OECD aid reaches record high but more money is spent domestically

Net aid from members of the OECD’s Development Assistance Committee reached a record high in 2016, according to figures released today — but part of the increase was due to money spent on refugee costs back home, with some countries spending more than 20 percent of annual ODA domestically. Bilateral aid to the least developed countries also fell.

Official development assistance from the 30 member countries or unions of the committee, which account for about 80 percent of ODA worldwide, reached $142.6 billion in 2016, a rise of 8.9 percent year-on-year.

However, in-donor refugee costs accounted for $15.4 billion of that funding, up by 27.5 percent in real terms from 2015, according to preliminary figures released today by the Organisation for Economic Co-operation and Development. This means that over 10 percent of total net ODA in 2016 was provided for this purpose.

Nonetheless, net aid rose by 7.1 percent even after stripping out refugee costs, the organization said.

Increasing in-donor spending

In 2016, 15 DAC donors showed increases in refugee costs as a percentage of their total ODA flows. The biggest increases were seen in Finland (rising from 3 percent in 2015 to 12.3 percent in 2016), Germany (16.8 percent to 25.2 percent), Italy (24.6 percent to 34.3 percent) and Norway (10.8 percent to 18.4 percent).

However, Austria, Germany, Greece and Italy registered the highest refugee costs as a percentage of ODA spending in 2016, at over 20 percent each.

Increased ODA spending domestically has been going on for several years among DAC donor countries. Many attribute this to the arrival of refugees affected by conflict in the Middle East. OECD rules currently allow this, but generally only for transportation of refugees to host countries and sustenance within one year of resettlement in a DAC member country.

A number of aid advocates have raised concerns about its impact on the volume of assistance spent overseas. While donors such as Germany — which reached the U.N. target of spending 0.7 percent of its GNI on foreign aid for the first time last year — continued to increase their overall ODA, others are diverting more of their assistance domestically, while at the same time cutting their core ODA funding. Finland’s total net ODA dropped from $1.288 billion in 2015 to $1.057 billion in 2016, but the proportion of its ODA spent domestically rose by 9.3 percentage points over the same period.

CONCORD, the European confederation of relief and development NGOs, expressed disappointment over the figures, which it said diverts aid from the countries most in need of assistance.

“Supporting refugees arriving in Europe is absolutely the right thing to do, and something we as Europeans should be proud of,” Amy Dodd, chair of the CONCORD structure working on financing for development, said in a statement. “But counting in-donor refugee costs as aid — money spent in the donor country which never reaches a developing country — is of questionable development impact at best and certainly an attempt to artificially inflate countries’ aid figures.”

The DAC has also been criticized for a move to include more security-related costs within ODA spending, subject to its “development test,” among other changes announced last year.

Falling aid trend to LDCs

Despite promises to increase aid to the least developed countries, bilateral assistance between DAC members and LDCs fell 3.9 percent in real terms to $24 billion in 2016, “as some DAC members backtracked on a commitment to reverse past declines in flows to the poorest countries,” the OECD said in a press release.

Detailed figures on the donor and recipient countries most affected are not yet available, and will likely be published toward the end of the year.

However, countries including Australia, Croatia and Denmark had lower ODA budgets overall as a result of cuts to bilateral aid programs.

Falling bilateral assistance to LDCs reflects an ongoing trend, although there was a slight increase in 2015, according to Yasmin Ahmad, OECD’s head of aid statistics. In 2014, aid to LDCs also saw a drop of almost 5 percent year-on-year.

“Part of the reason could be increases in humanitarian aid, but we would not be able to confirm that until we get the final figures,” Ahmad said in a webinar prior to the launch of the preliminary figures. Humanitarian aid stood at $14.4 billion in 2016, an increase of 8 percent in real terms from 2015.

Nonetheless, Ahmad noted that the OECD Secretariat will be pushing for DAC member countries to better target their aid toward LDCs.

Ahmad previously underscored the need for DAC donors to maintain their support for LDCs in an interview with Devex last year. She added at the time that an increasing interest among donors in providing concessionary loans in place of traditional grants was also having an impact on levels of aid to LDCs.

“Major donor nations have committed to refocus their efforts on the least developed countries,” OECD Secretary-General Angel Gurria said in a news release. “It is now time to turn these commitments into action. Together, we must pay close attention to where the money is going and what is being included in foreign aid.”

The OECD is currently looking at how to secure more private sector money to boost development assistance in pursuit of the Sustainable Development Goals, alongside emerging discussions among member countries on redefining ODA to include wider private sector support. However, civil society representatives have voiced concerns that this would lead donors to move further away from reaching the world’s poorest people.

In a statement shared with Devex, Eurodad senior policy and advocacy officer on aid, Polly Meeks, said that OECD rules allowing for donors to include in-refugee costs in ODA figures have already shown how easy it is to disguise the amount of aid going to poor countries.

The DAC’s new chair Charlotte Petri Gornitzka told Devex last month that the committee would begin large-scale reforms this summer, but the content of those reforms is not yet clear.

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