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Development Aid Rose In 2009 and Most Donors Will Meet 2010 Aid Targets
April 15, 2010

Press Release by OECD
April 14, 2010

New OECD figures show continuing growth in development aid in 2009, despite the financial crisis.

Total net official development assistance (ODA) from the donors in the OECD’s Development Assistance Committee (DAC) rose 0.7% in real terms, but the rise was 6.8% once debt relief, a volatile item, is excluded (see tables and charts for 2009).

The OECD Secretary General, Angel Gurría, welcomed news of the further increase in ODA and urged donors to keep the momentum going in future years, despite their fiscal challenges. “Aid is less than 1% of government spending on average in OECD countries while there is still much effort needed to reach the Millenium Development Goals. This is a vital investment with big returns for the world as a whole” he observed.

The DAC Chair, Eckhard Deutscher, pointed out that a clear majority of DAC members are meeting their aid commitments even in the face of the economic crisis. Though there has been an encouraging increase in ODA to Africa, Deutscher pointed out that this fell well short of the Gleneagles target of a USD 25 billion increase by 2010. “Aid financing remains vital to meet the MDGs,” he observed, “so all donors need to make the efforts necessary to meet their commitments.”

ODA in 2009

In 2009, total net official development assistance (ODA) from members of the OECD’s Development Assistance Committee (DAC) rose slightly in real terms (+0.7%) to USD 119.6 billion, representing 0.31% of DAC members’ combined gross national income. Debt relief, which had been especially high in 2005 and 2006 due to exceptional Paris Club packages for Iraq and Nigeria, fell sharply. Excluding debt relief, the rise in ODA in real terms was +6.8%.

If debt relief and humanitarian aid are excluded, bilateral aid for development programmes and projects rose by 8.5% in real terms, as donors continued to scale up their core development projects and programmes. Most of the rise was in new lending (+20.6%), but grants also increased (+4.6%, excluding debt relief).

In 2009, net bilateral ODA to Africa was USD 28 billion, representing an increase of 3% in real terms over 2008. USD 25 billion of this aid went to sub-Saharan Africa, an increase of 5.1% over 2008.

Donor performance

In 2009, the largest donors by volume were the United States, France, Germany, the United Kingdom and Japan. Five countries exceeded the United Nations ODA target of 0.7% of GNI: Denmark, Luxembourg, the Netherlands, Norway and Sweden.

The largest percentage increases in net ODA in real terms were from Norway, France, the United Kingdom, Korea (which joined the DAC with effect from 1 January 2010), Finland, Belgium and Switzerland. Significant increases were also recorded in Denmark, Sweden and the United States.

In 2009, the United States was the largest donor providing USD 28.7 billion in net ODA flows, representing an increase of 5.4% in real terms over 2008. Its ODA/GNI ratio rose from 0.19% in 2008 to 0.20% in 2009. Total net US ODA flows increased to each region, particularly to sub-Saharan Africa (+10.5% to USD 7.5 billion). ODA also increased significantly to Afghanistan (+39.5% to USD 3.0 billion). US net ODA to the group of Least Developed Countries (LDCs) increased by +13.6% to USD 8.1 billion.

Japan’s net ODA fell by 10.7% in real terms to USD 9.5 billion, representing 0.18% of its GNI. The fall was mainly due to the fact that debt relief, notably for Iraq, fell compared to 2008. However, contributions to international financial institutions increased significantly in 2009.

The combined net ODA of the fifteen members of the DAC that are EU members fell slightly (-0.2%) to USD 67.1 billion, representing 0.44% of their combined GNI. DAC-EU ODA represented 56% of total DAC ODA.

In real terms, net ODA rose in seven DAC-EU countries as follows:

  • Belgium (+11.5%), due to a general scaling up of its aid;
  • Denmark (+4.2%);
  • Finland (+13.1%), as it increased its bilateral aid;
  • France (+16.9%), due to an increase in bilateral lending and contributions to international organisations;
  • Luxembourg (+1.9%);
  • Sweden (+7.4%), as it continued to achieve an ODA level of 1 % of its GN
  • United Kingdom (+14.6%), reflecting the scaling up of its bilateral aid.

Aid fell in the following DAC-EU countries:Austria (-31.2%), due to reduced levels of debt relief compared with 2008;

  • Germany (-12.0%), as reduced debt relief outweighed significant increased bilateral aid;
  • Greece (-12%), reflecting tightening ODA budgets due to fiscal pressure;
  • Ireland (-18.9%), due to budgetary pressures;
  • Italy (-31.1%), due to a decrease in overall aid and reduced debt relief;
  • Netherlands (-4.5%);
  • Portugal (-15.7%);
  • Spain (-1.2%) though significant spending approved late in 2009 will only take effect in 2010, maintaining the increasing trend of its ODA.

Aid by EU institutions rose by 4.4% to USD 15.0 billion, mainly due to an increase in grant programmes.

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

  • Australia (-1.4%) due to high debt relief levels in 2008 which did not continue into 2009;
  • Canada (-9.5%), following a large contribution to IDA in 2008 and a reduction in debt relief;
  • Korea (+13.5%), due to an increase in bilateral loans;
  • New Zealand (-3.2%);
  • Norway (+17.3%), due to an increase in its bilateral aid;
  • Switzerland (+11.5%), due to special debt relief for Togo and increased costs for asylum seekers being counted in its ODA.

