Other official flows generally refer to official sector transactions and international public finance that do not qualify as concessional lending. A main element of other official flows are non-concessional loans, which are particularly important for countries that have graduated to middle income status, but still have difficulties accessing affordable financing from private markets.
Other official flows also include official export credits as well as instruments that can leverage private finance, such as guarantees. The potential of ODA to leverage additional financing for development was already recognized in the Monterrey Consensus. The Addis Agenda recognizes the potential of using these instruments to finance sustainable development. The Addis Agenda also recognizes associated risks, and calls for managing and sharing both risks and returns fairly. It also commits to transparency and accountability. It calls for inclusive and transparent discussions on the measurement of a broader set of financing flows for sustainable development in the proposed measure of ‘total official support for sustainable development’ (TOSSD) and for ensuring that any such measure will not dilute commitments already made.
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The expansion represents increases in both bilateral and multilateral lending, with increases by multilateral development banks, particularly regional development banks and the World Bank Group’s International Bank for Reconstruction and Development. The expansion of their activities in 2009 and 2010 provides evidence of the counter-cyclical role that development banks can play.
OOFs are primarily allocated toward middle income countries and play a much smaller role in LDCs, which largely do not have access to the non-concessional windows of MDBs. Gross OOF to LDCs amounted to USD 3.2 billion in 2015.
Measuring the extent to which ODA catalyses private investment is challenging. There is no agreed methodology, in part because there is no clear-cut definition of what catalysing private investment and blended finance means. The OECD has been working on developing measures to assess the mobilization of private resources, as have the multilateral development banks, through a joint working group.
In December 2014, Ministers of the OECD DAC agreed to carry out consultations and analytical work to develop a new measurement framework for valorising and incentivising more development finance in support of sustainable development, provisionally called Total Official Support for Sustainable Development (TOSSD). In the current proposal, TOSSD would include all officially-supported resource flows to promote sustainable development in developing countries and to support development enablers or address global challenges at regional or global levels. It would thus be composed of two components: one capturing the flow of resources crossing the border into a developing country, and one capturing resources for promoting development enablers or tackling global challenges at national, regional or global levels.
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Following the call in the Addis Agenda for open and inclusive discussions on TOSSD, the OECD has held a series of consultations with different stakeholders, including by publishing a TOSSD Compendium for public consultation in June 2016.
The Inter-agency Task Force itself has held two technical meetings on the proposal and on broader questions of measuring international public financing flows and development cooperation efforts in 2016. The meetings provided occasion for agency and academic experts to share and discuss critical perspectives on the proposal and to begin comparing and contrasting the scope and methodologies behind the proposed TOSSD measure against the monitoring of FfD commitments by the Task Force.
The meetings revealed that the ongoing Task Force monitoring of commitments on concessional and non-concessional international public financing flows (Action Area II.C of the Addis Agenda) largely encompasses the components of what OECD proposes to measure under the ‘cross-border flows pillar’ of TOSSD.
The meetings identified specific gaps in data and data inconsistencies in this area, such as on lending by multilateral development banks, South-South cooperation and leveraging of private finance, where the Task Force could welcome and work with others towards greater harmonization and standardization of data.
The meetings further revealed the much broader scope of the Task Force monitoring of FfD commitments as compared to the proposed measure of TOSSD. This includes provider-focused commitments (on ODA in particular), as well as a focus on allocation, uses, quality and effectiveness (including when it comes to PPPs and mobilization of private resources). The nature of these FfD commitments, with their emphasis on the qualities, characteristics and historic origins of different components also means that the Task Force would see little value in ‘adding up’ the different flows into a single metric.
The FfD commitments also prominently feature the international enabling environment. This critical area is partially reflected in the second TOSSD pillar on ‘promoting development enablers and tackling global challenges at national, regional and global levels’. Yet, FfD commitments in this area go well beyond financing flows to address the overall coherence and consistency of international financial, monetary and trading systems with sustainable development, and governance issues.
There are a number of efforts under way to develop principles of blended finance and for crowding in private finance, including in the OECD, by the multilateral development banks and the G20 (MDB Joint Principles for crowding in private sector finance, the so-called Hamburg Principles), and in other fora. While these efforts have large areas of agreement and overlap, there are also differences, related in part to the specific actors and constituencies that they are addressing.
A set of overarching principles on blended finance and public-private partnerships (PPPs), universally agreed by the UN membership, can also be found in the Addis Ababa Action Agenda (see also the infrastructure section of this website). They range from alignment with sustainable development and ensuring effective and fair use of PPPs, to calls for transparency, accountability, and inclusiveness. Due to their universal and overarching nature, they can also serve as a basis for the development of more detailed principles by specific communities of practice.
Addis principles on blended finance and PPPS
- Careful consideration given to the structure and use of blended finance instruments (para. 48)
- Sharing risks and reward fairly (para. 48)
- Meeting social and environmental standards (para. 48)
- Alignment with sustainable development, to ensure sustainable, accessible, affordable and resilient quality infrastructure (para. 48)
- Ensuring clear accountability mechanisms (para 48)
- Ensuring transparency, including in public procurement frameworks and contracts (paras. 30, 25 and 26)
- Ensuring participation, particularly of local communities in decisions affecting their communities (para. 34)
- Ensuring effective management, accounting, and budgeting for contingent liabilities, and debt sustainability (paras. 95 and 48)
- Alignment with national priorities and relevant principles of effective development cooperation (para. 58)