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Official development assistance

The Addis Agenda reaffirms ODA commitments contained in the Monterrey Consensus and Doha Declaration, including the commitment by many developed countries to achieve the target of 0.7 per cent of ODA/GNI and 0.15-0.2 per cent of ODA/GNI to the least developed countries. The Addis Agenda also includes new commitments to reverse the recent decline in ODA to least developed countries (LDCs), to encourage ODA of 0.2 per cent of GNI to LDCs, and to recognize those countries that allocate at least 50 per cent of ODA to LDCs. It further highlights the importance of ODA for the poorest and most vulnerable countries – beyond income-group-based ODA allocation that only considers narrow economic averages. It commits to prioritizing the allocation of concessional international public finance to those with the greatest needs and least ability to mobilize other resources. 

ODA trends

Net official development assistance (ODA) by members of the OECD Development Assistance Committee (DAC) amounted to $ 146.6 billion in 2017. This represents a decrease of 0.6 per cent in real terms over 2016. ODA of DAC donors also fell as a share of their gross national income (GNI), from 0.32 to 0.31 per cent on average, far short of the United Nations target of 0.7 per cent of GNI.

Net ODA rose in 11 DAC members, but fell in 18, with 5 meeting or exceeding the 0.7 per cent of GNI UN target: Denmark, Luxembourg, Norway, Sweden, and the United Kingdom.

The overall fall in ODA reflects the decline in in-donor refugee costs reported as aid, which amounted to 9.7 per cent of total ODA in 2017, down from 11 per cent in 2016. In-donor refugee costs can be reported as aid during the first 12 months of stay, and the fall reflects the receding of the refugee crisis from its peak in 2015 and 2016. Humanitarian aid on the other hand continued to rise, by 6.1 per cent compared to 2016, to $15.5 billion. In total, the share of ODA dedicated to responses to short-term emergency situations – refugee costs and humanitarian aid – has risen from an average of 16 per cent of bilateral aid between 2010 and 2014 to an average of 28 per cent between 2015 and 2017.

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Disbursements of ODA to countries most in need of concessional resources and most vulnerable to external shocks have stagnated in recent years. Despite an increase in ODA to LDCs in 2016 of less than 1 per cent in real terms to $43.1 billion, the medium-term trend is one of stagnation. Moreover, ODA flows to LDCs are very unevenly allocated, with almost half directed to seven countries in 2014 and 2015.  In the Addis Agenda, donors had committed to reversing the decline in ODA to LDCs. While this was achieved on aggregate, nine DAC members saw their aid to LDCs decrease between 2015 and 2016.

Preliminary estimates indicate that net bilateral ODA by DAC members to LDCs has increased by 4 per cent in real terms in 2017, to $26 billion. However, the medium-term trend of aid to vulnerable countries remains one of stagnation – in real terms 2017 aid flows to LDCs fall short of levels reached in 2010 and 2011.

Aid to small island developing States (SIDS) did increase significantly, from $5.1 billion in 2015 to $7.1 billion in 2016. This increase was driven by Spain’s restructuring of Cuba’s debt, which accounted for $2 billion in aid. Short of this exceptional measure and the 2010 spike in ODA inflows to Haiti due to the earthquake, ODA to SIDS has not kept pace with the overall increase in aid flows since 2000, and remains very concentrated in a few SIDS, despite the increasing frequency, volatility, and intensity of weather-related hazards many of them are exposed to. ODA trends to landlocked developing countries (LLDCs) and African countries (see below) broadly mirror the patterns for LDCs and SIDS.

This is of concern because vulnerable countries are most reliant on ODA to complement scarce domestic public resources and have only limited access to other forms of external financing. While gross ODA disbursements amount to only 1.3 per cent of government revenue in all developing countries on average, this figure is much higher in LDCs, where ODA represents about 15 per cent of government revenue on average. In 16 LDCs, gross ODA disbursements amount to a fifth of total domestic revenue or more, and in four of them it exceeds 50 per cent. ODA also represents the largest external financial flow for 22 SIDS, accounting for over 40 per cent of all external financing.

A Survey on Donors’ Forward Spending plans through 2019 suggested country programmable aid (CPA) to the LDCs should rise in this period. The survey also projects that global CPA should remain stable up to 2019, with a continued upward trajectory for LDCs. (CPA is a proxy for aid that goes to recipient countries and that is programmable at the country or regional level). ODA to SIDS – which had dropped steadily between 2010 and 2014 before rising in 2015 – is projected to remain stagnant through 2019, calling for special attention and monitoring given their structural vulnerabilities.

Meeting ODA commitments

ODA from the 28 countries in the DAC averaged 0.31 per cent of gross national income in 2017, down from 0.32 per cent of GNI in 2016. Only five countries (thDenmark, Luxembourg, Norway, Sweden, and the United Kingdom) met or exceeded the target of 0.7 per cent of GNI of ODA.

Modernization of ODA measurement
The statistical system of the Organization for Economic Cooperation and Development (OECD) Development Assistance Committee (DAC) is being modernized to better reflect the new global development landscape. This process includes official development assistance (ODA) modernization. Changes include recording ODA in grant equivalents (agreed in 2014, only grants and the “grant portion” of concessional loans would be counted as ODA, encouraging the use of grants and highly concessional loans); clarifications to the eligibility of activities in the field of peace and security (agreed in 2016, ensuring consistent statistical reporting, and approving the ODA eligibility of development-related training for military staff in limited topics); and clarifications to the reporting rules for in-donor refugee costs (agreed in 2017, improving consistency, comparability, and transparency of reporting). 
 
