EU Urged to Fill Development Finance's 'Gaps'

The Berlaymont in Brussels houses the headquarters of the European Commission. Photo by: European Union

The European Union could add more value to its multilateral aid by focusing on ‘gaps’ left unfilled by other sources of development finance instead of exploring and investing in new financial instruments, according to a network of EU-based non-governmental organizations focused on debt, finance and poverty reduction.

“Added value could come from filling the gaps that other sources of development finance cannot fill, i.e. providing grant resources which are not forthcoming from other sources and provide public sector support,” the European Network on Debt and Development, or Eurodad, said in a open letter to EU development ministers, who are meeting on Thursday (July 14) in Poland.

In its letter, Eurodad also emphasized the need to strike a balance between private and public sector support for development efforts and between loans and grants. The group argued that there is already a “vast amount” of lending and private sector support from EU institutions as well as other international financial institutions.

Eurodad outlined several recommendations on how EU development ministers can help restore the balance between the types of financial sources available to poor countries:

  • Stop increasing current levels of blended aid packages, which include both loans and grants, and of the use of aid to leverage private sector support.

  • Ringfence the amount of aid the EU provides for public sector investments.

  • Commission an independent review of the effectiveness of the European Investment Bank in delivering blended aid packages and private sector investments in African, Pacific and Caribbean countries.

  • Ensure private sector investments comply with international aid effectiveness principles.

  • Develop and implement operation policies to ensure that lending and private sector investments are in line with high standards of responsible financing.

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About the author

  • Ivy Mungcal

    As former senior staff writer, Ivy Mungcal contributed to several Devex publications. Her focus is on breaking news, and in particular on global aid reform and trends in the United States, Europe, the Caribbean, and the Americas. Before joining Devex in 2009, Ivy produced specialized content for U.S. and U.K.-based business websites.