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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

In 2017, ODA provided by members of the Organization for Economic Cooperation and Development (OECD) Development Assistance Committee (DAC) amounted to $147.2 billion. This represented a decline of 0.1 per cent in real terms over 2016. Five DAC members (Denmark, Luxembourg, Norway, Sweden and the United Kingdom of Great Britain and Northern Ireland) met or exceeded the United Nations target of 0.7 per cent of gross national income (GNI). However, on aggregate, DAC donors fell short of that target, providing 0.31 per cent of GNI on average. 

ODA to the least developed countries (LDCs) increased 10.2 per cent in real terms in 2017. This increase mainly reflected growth in aid for humanitarian assistance to three countries to address crises brought on by violent conflict, war or drought. Overall, ODA to LDCs accounted for only 0.09 per cent of DAC members’ GNI in 2017 (including imputed multilateral flows), below the United Nations target of 0.15 per cent, with five donors exceeding 0.20 per cent.

After the large increase of bilateral ODA to small island developing States (SIDS) in 2016, owing to the restructuring of Cuban sovereign debt, flows fell back to a total of $2.7 billion in 2017, in constant 2016 dollars (from $4.6 billion in 2016). ODA to SIDS has been fairly constant over time, with fluctuations around the occurrence of weather-related disasters and debt relief operations. ODA to landlocked developing countries (LLDCs), which face specific logistical and infrastructure challenges, reached $15.9 billion in 2017.

ODA allocation
Nevertheless, about a quarter of bilaterial ODA is not dedicated to humanitarian expenditure and in-done refugee spending, compared to less than one sixth in 2010.

The share of country programmable aid (CPA)-which excludes items such as humanitarian aid, in-donor refugee costs and administrative costs and has proven to be a good proxy for aid recorded at the country level-increased from 46.95 per cent in 2016 to 48.3 per cent in 2017. While this partially reversed a longer-term declining trend, it was still 6.6 percentage points below the share of CPA in 2010. ODA provided recipient-country budget support followed the same trend, rising from 2.5 billion in 2016 to 3.3 billion in 2017, in constant 2016 dollars (versus $4 billion in 2010). The recovery in CPA and budget support is particularly relevant to the availability of funds for financing national priorities expressed in national sustainable development strategies. Donors should maintain this momentum to reverse the previous decling trend. 

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A breakdown of ODA by type of flows shows that funds for project-type interventions, which are the largest portion of ODA, increased in real terms in 2017, particularly in LDCs and Africa, reflecting the rise in CPA. Project funding declined in SIDS, along with the overall decline in ODA disbursements to SIDS since 2010.

By country groups, ODA for the social sector decreased for LDCs between 2010–2013 and 2016–2017, while aid for economic infrastructure and services and production sectors increased in real terms over the same period. LLDCs also saw an increase in health and population services, but a decrease of ODA flows to infrastructure—particularly the transport and storage subsectors—which raises questions regarding alignment of ODA with these countries’ logistical and infrastructure challenges.

Concessionality

Since 2010, the concessionality of bilateral ODA has declined, owing to an increased reliance on concessional loans and a decline in grants. In 2016–2017, loans made up 15.2 per cent of ODA, compared to 12.4 per cent in 2010–2012 (figure 5). This increase was even more pronounced in the case of LDCs, where the share of loans rose from 2.8 to 8.3 per cent. LLDCs, as well as the group of African countries, show similar trends. Only in the case of SIDS has the share of loans decreased over time. The latter may reflect increased humanitarian aid to these countries on the one hand, and a response to already high levels of indebtedness on the other.

These trends also reflect the overall shift from social sectors to economic aid for productive investment noted above, as well as an increase in countries’ per capita income. Whether ODA is provided as a grant, concessional loan or, in rare cases, as an equity investment generally depends on the nature of the project being supported. Projects that can be expected to generate their own revenue streams are more frequently financed through loans, whereas social sectors are more than 90 per cent grant financed, with an even higher percentage of grant financing in the education and health sectors, which do not usually generate near-term revenue streams that could be used for loan repayments.

In 2018, 12 countries met the graduation criteria and are now at various stages in the graduation process. This marks a significant advance, as only five countries had graduated before 2018. However, nine of these countries remain highly vulnerable. Impact assessments by United Nations Department of Economic and Social Affairs (UN/DESA) indicate that providers aim to continue providing similar amounts of ODA following graduation for six countries. However, modalities might increasingly shift from grants to loans or to higher interest rates in some cases, as also discussed in the 2018 report of the Task Force.

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