Image credit: OECD - Photo: 2014

Aid To Sub-Sahara Expected To Decline

By Jaya Ramachandran | IDN-InDepth NewsAnalysis

PARIS (IDN) – While the trend of rise in international development assistance, which increased by 6.1 percent in real terms in 2013, is expected to continue in 2014 and stabilize thereafter, the declining share of aid for sub-Saharan countries, which need it most, looks likely to continue, according to an annual survey of donor spending plans by the OECD Development Assistance Committee (DAC).

Development aid reached the highest level ever recorded in real terms in 2013 despite continued pressure on budgets in OECD countries since the global economic crisis, says the DAC report. Donors provided a total of USD 134.8 billion in net official development assistance (ODA), marking a rebound after two years of falling volumes, as a number of governments stepped up their spending on foreign aid.

“It is heartening to see governments increasing their development aid budgets again, despite the financial constraints they are currently facing,” said OECD Secretary-General Angel Gurría. “However, assistance to some of the neediest countries continues to fall, which is a serious concern.”

In all, 17 of the DAC’s 28 member countries increased their ODA in 2013, while 11 reported a decrease. Net ODA from DAC countries stood at 0.3% of gross national income (GNI.) Five countries met a longstanding UN target for an ODA/GNI ratio of 0.7%.

Britain increased its ODA by 27.8% to hit the 0.7% target for the first time. The United Arab Emirates posted the highest ODA/GNI ratio, 1.25%, after providing exceptional support to Egypt.

Aid to developing countries grew steadily from 1997 to a first peak in 2010. It fell in 2011 and 2012 as many governments took austerity measures and trimmed aid budgets. The rebound in aid budgets in 2013 meant that even excluding the five countries that joined the DAC in 2013 (Czech Republic, Iceland, Poland, Slovak Republic and Slovenia), 2013 DAC ODA was still at an all-time high.

Shifting aid allocations

According to the DAC report, within bilateral net ODA, non-grant disbursements (including equity acquisitions) rose by about 33% in real terms from 2012. Total grants rose 7.7% in real terms; excluding debt forgiveness grants, they rose 3.5%. Net aid for core bilateral projects (excluding debt relief grants and humanitarian aid) rose by nearly 2.3% in real terms and core contributions to multilateral institutions by 6.9%.

Bilateral aid to sub-Saharan Africa was USD 26.2 billion, a decrease of 4.0% in real terms from 2012.  Aid to the African continent fell by 5.6% to USD 28.9 billion. Excluding debt relief, which was high in 2012 due to assistance to Côte d’Ivoire, net aid in real terms rose by 1.2% to sub-Saharan Africa but fell by 0.9% to the continent as a whole.

Bilateral net ODA to the Least Developed Countries (LDCs) rose by 12.3% in real terms to about USD 30 billion. However, there was exceptional debt relief for Myanmar in 2013.  Details on the impact of debt relief on aid flows to LDCs will be available later this year.

Donor performance

The survey finds that the largest donors by volume were the US, Britain, Germany, Japan and France. Denmark, Luxembourg, Norway and Sweden continued to exceed the 0.7% ODA/GNI target and the UK met it for the first time. The Netherlands fell below 0.7% for the first time since 1974.

Net ODA rose in 17 countries, with the largest increases recorded in Iceland, Italy, Japan, Norway and the UK. It fell in 11 countries, with the biggest decreases in Canada, France and Portugal.

The G7 countries provided 70% of total net DAC ODA in 2013, and the DAC-EU countries 52%.

The US remained the largest donor by volume with net ODA flows of USD 31.5 billion, an increase of 1.3% in real terms from 2012.  US ODA as a share of GNI was 0.19%.  Most of the increase was due to humanitarian aid and support for fighting HIV/AIDS.  By contrast US net bilateral aid to LDCs fell by 11.7% in real terms to USD 8.4 billion due in particular to reduced disbursements to Afghanistan.  Net ODA disbursements to sub-Saharan Africa fell by 2.9% to USD 8.7 billion.

ODA from the 19 EU countries that are DAC members was USD 70.7 billion, a rise of 5.2% in real terms from 2012, and 0.42% of their combined GNI. ODA rose or fell in DAC-EU countries as follows: Austria (+0.7%), Belgium (-6.1%): due to lower levels of debt relief in 2013 compared to 2012; Czech Republic (-4.7%): due to a decrease in bilateral aid to Afghanistan; Denmark (+3.8%): as it increased its bilateral aid; Finland (+3.5%): reflecting an overall scaling up of its aid; France (-9.8%): due to lower levels of loans disbursements and debt relief compared to 2012; Germany (+3.0%): due to a rise in bilateral lending and higher contributions to international organisations; Greece (-7.7%): due to austerity measures; Ireland (-1.9%): despite continued budgetary pressures, Ireland has largely stabilised allocations to ODA, with 2013 volumes marginally decreasing on the 2012 levels.

