Official Development Assistance (ODA)

Excluding debt relief operations, total Official Development Assistance (ODA) continued to increase in 2007. The net increase in ODA from DAC members rose slightly by 2 per cent over the 2006 figure5. Estimations show that the positive trend continued in 2008, with an increase of 10.2 per cent in real terms of total ODA from DAC members, this time including debt relief operations. Despite the improvement this trend remains much too slow if donors are to meet the targets for increases in aid by 2010 in line with the commitments taken in Gleneagles in 2005.

The total net ODA from members of the OECD Development Assistance Committee (DAC) was USD 103.5 billion in 2007. This figure represents a decline of 8.5 per cent in real terms6, and when expressed as a percentage of their combined gross national income, it represents a drop from 0.31 per cent of their combined gross national income in 2006 to 0.28 per cent in 2007. ODA had been exceptionally high in 2005 (USD 107.1 billion) and 2006 (USD 104.4 billion), due to large Paris Club debt relief operations for Iraq and Nigeria.

In 2007, debt relief amounted to USD 9 billion, considerably less than in 2006 and 2007, when it was USD 20 billion and USD 25 billion, respectively.

The largest donors in 2007, by volume, were the United States, followed by Germany, France, the United Kingdom and Japan. Five countries exceeded the United Nations target of 0.7 per cent of GNI: Denmark, Luxembourg, the Netherlands, Norway and Sweden. (See DAC 2009 Report Annex A, Table 1 and Chart1). Japan’s net ODA was USD 7.7 billion, representing 0.17 per cent of GNI, a fall of 29.8 per cent in real terms that was in part due to a decrease in debt relief operations, which were exceptionally high in 2005 and 2006, and to a decrease in contributions to international financial institutions. Japan’s ODA has been on a downward trend since 2000, except for an increase in 2005 and 2006 mainly due to debt relief.

The combined ODA of the 15 DAC member countries that are also EU members – which represents nearly 60 per cent of all DAC ODA – fell by 6.6 per cent in real terms to USD 61.5 billion, representing 0.39 per cent of their combined GNI. Again, the fall was mainly due to a decrease in debt relief grants. Excluding debt relief, net ODA from DAC EU members rose by 7.7 per cent.

Aid rose in real terms in ten DAC EU countries as follows: Germany (+6.1 per cent), reflecting increases in both bilateral aid and contributions to international organisations; Luxembourg (+15.0 per cent), due to the general scaling up of its aid; Spain (+19.7 per cent), mainly due to a rise in its multilateral contributions, within a planned process of scaling-up of its aid. Austria (+8.3 per cent), Denmark (+2.9 per cent), Finland (+6.4 per cent), Greece (+5.3 per cent), the Netherlands (+3.2 per cent), and Portugal (+5.9 per cent) also increased their aid. Finally, Ireland (+4.8 per cent), raised its ODA/GNI ratio to 0.55 per cent.

Aid from other DAC EU countries fell in real terms, due mainly to decreased debt relief: Belgium (-11.2 per cent), France (-16.4 per cent), Italy (-2.6 per cent), Sweden (-2.5 per cent) and the United Kingdom (-29.6 per cent). Excluding debt relief, aid rose in these countries with the exception of the United Kingdom, where net ODA decreased slightly due to sales of equity investments.

Net ODA by the European Commission rose by 3.1 per cent to USD 11.8 billion mainly due to increased programme and project aid. Humanitarian aid also increased, and the EC’s disbursement capacity continued to improve.

The largest recipient of net bilateral ODA in 2007 was Iraq, which received USD 9 billion, of which USD 4.8 billion were net debt forgiveness grants. Afghanistan was the next largest recipient receiving USD 3 billion, followed by Tanzania (USD 1.8 billion), Cameroon and Sudan (USD 1.7 billion each).

