Norway diverting aid to cover refugees: Robbing Peter to pay Paul?

The Norwegian flag. The country plans to divert ODA funds to finance the costs of the refugee crisis. Photo by: Lemsipmatt / CC BY-SA

The Norwegian government is considering diverting 21 percent of its $4.8 billion official development assistance budget to supporting domestic refugees for their first year in Norway, a Norwegian Ministry of Finance spokeswoman told Devex.

Norway’s proposed cuts come as a supplement to the country’s 2016 budget proposal and are the most recent and most severe of any European country so far. The funds will ease the transition of refugees fleeing to Europe from war-torn Syria. Finland approved drastic cuts last month during extended budget negotiations, amounting to a 20 percent cut to its $798 million aid budget. Sweden is weighing similar proposals amid fierce resistance from NGO groups and reports of internal dissent right up to the cabinet level. The trend suggests a shift in what observers previously called “Nordic exceptionalism” in the region’s robust aid policies.

Aid experts from Save the Children Norway worry the government’s decision to use ODA domestically could create a trend across Europe resulting in drastic cuts to development projects and the budgets of aid implementers overseas. The measures also create a degree of uncertainty, at a time when the newly approved Sustainable Development Goals call for long-term consistency and commitment from donor countries.

At the same time, Veslemøy Lothe Salvesen, Norwegian Ministry of Finance spokeswoman told Devex the reduction was offset by a $145 million increase in the aid budget, and that despite the huge reduction, Norway will maintain its status as a top aid donor.

“Norway’s total aid budget for 2016 makes us one of the largest aid donors in the world, both in terms of percentage of [gross national income], at 1.03 percent, and not least in terms of foreign aid per capita,” Salvesen told Devex.

While OECD policy states ODA funds may only be used for the first year of a refugee’s resettlement, the Norwegian government has hinted that the increase in funds diverted for this purpose — previously 18 percent, according to the Ministry of Finance — will likely be a long-term result of the ongoing refugee crisis.

“We are laying the foundations for a policy that is sustainable in the long term in a situation with large asylum flows ahead,” said Norwegian Finance Minister Siv Jensen in a statement.

Yasmin Ahmad, data collections manager in the OECD’s development cooperation directorate, added that officials are worried OECD countries may abuse the policy for political reasons, using the refugee offsets to rationalize a reduction in ODA.

“As of now, there’s no capping of how much ODA can go to [domestic] refugees; donors can spend as much as they want,” Ahmad told Devex in a phone interview.

“It’s the biggest crisis we’ve had for using ODA for something that’s not a cross-border fund,” she said. “We are addressing the problem with our members in order to safeguard ODA.”

The Norwegian government estimates that the total number of refugees settling in Norway will reach 33,000 in 2016. The funds diverted from ODA will help ensure new arrivals are able to “acquire a home, learn Norwegian and win entry into the labor market,” Jensen said.

However, if funds are diverted, the effect on aid projects, overseas and bilateral assistance would be dire, Tove Wang, CEO of Save the Children Norway, told Devex.

“It’s the poor people in Africa, Asia and Latin America who will actually pay this bill,” Wang said in a phone interview with Devex. “We are a country that could settle it ourselves, instead of sending the bill to Africa.”

Wang pointed out that the knock-on effect for civil society organizations would be huge, amounting to a 66 percent cut to both local and international implementers in-country.

“That was surprising to us because CSOs have been seen as a fairly efficient channel for long-term development assistance,” Wang said.

Notably, while Finland’s measures saw a decrease in grant-based aid, cuts were slightly off-set by a $141 million increase to financial investments. It remains unclear what percentage, if any, of Norway’s offsets will go to investments vs. traditional aid.

The damage to implementer operations would echo Finland’s cuts, which reduced annual support for these organizations by 38 percent.

“It may be that we are just going to have more of a consensus among donors in favor of using ODA for domestic refugee support,” Simone Dietrich, senior lecturer of government at the University of Essex and director of ESSEXLab told Devex.

Dietrich noted that Norway’s decision could accelerate the trend across EU member states and neighboring countries of diverting a portion of ODA to incoming refugees.

“[This] of course paints a more dire picture for the future of development-oriented ODA,” she said.

Though the government hasn’t yet provided a breakdown of the proposed cuts, Dietrich speculated that organizations with short-term contracts may be the hardest hit.

“Depending on the terms of contract, it may be more difficult to withdraw funding from multi-year contracts relative to short-term ones,” she said.

Salvesen told Devex the government will preserve “as far as possible” development projects related to “education for children and young people, humanitarian assistance, and health in fragile states.”

According to OECD data, the amount of refugee support in OECD countries has more than doubled in the past 10 years. OECD donor countries spent an average of 4.4 percent of their ODA budgets on refugee support in 2013. Over the past few years, Sweden has led the region in ODA-sourced refugee support at 18 percent, followed by Switzerland at 12 percent and the Netherlands at 11 percent.

Does the ODA shift spell the end to "Nordic exceptionalism"? Have your say by leaving a comment below and stay tuned for more on this issue from Sweden, the United Kingdom, Germany and elsewhere across the EU.

Read more international development news online, and subscribe to The Development Newswire to receive the latest from the world’s leading donors and decision-makers — emailed to you FREE every business day.

About the author

  • Molly%2520anders%2520cropped

    Molly Anders

    Molly Anders is a former U.K. correspondent for Devex. Based in London, she reports on development finance trends with a focus on British and European institutions. She is especially interested in evidence-based development and women’s economic empowerment, as well as innovative financing for the protection of migrants and refugees. Molly is a former Fulbright Scholar and studied Arabic in Syria, Jordan, Egypt and Morocco.