Celebrating your first anniversary in a job usually involves taking a moment to pause and reflect on how things have gone so far, but Nemat Shafik – known universally by her nickname, Minouche – won’t have much time for that. Though March saw her mark 12 months since taking over from Sir Suma Chakrabarti as permanent secretary at the Department for International Development (DfID), Shafik says that dealing with the effects of ongoing economic turmoil is eating up all the space in her diary.

“Sometimes it’s felt like the fastest year of my life, and at [other] moments it’s felt like the slowest,” she says. “We’ve kind of been in crisis-response mode from day one.”

The former World Bank vice-president says that although banks in the poorest countries aren’t “systemically significant” enough to local economies for the global financial sector’s meltdown to have caused much direct damage, their citizens nonetheless end up suffering the most. As recession bites in the developed world, in impoverished parts of the globe exports shrink, commodity prices decline, and emigrants working overseas send back less money. Unfortunately, the DfID chief says, more evidence is arriving from country offices indicating the damage being done to already impoverished populations. “We estimate that 90 million more people are going to stay in poverty [than otherwise would have done], as a result of this crisis,” Shafik states, admitting that the crisis has jeopardised some of the West’s best laid plans on poverty reduction, many of which were founded on a presumption of continuing global growth.

On a day-to-day level, what has changed for the work of DfID, at the centre and in the field? For a start, the fall in sterling has reduced by around 20 per cent the value of aid given by the United Kingdom to developing countries. But it also means that DfID staff are reassessing projects and priorities on a daily basis to check that money and time is being spent in ways that counter the effects of the downturn.

“Every day we are reviewing everything we do – in countries, in multilateral organisations, in the EU,” Shafik says. “Across the board our policy, our research work [is being reviewed] to make sure that what we are doing is relevant to the crisis.” That means constant updates from country teams, and a weekly report from the DfID chief economist on the most vulnerable states.

The case for aid

Given the new challenges emerging to face it, the department will have been gratified – not to say relieved – that Alistair Darling left overseas aid untouched in his Budget. There was speculation that he could have reduced the £7bn funding by £500m this year and still met the UN goal for developed countries: that aid should reach 0.7 per cent of GDP by 2013. Given the instability of the economy – and the position of the broader public sector, which is braced for years of bread-and-water austerity – I ask Shafik why it would be wrong to reduce overseas aid to protect funds for frontline services at home.

She is in little doubt. Although she pauses to acknowledge the problems many face in Britain, she insists that the consequences for the poorest nations are incomparable. “The crisis in poor countries will mean that five million children will die of malnutrition,” she says. “It’s important to remember how fortunate we are relative to people in other countries.”

What’s more, Shafik says, overseas aid – and the development agenda in general – is about enlightened self-interest, given the indisputable relationship between economic prosperity and political stability. Pointing to the number of asylum-seekers who come from developing countries in conflict, Shafik says: “The current number-one requesters of asylum are Afghans, so if DfID doesn’t make those economies grow, the risk to the UK will be greater.”

Despite the logic of such arguments, aid-sceptics seem to have been rising in profile and ferocity in recent months – most prominently in the form of another World Bank alumnus, Dambisa Moyo, whose book Dead Aid was recently reviewed in our lifestyle pages (WWW, 11 February, p14).

It’s safe to say that Moyo – who argues that aid has actually retarded African growth – is not on Minouche Shafik’s Christmas card list. “The evidence is incredibly distorted and, to be honest, she misrepresents a lot of the facts in that book and I think that’s just not on,” says Shafik. Discarding Whitehall traditions of diplomacy for a moment, the DfID boss rejects the book’s proposal that poor African countries could raise money on the international bond markets as “completely irrelevant”. “In the current environment, it’s farcical to propose that, because low-income countries have been completely cut off from private capital markets,” she adds.

In the past, DfID has faced hostility from closer to home, including – in the years following the inception of the new department in 1997 – from colleagues in the Foreign & Commonwealth Office (FCO). FCO permanent secretary Sir Peter Ricketts admitted as much at a reception with DfID staff in January – though he insisted relations have much improved. In the recently published diaries of former DfID junior minister Chris Mullin, he recalls a 2003 conversation with then-foreign secretary Jack Straw, who questions the logic for setting up a separate department at all.

“That attitude has diminished,” Shafik says when I put this to her. “And it’s diminished because when things were all under one roof, Britain was a middle-ranking development player.” Now, she insists, the UK is a world leader in development – and the diplomats in King Charles Street have a healthier respect for the specialist skills honed by international development officials.