Gross ODA (i.e. ODA without subtracting loan repayments) in 2009 amounted to USD 132.7 billion (see table for 2009). The largest donors were: the United States (USD 29.5 billion), Japan (USD 16.5 billion), France (USD 15.3 billion), Germany (USD 13.3 billion) and the United Kingdom (USD 11.7 billion).

The following non-DAC members reported changes in their net ODA in 2009 as follows:

  • Czech Republic (-4.7%);
  • Hungary (+21.7%), due to an increase in its bilateral programmes;
  • Iceland (-11.7%) due to budgetary pressures;
  • Poland (+13.2%);
  • Slovak Republic (-18.9%), as its bilateral assistance was reduced;
  • Turkey (+2.1%).

What are the expected aid levels for 2010?

At the Gleneagles G8 and Millennium +5 summits in 2005, donors made specific commitments to increase their aid. When quantified by the OECD Secretariat, the pledges implied lifting aid from around USD 80 billion in 2004 to nearly USD 130 billion in 2010, at constant 2004 prices, representing 0.36% of estimated GNI in 2010.

On 17 February 2010, the OECD released its first estimate of the 2010 ODA outcome, based on a special review of donors’ budget plans for 2010. This estimate has now been updated in light of the DAC donors’ 2009 performance and some further adjustments to the 2010 targets. In general, GNI reported by DAC donors for 2009 was slightly higher than previously estimated and the GNI prospects for 2010 are also slightly improved.

The OECD now estimates that the recent economic contraction has, by cutting nominal GNI, reduced the dollar value of the commitments made for 2010 to around USD 126 billion (in constant 2004 dollars), or USD 46 billion over the 2004 level, compared with the original estimate of USD 50 billion.

While most countries have maintained their commitments for 2010, others, including some large donors, have reduced or postponed the pledges they made for 2010. On the basis of current 2010 budget proposals and latest GNI figures:

  • The overall expected ODA level for 2010 is estimated at USD 108 billion expressed in 2004 dollars, an increase of USD 28 billion over the 2004 baseline, with the ODA/GNI ratio rising over the same period from 0.26% to an estimated 0.32%.
  • The shortfall is USD 18 billion (in 2004 dollars) against the 2005 commitments, once the effects of reduced GNI are taken into account; this shortfall impacts particularly on Africa.
  • Expressed in 2009 prices, projected 2010 ODA is estimated at USD 126 billion, representing an increase of nearly USD 6 billion over 2009.
  • Africa, in particular, is likely to receive only about USD 11 billion of the USD 25 billion increase envisaged at Gleneagles, due mainly to some European donors who give large shares of their official development assistance (ODA) to Africa not meeting their ambitious targets.

2010 is a key year for DAC-EU donors, who in 2005 aimed to reach a collective total of 0.56% of GNI in net ODA for that year, with a minimum country target of 0.51%. 2010 is also special for DAC-EU donors as it represents the midpoint between the 2005 commitments and the 2015 target date for meeting the 0.7% ODA/GNI level.

Some will surpass that goal: Sweden, with the world’s highest ODA as a percentage of its GNI at 1.01%, is followed by Luxembourg (1%), Denmark (0.83%), the Netherlands (0.8%), Belgium (0.7%), the United Kingdom (now estimated at 0.60%), Finland (0.56%), Ireland (0.52%) and Spain (0.51%).

But others are unlikely to reach the target, although some have made significant progress since 2004: France (estimated at between 0.44 and 0.48%, 0.46% is used in the attached projections), Germany (0.40%), Austria (0.37%), Portugal (0.34%), Greece (0.21%), and Italy (0.20%).

Other DAC countries made varying ODA commitments for 2010, and most, but not all, will fulfil them. The United States pledged to double its aid to sub-Saharan Africa between 2004 and 2010 and already attained this goal in 2009. Canada aimed to double its 2001 International Assistance Envelope level by 2010 in nominal terms, Australia aimed to reach $A 4 billion, and New Zealand planned to reach 0.28% of its GNI.

These three countries all appear on track to meet these objectives, and Australia and New Zealand have since set further targets for later years. Norway will maintain its ODA level of 1% of its GNI, and Switzerland will likely reach 0.47% of its GNI, exceeding its previous commitment of 0.41%.

Japan’s Gleneagles promise was to give USD 10 billion more over the period 2005 to 2009 than if its ODA had stayed at its 2004 level over this period. It fell short by USD 3.6 billion due mainly to severe economic and budgetary constraints, as well as significant early repayments on ODA loans by some borrowing countries. For 2010, Japan aims to increase its ODA, although since the exact level is not yet known the projections below use the 2009 figure for the time being.

Despite various shortfalls against commitments, ODA increased by nearly 30% in real terms between 2004 and 2009, and is expected to rise by about 36% in real terms between 2004 and 2010. ODA as a percentage of GNI rose from 0.26% in 2004 to 0.31% in 2009 and is expected to rise to 0.32% in 2010. This is the largest volume increase ever in ODA over such a period and does not depend on the large increase in debt relief which boosted the aid numbers in 2005-07. The continued growth in ODA has shown that aid pledges are effective when backed up with adequate resources, political will and firm multi-year spending plans. ODA will continue to rise in 2010, unlike other financial flows to developing countries which have fallen sharply since the onset of the global financial crisis.