At the time of the Gleneagles G8 and UN Millennium +5 summits in 2005, donors committed to increase their aid. These commitments were expected to raise ODA by USD 50 billion in 2010 compared with 2004 (at 2004 prices and exchange rates). Excluding debt relief and humanitarian aid, which are expected to return to their historical levels by 2010, the annual average growth rate required to reach the target was is 11 per cent. In particular, at the Gleneagles G8 Summit, donors made specific individual commitments8. The “Gleneagles commitment” from Annex II of the Gleneagles G8 Communiqué on Africa stipulated:

“The EU has pledged to reach 0.7 per cent ODA/GNI by 2015 with a new interim collective target of 0.56 per cent ODA/GNI by 2010. The EU will nearly double its ODA between 2004 and 2010 from 34.5 billion EUR to 67 billion EUR.”

While the DAC Secretariat’s assessment of donors stated spending plans through 2010 indicate that a sizeable increase in total ODA and in ODA for Africa will occur, the expected increases will not be enough to meet the Gleneagles commitments in Figure 6.

An OECD survey of donors’ forward spending plans showed that, at country or regional levels, donors have already programmed an additional USD 17 billion by 2010 compared to 2004 levels. Record replenishments of IDA and the African and Asian Development Banks will add about another USD 4 billion to this figure in 2010. Thus, about USD 21 billion of the USD 50 billion promised by 2010 has already been delivered or has been planned. This leaves nearly an additional USD 30 billion in 2004 dollars – about USD 34 billion in 2007 dollars – to be programmed into donors’ aid budgets if their aid commitments for 2010 are to be achieved10. The severity of the economic crisis in major donor countries reinforces doubts on whether aid commitments will be respected. The World Bank and the IMF11 recently estimated that the current aid gap for Low Income Countries (LICs) is between USD 20 to USD 25 billion taking into account the impact of the global financial crisis.

Concerning other donors, China is playing an increasing role though, according to the IMF, there are few available data on the growing Chinese presence in Africa in terms of aid, debt and direct investment flows. Aid and direct investment from the Gulf countries have also risen in 2007 especially in infrastructure, hotels, and real estate in West Africa.

Bilateral development projects and programmes which slightly dipped in 2006 started to rise again in 2007. Donors have also been making some progress in gradual scaling up core aid programmes in order to reduce fragmentation, which continues to be a major concern both donors and partners: a) for donors managing programmes in many countries (Canada, EC, France, Germany, Japan, and the United States give aid to over 100 countries; Portugal to 19 and New Zealand to 2112); and b) for partners having to deal with a large number of small donors (37 countries have more than 24 DAC and major multilateral donors; in two thirds of these more than 15 of those donors account for just 10 per cent of their aid).

To address the global challenges of poverty reduction and achieve the MDGs, aid is also reported to be increasingly poverty-focused14. Indeed, total net ODA to the Least Developed Countries (LDCs) has nearly doubled in real terms over the last 10 years, to reach USD 32.5 billion in 2007, representing about a third of total aid15.

Looking at countries in terms of their relative development, the DAC report shows that country programmable aid (CPA) increased by about USD 3.8 billion between 2005 and 2010 for least-developed countries (LDCs) and nearly USD 3 billion for other low-income countries (other LICs).

Regarding scaling up by country, the survey data for individual developing countries indicate that scaling up has been planned in two-thirds of them between 2005 and 2010. The survey suggests an increase in CPA of about USD 10.3 billion in 102 countries, of which 39 are in Africa, with an increase of some USD 6.1 billion. Many of the countries with the largest increases in CPA are priority partners for several DAC members and thus reflect scaling up firmly rooted in donors’ country strategies.

Excluding debt relief, net ODA disbursements to fragile states have risen steadily since 2000. However, only five countries among which four in Africa – Afghanistan, Cameroon, Democratic Republic of Congo, Nigeria and Sudan – have received more than half of total ODA to the group in recent years (with a peak in 2006 –74 per cent – due mainly to debt relief for Nigeria). Most of this aid is provided in the form of debt relief or humanitarian relief, leaving some countries marginalised and with limited programmable aid. In these circumstances the unpredictability of aid flows is a major impediment to attaining the aid effectiveness objectives of the Paris declaration. The DAC Principles for Good International Engagement in Fragile States and Situations focus on state building as the central objective. Aid for government and civil society (which includes aid for peace, security conflict prevention and resolution) has increased by over 155 per cent in real terms between 2000/01 and 2005/06.