Amid the cuts, why the OECD development chief is optimistic about aid

If you are looking for a glass-half-full assessment of the state of foreign aid, look no further than Carsten Staur. The chair of the Organisation for Economic Co-operation and Development’s Development Assistance Committee has been in the job for 18 months, leading the largely closed-door group that defines what qualifies as aid, measures it, and peer-reviews each other’s efforts. But the start of the Danish career diplomat’s tenure has seen many of the top donors on the 32-member committee announce deep spending cuts, including France, Germany, the Netherlands, Sweden, and the European Union. The new Labour government in the United Kingdom is showing no sign of hurrying back to the 0.7% target of gross national income for official development assistance, or ODA, abandoned by the previous Tory administration. USAID is going backward in its effort to channel more money to local organizations. The European Commission, the EU’s executive arm, is openly stating its intention to use its formidable aid budget as an arm of its “economic foreign policy” — i.e. in its own interests. Aid to the lowest-income countries is trending downward. And with the World Bank’s International Development Association; Gavi, the Vaccine Alliance; and the Global Fund to Fight AIDS, Tuberculosis and Malaria among the heavy-hitters facing upcoming replenishments, the Center for Global Development warned in February that “2024-2025 could become a zero-sum competition for a fixed pot of resources.” Bill Gates is just one of many pointing to the growing tension between the funding demands of climate change and global health. So, when we met with Staur in his office in Paris recently, we asked, “how will this all add up?” The volume of foreign aid will always reflect geopolitical conditions, he answered, citing the steep drop in ODA after the end of the Cold War. The United Nations-led effort in setting the 2000-2015 Millennium Development Goals and then the 2015-2030 Sustainable Development Goals showed the “surge in support” for development cooperation built on a global platform, he said. Contrast that with today’s world, Staur said, where, particularly in Europe, countries are grappling with budget deficits and higher military spending. His argument is that it is possible to do it all. “Countries should be able to do what they need to do in their budget policies, in their defense policies,” Staur said, “but at the same time, maintain a level of development cooperation that is in line with the aspirations of the commitments they have made.” Few do. Only five of the 32 DAC members hit the 0.7% target in 2023. Is it time then to advocate more forcefully for new revenue streams for climate and development spending, such as solidarity levies on the likes of maritime fuel and financial transitions? “It's not for me to define what are the parameters for governments,” Staur replied. But, he added, “the argument that we are met with by many countries in the developing world, is that it is possible for developed countries to mobilize quite a lot of money when they see the need for it. We saw that with COVID-19. We have seen it in other circumstances.” For all the committee’s expertise and analytical rigor, the DAC rarely, if ever, criticizes its own members. Staur continued that tradition. As the EU embraces a self-interested version of its aid spending as a way to forge markets for European companies, do we risk a return to the bad old days of tied aid? No, Staur replied, “global solidarity and humanitarian support for those who have less” are ingrained ideas in European development policy. Support to the Least Developed Countries group from European donors is sinking well below the U.N.-target of 0.15%-0.2% of GNI, but Staur said that the EU, the World Bank, and others are being asked to respond to middle-income countries’ need for greater access to concessional finance. And he thinks that is as it should be. “I must confess that I also see there’s some merit actually — when there has been a change in the global economic parameters — that we respond to that,” he said. “I would argue that it should not be a response at the cost of the most vulnerable countries. And I hope that in the longer run, we can redress that situation.” Could the fourth Financing for Development summit in Seville, Spain, in June 2025 provide some solutions? “We [the DAC] are not part of it, that's very clear,” Staur said. “It's member states of the U.N. that will negotiate the outcome of the FFD4. But I hope we can impact on the thinking and the rationale, the facts and the visions behind it.” Seville comes 10 years after the previous Financing for Development summit in Addis Ababa, Ethiopia, which championed the idea of using billions in public money to trigger trillions in private sector investment on global development issues. Earlier this year, however, Staur wrote on LinkedIn of the need to analyze why aid had failed to leverage more private finance. “There’s no doubt that we have been slow as an international community,” he told Devex. “The expectations created in Addis were quite high and it has not been delivered upon.” His two suggested reasons? First, the geoeconomic situation has changed: “COVID-19, the credit crunch with interest rates, and you can see that there has been a decline in foreign direct investment in recent years.” Second, donor governments have taken longer than expected to create blended finance instruments. Still, Staur said now is the time to focus on the elements that are “picking up traction,” such as guarantee schemes (to de-risk investments), as well as green and blue bonds. “I think we are at the brink of developing a lot of new initiatives and ideas that can actually be followed up,” he said. “So I would say that the glass is more half full than it's half empty. It has taken time to get the water into the glass … But I think we are at a situation now which is quite positive, in the sense that I think we have a lot to build on, and I think we can go forward in that direction.”