Aid from Italy rose by 13.4%: the Italian government had made a firm commitment to increase its ODA allocations to 0.16% of GNI in 2013 and reached this target. Luxembourg’s ODA/GNI ration increased by1.2%. The ODA/GNI ratio in the Netherlands fell below 0.7% due to overall aid budget cuts. But the Netherlands says it remains committed to the 0.7% target and to innovative, results-oriented support mechanisms and partnerships to increase the leverage of its development efforts

The DAC annual survey finds further: 8.6% rise in ODA/GNI ration in Poland due to increased contributions to EU Institutions: a 20.4 percent decline in Portugal’s due to financial constraints leading to budget cuts; 2.4 percent rise in the Slovak Republic; 0.6% decline in Slovenia’s; 3.7% rise in Spain’s due to debt relief operations in sub-Saharan Africa; 6.3 percent in Sweden’s due to increases in its bilateral aid and aid to international organisations; and 27.8 percent in Britain’s as it put into place firm budget allocations to meet the 0.7% ODA/GNI target.

In 2013, net ODA by the 28 EU member states was USD 71.2 billion, or 0.41% of their combined GNI. Net disbursements by EU Institutions to developing countries and multilateral organisations were USD 15.9 billion, a fall of 13.1% from 2012, due especially to a lower volume of concessional loans.

Net ODA rose or fell in other DAC countries as follows:

– Australia (-4.5%): as it delayed expenditure due to reprioritisation of its aid program to focus on the Indo-Pacific region. Australia’s aid remains stable and on track for an estimated expenditure of A$ 5 billion in 2013-14.

– Canada (-11.4%): due to exceptional payments made in 2012 for climate change and debt relief and to budget cuts affecting 2013

– Iceland (+27.4%): as it is increasing its aid programme;

– Japan (+36.6%): due to increases in debt forgiveness and bilateral lending

– Korea (+4.8%): due to scaling up aid overall

– New Zealand (-1.0%): due to an increasing aid programme being offset by inflation

– Norway (+16.4%): due to planned growth in the development cooperation budget, together with an increase in disbursements to Brazil

– Switzerland (+3.4%): reflecting the overall scaling up of its aid to reach 0.5% of GNI by 2015.

Other donor countries reported preliminary ODA figures as follows: Estonia (+22.3%):  due to increases in humanitarian  aid and contributions to EU Institutions; Hungary (-2.1%); Israel (-6.2%); Latvia (+12.2%); Russia (+26.4%): due to an increase in bilateral aid; Turkey (+29.7%): continuing the significant expansion of its development co-operation programme in recent years;  the large increase in 2013 is due in part to the crisis in Syria; and UAE (+375.5%): due to exceptional measures to address financial and infrastructure needs in Egypt; its ODA/GNI ratio rose to 1.25%, the largest reported share of any country in 2013.

In 2013, DAC countries’ gross ODA (i.e. without deducting loan repayments) was USD 151.2 billion, an increase of 9.5% in real terms from 2012. Within bilateral gross ODA, non-grant financial instruments rose by 27.3% in real terms, representing nearly USD 18 billion. The largest donors on a gross basis were the US, Japan, the UK, Germany and France (see Table 2).

Further outlook

The 2014 DAC Survey on Donors’ Forward Spending Plans gives estimates of future aid allocations for all DAC members, major non-DAC and multilateral donors up to 2017, based on developing countries’ gross receipts of Country Programmable Aid.  CPA thus differs from ODA, especially by counting multilateral agencies’ outflows rather than inflows.  The CPA increase predicted last year for 2013 did translate into increased overall ODA, and affected all income groups.  Global CPA rose by 10.2% in real terms in 2013 to USD 103.1 billion, but with widely differing increases from DAC members (+2.0%), multilateral agencies (+17.6%), and non-DAC donors (+123.7%).

CPA is projected to increase slightly by 2.4% in real terms in 2014, due to continued increases by a few DAC donors and multilateral agencies, and is expected to remain stable beyond 2014.

The survey suggests a continued focus in the medium term on middle-income countries – many with large populations in extreme poverty – in particular countries such as Brazil, China, Chile, Georgia, India, Mexico, Pakistan, Sri Lanka, and Uzbekistan, where programmed increases above 5% are expected up to 2017. It is most likely that aid to these countries will be in the form of soft loans.

By contrast, the survey suggests a continuation of the worrying trend of declines in programmed aid to LDCs and low-income countries, in particular in Africa. CPA to LDCs and LICs is set to decrease by 5%, reflecting reduced access to grant resources on which these countries are highly dependent. Some Asian countries may see increases, however, so that by 2017 overall allocations to Asia are expected to equal those towards Africa.

According to the donor survey, some Asian countries may see increases, however, so that by 2017 overall allocations to Asia are expected to equal those towards Africa. [IDN-InDepthNews – April 19, 2014]

Image credit: OECD

2014 IDN-InDepthNews | Analysis That Matters

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