France to reform aid program, increase annual development budget by 4 billion euros

French flags. The country’s aid agency, Agence Française de Développement will receive an increase of 4 billion euros by 2020 in its annual development budget. Photo by: Frog and Onion / CC BY

French President François Hollande confirmed last week a major reform of the country’s aid program that would boost its annual development budget from 8.5 billion euros ($9.27 billion) to 12.5 billion euros by 2020.

The French Development Agency — or AFD — will be integrated under the Deposits and Consignments Fund, a financial organization under control of the French Parliament. AFD’s yearly development budget will increase by 4 billion euros by 2020, of which half of that increase will be directed towards climate change — raising annual climate financing from 3 billion to 5 billion euros by 2020.

This reform is a direct result of a “redefinition” of sustainable development, which included the creation of a global framework for financing development post-2015 — also known as the Addis Ababa Action Agenda on finance for development, the Sustainable Development Goals, and last month’s Paris Climate Agreement, according to a French government report on the reform released last week.

Hollande first announced his intent to reform France’s development program in August last year during a gathering of French ambassadors in Paris.

“Our development policy must evolve, must be reformed, and the tools that, today, are at the service of this policy have to again be re-enforced,” Hollande said, adding that as a result of the reform, France will have “a true finance agency that will be better endowed, better equipped, and which will be better linked to local communities and to businesses.”

The reform — scheduled to come into full effect in September — will allow AFD and the Deposits and Consignments Fund to be more effective in four notable areas, the report states. First in the fight against global warming and the promotion of clean energy; second, in sustainable urban development; third, in engagements with the private sector; and fourth, in migration, security and crisis.

AFD — unlike most bilateral donors — finances primarily through loans as opposed to grants, and this reform will primarily boost the agency’s lending capacity. But the agency’s annual grant giving capacity will also increase, rising by 370 million euros by 2020, according to the government report.

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