Working together

Meanwhile though, the departments are attempting to share office spaces abroad, in order to reduce the cost of the government’s overseas estate – an agenda that may be accelerated to keep up with the demands for efficiency savings. Disparities in pay rates remain, however, with tensions caused by the fact that DfID staff in the field very often enjoy better pay and conditions than colleagues from other departments. Shafik admits that these pay gaps “cause a lot of friction”, but says she and Sir Peter Ricketts have agreed a mechanism that will lead to the pay rates of staff based in each country converging in the coming years.

This leads us to what Shafik calls a “Whitehall myth”: that DfID is the most generous payer in the entire government, and specifically that her predecessor was paid less than all four of his directors-general (she was one of them). She is keen to debunk both suggestions as “completely untrue”. “We are one of the lowest payers in Whitehall. We are sort of middle range at the senior civil service (SCS) and above levels, but below SCS we are at the bottom of the league,” Shafik says, before adding, with a touch of pride, that her department nonetheless has no trouble attracting staff.

Pushing further on the subject of relations between DfID and the foreign office, I ask if she is concerned about recent suggestions by the shadow international development secretary, Andrew Mitchell, that her department needs to be reined in and has strayed “perilously close” to pursuing its own foreign policy. Shafik responds that the boundaries are clear, and DfID sticks to them. “The foreign office does foreign policy; they are the ones who have to make the calls on those issues, and we are the ones who lead on development policy,” she says, adding that both departments have knowledge and “skill sets” that are useful to the other in certain areas of work.

However, with Mitchell also claiming the department is too sceptical of the private sector, and that it behaves more like an aid agency than a government department, is she concerned about the implications of a Conservative election victory for the department’s work?

“We serve the government of the day,” Shafik states, adding that she monitors what opposition politicians say about development and her department. “The Conservatives have made clear they are very committed to 0.7 per cent [the UN’s millennium development target for foreign aid as a proportion of GDP] and very committed to having an independent DfID at cabinet level, so for us those are the biggest issues, and it’s good to see that they have seen the value of DfID’s work,” she says.

The future

The Conservatives have so far been strategically vague on their spending plans once elected, one of the few exceptions being a pledge not to cut DfID funding and a commitment to meet the millennium development goal target. Both Labour and the Liberal Democrats have made similar commitments.

Relative to other departments, DfID’s medium-term financial future is secure, but like everyone else it is under pressure to find efficiency savings. The department will have to save £155m by 2011, and other departments – the Home Office, Department for Energy and Climate Change, and Foreign Office – have agreed to raise their aid contributions so that the overall spend on development is unchanged. To meet her own efficiency targets, Shafik says DfID’s communications budget will come down, and she will change how the UK makes contributions to international organisations.

Returning to the current crisis, she says that working within those international organisations – the UN, World Bank, International Monetary Fund (IMF) and EU – will be crucial to achieving the department’s goals in the months and years ahead. She wants to make sure that all partners deliver on promises made at the G20 summit in London, including a planned extra $50bn in aid and renewed commitment to the millennium development goals.

This will not be easy, she concedes, but she’s pleased that the UK has so far set an example on delivering aid. I ask which countries haven’t. “Italy’s not doing great, France is not doing that well,” she says candidly. “The US is generous in aggregate terms, but as a share of their economy, they are below where they should be.” She says the spring meetings of the World Bank and IMF, which she recently attended in Washington, offered hope that the US administration would soon be improving its performance on development money.

Her own long experience of these institutions, including stints at the World Bank, may well help her in pushing for increased support. “It’s definitely an advantage to know how the insides of these organisations work, because you know how hard you can press them,” she says. “Following our discussions with the World Bank, they’ve offered to triple their lending, but we’ve pressed them to go a little further than that because we understand their balance sheet and think they could do more.”

Shafik will need all that savvy, as well as her passion for the aid agenda, in trying to mitigate the effects of economic collapse in the poorest parts of the world. Even with her formidable experience, both in academia and intergovernmental work, it’s been a steep learning curve for a woman who was once the World Bank’s youngest ever vice-president. “I don’t think I’ve ever learned more in my life than I have in the past year,” she says.


Minouche Shafik: career highlights

1962: Born in Alexandria, Egypt
1983: Graduates from University of Massachusetts Amherst with a BA in economics and politics
1987: Awarded MSc in economics by London School of Economics
1989: Finishes PhD in economics at St Antony’s College, Oxford, then works as researcher and tutor at the university
1992: Becomes senior economist for Central and Eastern Europe at the World Bank, and adjunct professor at Georgetown University
1996: Named World Bank director, private sector development and finance, Middle East and North Africa
1999: Promoted to become World Bank vice-president, private sector development and infrastructure
2004: Moves to the Department for International Development (DfID), becoming director-general of country/regional programmes division
2008: Becomes DfID permanent secretary