 
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The DAC also adopted principles to encourage the use of private sector instruments (loans, equity, mezzanine finance and guarantees to private sector entities in developing countries). However, a detailed methodology of how to count donor effort in deploying such instruments has not yet been finalized, even as donors have started reporting private sector instruments as ODA. The DAC is committed to reaching a conclusion by consensus on this topic.

Work is also ongoing in relation to the rules for updating the DAC List of ODA Recipients. Methods for measuring the SDG focus of development cooperation are also being developed (adjustments to purpose codes and policy markers, such as a marker for tracking donor spending on disaster risk reduction across sectors, and possible new SDG fields) to keep the statistical classifications relevant and fit for purpose for monitoring the SDG agenda, including purpose codes to directly measure donors’ support for the enabling environment for development financing. From 2017, the OECD will also measure donors’ support for remittances facilitation, promotion and optimization.

ODA modalities and sector allocation

The share of aid that providers can programme for individual countries and regions, and over which partner countries could have a significant say—so-called country programmable aid (CPA)—has fallen in recent years. CPA excludes items such as humanitarian aid, in-donor refugee costs and administrative costs. In 2015, CPA amounted to 49 per cent of total gross bilateral ODA, or $52 billion, as compared to 53 to 55 per cent in the five previous years. Budget support, an aid modality particularly well aligned with development effectiveness principles, such as country ownership, declined in parallel. In 2016, general and sector budget support amounted to 1.9 per cent of total bilateral aid commitments of DAC donors. ODA spent within donor countries—such as refugee costs, scholarships and administrative costs—accounts for a growing share, increasing from 12 per cent of bilateral aid in 2010 to 20 per cent in 2016.

 

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Aid to social sectors such as health and education had grown rapidly in the first decade of the millennium during the era of the Millennium Development Goals, but since its peak in 2009 has decreased slightly in real terms. Donors’ focus has shifted to economic aid and support for production sectors, including investments in transport and storage, energy, and other economic sectors in line with the broader focus of the SDGs.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gender equality and women’s empowerment are key cross-cutting priorities in the Addis Agenda. In 2015-2016, DAC countries committed a total of $41.4 billion of ODA targeting gender equality and women’s empowerment on average per year. The DAC country average for the share of development assistance that had a gender equality and women’s empowerment objective was 40 per cent in 2015-2016. While DAC peer reviews find that DAC countries’ political commitment to gender equality and women’s empowerment is strong, implementation remains difficult. This is partly a result of difficulties of mainstreaming gender equality and women’s empowerment across development cooperation programmes. Recommendations by the DAC focus on operationalizing the political commitment, noting that DAC members need leadership, guidance, resources, capacity and a stronger focus on the results of investment in gender equality. 

Regional allocation of ODA

Africa

Official development assistance ODA is the third largest external source of finance in Africa, next to remittances and foreign direct investment. However, recent figures show a declining trend following the peak of US$56.8 billion in 2013. ODA to Africa declined in 2016, by 2 per cent in nominal terms as some donors backtracked on a their commitments.

 

Asia-Pacific

ODA provides budgetary support to domestic public expenditure in Asia-Pacific LDCs, LLDCs and SIDS. These economies received bilateral ODA exceeding $10 billion every year over the past five years from OECD-DAC member countries, of which more than 80 per cent was directed to LDCs. However, the share of ODA to GDP declined from 2.9 per cent in 2002 to 1.4 per cent in 2014. This downward trend is particularly noticeable for LLDCs (from 1.9 per cent to 0.3 per cent) and for SIDS (from 7.0 per cent to 3.6 per cent), while the share has leveled at around 4 per cent of GDP for LDCs during the same period.

 

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Africa 

Most of the fragile states in the world are located on the African continent; 37 of the 56 fragile states in the world are in Africa and 10 African economies are considered extremely fragile. Relative to the size of their economies, fragile African states have benefited more from ODA flows to the region than others. During 2011-2015, 15 African countries received ODA that amounted to, on average, more than 10 per cent of their Gross National Income (GNI) annually. Except Cape Verde, the remaining 14 countries are fragile economies, of which 5 economies —Somalia, South Sudan, Democratic Republic of Congo, Central African Republic and Burundi— are extremely fragile. One of key features of ODA allocation to Africa during 1996-2015 is the increasing aid allocation from other sectors to the social sector due mainly to the Millennium Development Goals (MDGs). The MDGs had a strong focus on poverty, health and educational development. The share of ODA to the social sector of Africa has increased from about 32 per cent in 1996 to 43 per cent in 2015. Humanitarian aid has also increased from about 6 per cent in 1996 to 9 per cent in 2015. The share of economic sector initially declined from 17 per cent of total aid flows to the region in 1996 to 10 per cent in 2005, after which it gradually increased to reach 18 per cent in 2015. 

Asia-Pacific

The distribution of ODA across LDCs is heavily skewed toward fragile states such as Afghanistan, Bangladesh and Myanmar. ODA to these three countries accounted for 81 per cent of the total ODA received by the 12 Asia-Pacific LDCs between 2011 and 2014. Afghanistan received 46 per cent of the total ODA, making it by far the largest recipient among all the Asia-Pacific LDCs, with the estimated value of $5 billion or 24 per cent of GDP per annum over the same period. Between 2010 and 2014, an average of $5 billion was provided annually as ODA from multilateral agencies to Asia-Pacific LDCs, LLDCs and SIDS. As a proportion of GDP, LDCs and SIDS received more than 1 per cent of GDP, while ODA from those agencies to LLDCs were rather limited with only 0.3 per cent of GDP. Of this amount, $1.2 billion (approximately 23.6 per cent) was directed towards economic infrastructure, such as transport, energy, water supply and sanitation and ICT, with transport being a key area of intervention (11.6 per cent), followed by energy (6.6 per cent) and water supply and sanitation (4.9 per cent).

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