Development aid drops for the first time in 15 years

Components of net ODA from OECD Development Assistance Committee countries

Figures just published by the OECD show that major donors’ aid to developing countries, known as Official Development Assistance or ODA, fell by nearly 3%  to 133.5 billion in 2011 compared to 2010, the first drop since 1997 when debt relief figures are not included.

This global average hides even worse news. Within total net ODA, aid for core bilateral projects and programmes (in other words, excluding debt relief grants and humanitarian aid) fell by 4.5% in real terms and by 8.9% for flows to the Least Developed Countries.

In 2011, the largest donors were the United States at $30.7 billion (a fall of 0.9%); Germany ($14.5 billion, up 5.9%); the United Kingdom ($13.7 billion, -0.8%), France ($12.9 billion, -5.6%); and Japan (10.6 billion, -10.8%).

Denmark, Luxembourg, the Netherlands, Norway and Sweden continued to exceed the United Nations’ ODA target of 0.7% of GNI.

In real terms, the largest rises in ODA was registered in Italy at 33%, while Greece showed the sharpest drop, at -39.3%.

The recession and sovereign debt crisis certainly played a large role but they don’t explain everything when you look at the national-level data. Spain’s ODA fell by almost as much as Greece’s (36%) but Portugal’s aid was down by only 2.8%. OECD Secretary-General Angel Gurría warned that “the crisis should not be used as an excuse to reduce development cooperation contributions”.

Governments are however under pressure to reduce aid spending in line other cuts, and the OECD-DAC Survey on Donors’ Forward Spending Plans for 2012 to 2015 suggests that global country programmable aid (CPA, one measure of receipts by developing countries) may rise  by 6% in real terms in 2012. However, this is mainly because of expected increases in soft loans from multilateral agencies funded from capital replenishments during 2009-2011. From 2013, global CPA is expected to stagnate, and could confirm earlier findings such as those of the 1996 Development Cooperation Report that it takes several years from the onset of a recession for the full impact to be felt on aid flows.

Apart from calls to help combat the effects of the crisis at home before spending money abroad, there is a more general criticism of aid, claiming that it has not only failed to do its job, but has held back development and helped keep corrupt regimes in power. Brenda Killen of the OECD Development Co-operation Directorate answered these arguments in the latest OECD Yearbook, and concluded that aid is needed because “in our highly interdependent world, what happens with the economy, security, climate and health of any country affects us all”.

DAC Chair Brian Atwood, a regular contributor to the Insights blog, echoed this in a statement to the press when the figures were released, saying that while he was “disappointed that some countries have failed to maintain their commitments, the overall level reflects the growing awareness that global challenges… cannot be resolved without development progress.”

Aid is a small part of financial flows to developing counties, behind investment and remittances from workers living abroad, but it is still a vital tool in the fight against poverty. Everybody would like to see its role diminish, and even disappear because it was no longer needed.

Useful links

Click here to see Annex Tables and Charts covering:

  • Net official development assistance from DAC and other OECD Members in 2011 (Preliminary data for 2011)
  • Net official development assistance from DAC Members in 2011 by volume and as a percentage of GNI (Preliminary data for 2011)
  • Components of DAC Donors’net ODA
  • Gross official development assistance in 2011 (Preliminary data for 2011)

Conflict – the enemy of development

Click to download the report

The human cost of the conflict in Côte d’Ivoire has been all too clear, with almost daily reports of deaths and casualties. 

Against that background, it can seem callous to discuss the economic cost.

But, unfortunately, it’s likely to be very real and risks hanging over people’s lives for perhaps a generation to come.

Poverty rates may well rise, with knock-on effects in areas like child mortality, education levels and access to water.

 How do we know? Simply, because it’s happened so many times before, as the latest edition of the World Bank’s World Development Report demonstrates.

The report, issued today, is further evidence for the case that conflict and violence are among the greatest enemies of development. It presents some depressing statistics:

  •  Worldwide, 1.5 billion people live in fragile states or areas afflicted by conflict or large-scale, organized criminal violence.
  •  No low-income fragile state or country afflicted by conflict has attained even one of the Millennium Development Goals.
  •  People in such countries are more than twice as likely to be undernourished as those in other developing countries, and more than twice as likely to lack clean water.

 What’s striking, also, is that the conflicts that are dominating the news right now are relatively rare these days (albeit not rare enough): Since the 1980s, says the World Bank, the incidence of war between states has declined, while deaths from civil wars now stand at a quarter of where they were. But in many cases they’ve given way to other forms of violence and crime. “In Guatemala you have more people dying now from criminal violence and from drug trafficking than you did during the civil war,” Sarah Cliffe, one of the report’s authors, told The Guardian.

Of course, there’s an element of cause-and-effect to such conflicts and violence. Countries that are poorer or have high levels of inequality are more likely to suffer conflicts, which, in turn, is likely to make them poorer still, creating a vicious cycle of poverty and conflict. Equally, once a country has experienced a civil war, it’s much more likely to experience another one within 30 years.

The World Bank says international aid and development cooperation need to focus more on breaking such cycles. That call echoes a growing strand of work in the development community, which has seen a new focus on tackling the special challenges facing fragile states, especially governance. At the OECD, a special forum to address these issues was set up two years ago, and a set of guidelines for dealing with fragile states has also been created.

The World Bank says also that the current international system is still designed to handle the conflicts of the 20th century – civil wars and wars between states – and needs to be “refitted” to address 21st century risks, as the Financial Times reports.

Overall, the Bank suggests a number of strategies for breaking the links between conflict and poverty. It calls for a strong emphasis on strengthening national institutions and governance to improve people’s security, justice and job prospects. In the post-conflict rebuilding process, citizens also need to see quick evidence that things are going to get better, for example by making “a few highly visible improvements, like free health care for small children or restoring regular electricity”, as Binyamin Appelbaum notes . But, as he also points out, that’s just the first step of a process that “takes a generation”. If donors and international agencies are to underpin that sort of process, they need to make firm long-term commitments and “end stop-go patterns of aid” .

Incidentally, last week saw the release of annual aid figures from OECD countries, which provide the bulk of the world’s development assistance. Overall, foreign aid hit a record $129 billion in 2010, representing about 0.32% of the combined gross national income (GNI) of member countries of the OECD’s Development Assistance Committee. That was the good news. Less encouraging was the news that although donors plan to raise aid spending in the coming three years, the pace of that increase looks set to slow sharply.

 Useful links

OECD work on conflict and fragility and on governance and development

OECD aid statistics, Aidflows visualiser and Query Wizard

Annual Bank Conference on Development Economics (ABCDE), hosted at the OECD in Paris, 30 May-1 June

Aid to developing countries

With the crisis still unfolding, can governments meet their agreed development aid targets? Total net official development assistance (ODA) from donor countries in the OECD Development Assistance Committee came to $119.6 billion in 2009, which is a real increase of 0.7% from 2008. If debt forgiveness is excluded, the real increase jumps to 6.8%. In fact, development aid rose by some 30% in real terms between 2004 and 2009, and continued to grow during the crisis, unlike other financial flows to developing countries, which have fallen sharply. Nonetheless, more aid effort is needed.