Brussels, 12 April 2022 – The Development Assistance Committee (DAC) of the Organization for Economic Cooperation and Development (OECD) released its early figures for Official Development Assistance (ODA) spending across donor countries in 2021. In an increasingly unpredictable world that is still countering the shockwaves of the global pandemic and compounding crises, EU ODA donors are still falling short on their collective and decades-old commitments to leave no one behind.
The EU continues to fall short on its commitment to deliver 0.7% of gross national income (GNI) towards ODA. In absolute terms, the figures show that, for the nineteen EU DAC Member States’, ODA has increased by 4.2% (81.3 billion USD) compared to 2020. However, this represented only 0.49% of their ODA/GNI ratio. This is still far below the 0.7% ODA/GNI target – and is especially alarming in a year where the effects of the global pandemic are continuing to reverse decades of progress on most human development indicators.
This target wasn’t set as a shot in the dark. It was agreed, with purpose, to ensure justice and global solidarity and it must be upheld to mitigate the impacts of rising inequalities amidst ever more frequent global crises. The EU and Member States’ responses to rising inequalities have been disjointed. Beyond the targets, it also matters how the EU delivers its ODA. While the quantity of ODA is critical, CONCORD also underscores the importance of ensuring that money actually reaches where it is needed most. As in previous years, this year’s figures show that some Member States, such as France and Germany, are increasingly favoring loans versus grants to bankroll development assistance. Instead of contributing to sustainable development in partner countries, this only fuels an already spiraling debt crisis.
Despite the EU’s repeated reaffirmation of its commitment to meeting the 0.7% target by 2030, very few EU Member States are actually keeping it, making the chances of meeting the Sustainable Development Goals even more remote. “Although there is progress in some areas, for example some increase in the support to Least Developed Countries, the EU is just not mobilizing enough development assistance to really support countries to achieve the SDGs by 2030,” says Antoinette van Haute, Research and Advocacy Officer at CNCD-11.11.11, the Belgian platform of French-speaking NGOs.
Development aid, often called “Official Development Assistance” (ODA), is all the funding or financing provided by public actors from the most well-off countries to improve living conditions in the least well-off countries.
Official development assistance (ODA) is defined as government aid that promotes and specifically targets the economic development and welfare of developing countries. The DAC adopted ODA as the “gold standard” of foreign aid in 1969 and it remains the main source of financing for development aid. ODA data is collected, verified, and made publicly available by the Organisation for Economic Co-operation and Development OECD.
ODA is grants or loans at favorable rates, whose aim is to fund programs to improve access to drinking water, health care, electricity, school, decent housing, or preservation of the environment, etc. This aid helps both to develop long-term projects and to provide humanitarian aid in emergencies. It can focus on small local projects or on very huge policies at a national level. ODA is implemented by local actors such as ministries, local authorities, banks, professional organizations, NGOs, or even businesses. But the aim is always to help local people.
The aid can go directly from the donor country to the beneficiary country. This is called “bilateral” aid. It can also take the form of contributions from States to the operating costs and programs of international organizations (such as UNICEF or the World Bank): this is “multilateral” aid.
At the global level, ODA amounted to 142.6 billion dollars in 2016. But this amount represents only one aspect of development financing or funding, which also includes public, local, and international financing, as well as private investment, money transfers from diasporas (around $400 billion per year), and actions carried out by foundations and NGOs, etc.
IMPLEMENT ALL DEVELOPMENT ASSISTANCE COMMITMENTS
To understand how to address financing needs emerging from this unprecedented crisis, we need to look at the evolution of the global aid architecture
This isn’t just about the loss of progress made, it’s also about the disproportionate consequences on peoples’ livelihoods. The economic impacts are felt especially by women and girls, who are more likely to earn less and to hold insecure jobs
2020’s report also provides a preliminary assessment of the ‘EU Global Response to COVID-19’ in partner countries. The EU efficiency in adopting the package was welcome, but it did not introduce extra funding. It only diverted it from other programs. Moreover, the lack of data availability makes it difficult to account for how the EU is spending this money.
COVID-19 brutally exposes how investments in social sectors are key to enabling sustainable development in partner countries. As we enter into the Decade of Action to accomplish the SDGs, EU ODA should be regarded as an essential expression of global solidarity. As Tomás Nogueira, Advocacy Officer at Portuguese NGDO Platform says, “… EU donors must drastically scale up their efforts to achieve their international commitments. Otherwise, it won’t be possible to address the economic and social consequences of the pandemic on people around the world, especially the most marginalized.” In the recovery from COVID-19, EU donors must collectively work against the trend of national priorities overshadowing international commitments.
Only four EU countries fulfilled or exceeded their commitments on development assistance in 2020: Denmark, Germany, Luxembourg and Sweden. And this in a year when – for the first time since 1998 – the global poverty rate has increased. An estimated 150 million additional people will be pushed into extreme poverty by the end of 2021, living on less than 1.90 USD per day. “This isn’t just about the loss of progress made, it’s also about the disproportionate consequences on peoples’ livelihoods. The economic impacts are felt especially by women and girls, who are more likely to earn less and to hold insecure jobs,” said Daniel Kaba, Executive Secretary at Ambrela, the Slovak platform of development NGOs. With less than a decade to reach the Sustainable Development Goals, the EU Member States simply must step up to meet their collective commitment of 0.7% ODA/GNI.
