Flat ODA and blended finance: What it means for aid implementers

Impact investing, domestic resource mobilization, blended finance — where do aid implementers fit inside this complex development funding picture? Photo by: Iain Browne / CC BY-NC-ND

If 2015 was the year for setting goals and signing on to global commitments, 2016 could be the year of figuring out how to pay for it.

Financing to support the Sustainable Development Goals and the Paris climate change accord will have a distinctly different feel than that of the era of Millennium Development Goals. The development finance picture today bears little resemblance to that of only a decade ago.

At that time, official development assistance, public funds given by donor governments through concessional loans and grants, had risen sharply from $85 billion given by Development Assistance Committee countries in 1990 to $128 billion in 2005. The wall between public spending and private investment in developing countries was also more intact. Debates centered on the differences between official development assistance and foreign direct investment and their relative effectiveness at creating results like job growth and reducing inequality, but not on how one could complement the other.

Now the picture is dramatically different. While official development assistance has remained relatively flat, increasing by $6 billion between 2005 and 2014 across DAC countries — and not at all from the largest donor country, the United States — private investment in developing countries has accelerated. In 2010, for the first time, foreign direct investment in developing countries surpassed foreign direct investment in rich countries. Developing countries have also seen the value of remittances from international migrants increase to roughly half a trillion dollars per year; and the international community has placed greater emphasis on the importance of domestic tax revenues to fund national development priorities.

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About the author

  • Igoe michael 1

    Michael Igoe

    Michael Igoe is a Senior Reporter with Devex, based in Washington, D.C. He covers U.S. foreign aid, global health, climate change, and development finance. Prior to joining Devex, Michael researched water management and climate change adaptation in post-Soviet Central Asia, where he also wrote for EurasiaNet. Michael earned his bachelor's degree from Bowdoin College, where he majored in Russian, and his master’s degree from the University of Montana, where he studied international conservation and development.