Opinion: As aid levels stall, quality of spending is critical

An internally displaced persons camp at Dollow houses new arrivals from the Bay and Bakool regions in Somalia. Photo: Amunga Eshuchi / Trocaire / CC BY

This weekend, as executive directors of the World Bank and International Monetary Fund meet with finance ministers in Washington, D.C., to discuss how to address the multitude of global aspirations and challenges, they must also think about the promises leaders have made.

Scaling up sustainable financing for development — including how to leverage private finance and increase access to concessional and non-concessional lending — will be a key topic. But what the discussion most likely won’t include is how to increase traditional official development assistance, as most donors are sidestepping their aid commitments and instead focusing on leveraging other financing flows.

Last week’s release of the latest ODA figures by the OECD’s Development Assistance Committee — the organization that monitors policy and tracks aid reporting by countries — is underwhelming. Total net aid in 2017 from DAC donors was $146.6 billion, representing a slight fall of 0.6 percent in real terms from 2016, the first actual decrease in many years. Aid as a share of national income also fell to 0.31 percent (from 0.32 percent).

On average, donors are moving further away, not closer, to the gold standard benchmark of 0.7 percent ODA of a nation’s gross national income. Only five countries met that target in 2017 — Denmark, Luxembourg, Norway, Sweden, and the United Kingdom, which is the only G7 donor, and barely squeaked in based on rounding. Germany, having previously met the target in 2016 due to additional refugee costs, has now come up short with a fall in those same costs.

Note: Interactive version on Tableau Public here, which can be embedded directly into a published piece.

Rising costs spent on refugees living in donor countries have accounted for more than one-third of the overall aid increases in the past eight years. When the G7’s historic Gleneagles commitments came to an end in 2010, ODA excluding in-donor refugee costs and debt relief increased by approximately 14 percent in real terms, or $16 billion. In that same time period, in-donor refugee costs grew by 325 percent, or $10.5 billion.

Although these costs never leave donor countries, the rules of the OECD DAC state that the costs of supporting refugees for the first year can be reported as aid. Last year, asylum seeker applications in Europe dropped by almost half of what they were in 2016, but reported in-donor refugee costs only dipped by 13.6 percent, and still account for 9.7 percent of total ODA. And this subsidy for refugee costs does not account for all aid decreases — excluding these costs, almost half of donors, including Germany, Australia, and the Netherlands, still decreased their total aid in 2017.

One positive story from the data is that the share of aid going to the least developed countries, where over 40 percent of people in extreme poverty live, increased for the first time in four years. Yet the 28.4 percent of total aid going to LDCs in 2017 is still far below the 33.4 percent figure from 2010, and greatly out of proportion compared to need. Although 28 percent of aid in 2017 — down from 32 percent in 2013 — went to sub-Saharan Africa, the region is still home to more than half of people living on less than $1.90 each day.

At a time when aid levels are stalling, the quality of that spending is critical to success. Donors once aspired to increase aid effectiveness alongside volume, and committed to the Paris Principles later to become the Development Effectiveness Principles in Busan. Targets around making aid more transparent, more aligned with country’s needs, and “untying aid” — making aid independent on procurement from companies in a donor country — were aims donors were measured against and held accountable.

But the past few years have seen donors lobbying within the OECD DAC to change the rules around what counts as aid, pushing to include refugee costs and tools used to leverage private finance, often with the aim of incorporating spending in other contexts, as aid. Rather than finding ways to increase real aid, many donors are trying to find ways of increasing aid recognition without any additional financial cost.

It’s undoubtable that we’re going to need to mobilize trillions of dollars in financing to meet global challenges. The costs of humanitarian crises are projected to double to $50 billion by 2030, alongside an increase in the number of people displaced globally. Meeting the goals of ending poverty for the 767 million people in this world who scrape by on less than $2 a day; providing vaccines in order to prevent death for the nearly 6 million children who never live to see their 5th birthday; and giving all 36.7 million people living with HIV access to medicines so they, and their children, can have a shot at life — just to name a few — are going to need substantial and sustained investments. We also know that Africa’s population will double by 2050.

Investments are needed to ensure this next generation has the resources and opportunities to be educated, employed, and empowered. Fiddling at the margins and forcing trade-offs in an already limited pot aren’t going to cut it.

Countries should follow the lead of the U.K., the first G7 country to meet the target of spending 0.7 percent of its national income on aid, which it enshrined in law in 2015. In a promising sign, some donors, including France, Japan, and Italy, all made big aid increases in 2017. 

Indeed, France has set out a trajectory to meet 0.55 percent ODA/GNI by 2022. And a strong bipartisan congressional consensus on the importance of foreign aid in the United States has helped protect the budget from attempted cuts by the Trump administration. All the while China — not a member of the OECD DAC — has been making moves to better coordinate investments in Africa, which it sees as a strategic priority. While it’s going to take more than a few countries to see a real turnaround, there are ample opportunities.

This year the European Union is debating the Multiannual Financial Framework, its budget for the next seven years. If EU countries begin to make serious progress toward 0.7 percent and continue to channel approximately 20 percent of their aid through the EU’s budget, there could be an additional 40 billion euros available over the next seven years, which should be prioritized for the people who need it most, particularly women and girls in the least developed and fragile countries in Africa.

To make the most of every dollar, we need a return to the aid effectiveness principles, which aim to see aid spent well, not cheaply, with returns measured in development impact, rather than financial return.

Note: Interactive version on Tableau Public here, which can be embedded directly into a published piece.

About the author

  • Sara Harcourt

    Sara Harcourt is senior policy director for development finance at the ONE Campaign in London, where she leads a team focused on analysis of official development assistance and domestic resource mobilization. Previously she worked on aid effectiveness and U.S. foreign assistance in Washington, D.C.; and represented ONE at the Fourth High Level Forum on Development Effectiveness in South Korea in 2011. Prior to joining ONE, Sara worked for the Global Economy and Development program at The Brookings Institution in the United States, where she helped launch the Africa Growth Initiative. She holds an M.A. in international relations from the University of Florida, and a B.A. from Wake Forest University.