Brussels, 13 April 2021 – Today, the Development Assistance Committee (DAC) of the Organization for Economic Cooperation and Development (OECD) released its early figures for development assistance spending across donor countries in 2020. The DAC figures offer the first tangible evidence of the global pandemic’s impact on EU ODA. In absolute terms, according to the OECD DAC, EU aid increased by 7.8% (72.7 billion USD) compared to 2019. However, this rise is mainly the result of a fall in GNI prompted by the global pandemic. For the nineteen DAC EU Member States, this represented 0.5% of their ODA/GNI ratio – still far below the longstanding international commitment of 0.7%. The EU institutions’ ODA rose by 25.4% in real terms.
“Yes, EU ODA/GNI has risen, and we are glad, in particular, that EU institutions mobilized additional resources to respond to COVID-19. But this is not yet a reason to celebrate: EU ODA levels are still very far from the level of development financing required. And especially so if you think of the money needed to mitigate the social and economic impact of COVID-19, especially on women and girls,” said Luísa Fondello, International Cooperation Officer at Caritas Europa.
From among this broad range of financing and funding sources, ODA plays an essential role. It helps start up projects in sectors or areas that have been left behind. It initiates processes of “virtuous development” and creates dynamics that can help bring all the other stakeholders, especially businesses, into the picture. It creates a leverage effect that multiplies impacts. All in all, since the 1960s, development aid has proven to be effective: it’s a powerful factor of change for the most vulnerable populations.
Today, aid comes within the framework of the SDGs (Sustainable Development Goals) that have been set by the United Nations for the 2015-2030 period. The SDGs attempt to meet challenges that concern all countries—from the poorest to the most prosperous—and all domains. Their purpose is to build a peaceful, prosperous, egalitarian, and sustainable world.
2020 marks the first year since 1998 that the global rate of poverty has increased. The COVID-19 pandemic has much to do with that, but it doesn’t help that the EU and its Member States are further off-track than ever in meeting their aid targets. In fact, at the current rate of growth, the EU will not meet the (genuine) aid target before 2070, as revealed by CONCORD’s 2020 AidWatch report.
Since 2005, CONCORD’s annual AidWatch report monitors the quantity and quality of EU Official Development Assistance, or ODA. It holds the EU accountable for their commitment to allocate 0.7% of Gross National Income (GNI) to ODA by 2030. In 2019, despite an absolute rise of €3 billion, ODA fell for the third consecutive year in proportion to the EU’s GNI. So, the EU was off-track in its support to partner countries even before the global pandemic.
Only four EU countries fulfilled or exceeded their commitments on development assistance in 2020: Denmark, Germany, Luxembourg, and Sweden. And this in a year when – for the first time since 1998 – the global poverty rate has increased. An estimated 150 million additional people will be pushed into extreme poverty by the end of 2021, living on less than 1.90 USD per day. “This isn’t just about the loss of progress made, it’s also about the disproportionate consequences on peoples’ livelihoods. The economic impacts are felt especially by women and girls, who are more likely to earn less and to hold insecure jobs,” said Daniel Kaba, Executive Secretary at Ambrela, the Slovak platform of development NGOs. With less than a decade to reach the Sustainable Development Goals, the EU Member States simply must step up to meet their collective commitment of 0.7% ODA/GNI.
The quantity of EU ODA is one thing, but its quality is yet another. While welcoming the overall rise in EU ODA/GNI, CONCORD, the European Confederation of relief and development NGOs, underlines the importance of checking how much of this money actually reached the most marginalized people and countries. For instance, a considerable amount of the Team Europe package to respond to COVID-19 in partner countries is being disbursed through loans. This adds to the debt burden that many countries already struggle with and often negatively affects public spending on health and education which is crucial for marginalized communities, especially in the current situation.
ODA must be seen as an expression of EU solidarity with the rest of the world. This is especially the case for Least Developed Countries (LDCs), which have the highest need for resources to lift people out of poverty. Although the 2020 figures for EU ODA to LDCs will only be published at the end of this year, in advance of the 5th United Nations Conference on the LDCs, CONCORD is urging the EU to present forward-looking and concrete plans to achieve adequate financing for the countries furthest behind. “Given the interconnected crises such as rising inequalities, climate change, growing conflicts, and fragilities, it’s crucial that the EU prioritizes grant-based finance in its plans to achieve the target for ODA/GNI to LDCs”, said Tanya Cox, Director of CONCORD. “All EU-funded programs and projects to LDCs should also be screened to ensure they are in line with Leave No One Behind and gender equality principles,” she added.
To understand how to address financing needs emerging from this unprecedented crisis, we need to look at the evolution of the global aid architecture over the past two decades.
A new paper, “A Changing Landscape: Trends in Official Financial Flows and the Aid Architecture,” analyzes the trends between 2000 and 2019.
Development activities continue to remain highly fragmented with the average size of official loans or grants reducing by one-third in value over the last 20 years. Fragmentation is mostly concentrated in the social sectors and in bilateral activities. ODA grants, which dominate the number of transactions, saw a halving of average size from $1.5 million in 2000 to $0.8 million in 2019.
As the world’s most vulnerable people seek to recover from this crisis, three sets of emerging issues would benefit from additional research: the impact of proliferation and fragmentation on aid effectiveness; an analysis of the growing volume of aid beyond the country level; and the evolution of the concessionality of official finance.