winner is due to be announced Sep 5 and take power the following day.

Parliament approved Sunak's cut despite a significant rebellion among Tory MPs, which included former Prime Minister Theresa May and former International Development Secretary Andrew Mitchell.

May said at the time that the cuts meant "fewer girls will be educated, more girls and boys will become slaves, more children will go hungry and more of the poorest people in the world will die."

Sunak argued that it was necessary to make the "commitment more secure for the long term, while helping the government to fix the problems with our public finances."

Ministers remain committed to the 0.5 per cent spending target, with a return to 0.7 per cent "when the fiscal situation allows," the government said in Tuesday's (Aug 16) statement. BLOOMBERG

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