Opinion: How the refugee crisis impacts Europe’s development spending

By mid-2016, the number of displaced people around the world reached an all-time high of 65 million. Driven by growing instability and conflict, large numbers of people desperate for a peaceful life — or simply the opportunity to earn a living — have attempted the journey to Europe.

The human costs of this crisis are incalculable. The stories of refugees packed into unseaworthy vessels — and the tragic accounts of the thousands who have died in the attempt — have become shockingly commonplace.

The refugee crisis has also, as a new report by the Donor Tracker shows, impacted development policies and budgets of European donors. It did so in three ways: It has influenced how much funding donors provide for global development, how donors report costs for hosting refugees as official development assistance and even how donors allocate funding within their development budgets.

Some donors cut their development programs as they use their ODA budgets to cover refugee costs

The Netherlands, Norway, and Sweden have covered parts of their costs for hosting refugees from within their development budgets. As a result, some funding that should have been allocated to development programs abroad has been set aside to support hosting refugees domestically. In all three countries, some of the funds budgeted for refugees were later reallocated again to development programs, as the number of incoming refugees turned out to be lower than expected. The United Kingdom government has not directly reduced funding to its Department for International Development. However, as parts of the costs for hosting refugees are — just like DfID’s budget — sourced from the U.K.’s 0.7 percent ODA budget, increasing refugee costs reduces the amount of additional funding that could potentially be allocated to DfID. In contrast, Germany, France, Italy and Spain have so far covered the costs of hosting refugees with money from outside of their ODA budget: Funds thus come “on top” of funding allocated to global development programs. Germany, Italy and France have increased their investments in development programs.

Donors report higher ODA levels since they include costs for hosting refugees  

Donors report parts of the costs of hosting refugees as ODA, even if they do not use their development budgets to fund them. Globally, these “ODA-reportable” refugee costs have quadrupled from $3.9 billion in 2012 to $15.4 billion in 2016, or 11 percent of total ODA, up from 3 percent in 2012. This shows that an increasing amount of ODA does not flow to developing countries, but remains in donor countries. Italy, Germany, Norway, Sweden, the Netherlands, France, the U.K. and Spain together accounted for 75 percent of these costs. In Italy — at the forefront of the refugee crisis given its proximity to North Africa — these costs made up 34 percent of ODA in 2016. In Germany, refugee costs (25 percent of ODA) were the main driver behind Germany’s reaching the 0.7 percent ODA/gross national income target in 2016, for the first time ever. Norway (18 percent) and Sweden (17 percent) also reported large shares, among others.

More funding is provided for humanitarian aid and fragile and conflict-affected regions

European donors are increasingly shifting their ODA towards humanitarian aid and regions that are fragile or affected by conflict, particularly the Middle East and North Africa. DfID allocates at least 50 percent of its budget to fragile and conflict-affected regions. France is increasingly focusing on the Sahel region in Africa. Germany has set up “special initiatives” to tackle the “root causes” of displacement in the MENA region. Italy has made migration a top priority of its G-7 presidency in 2017.

And where to from here?

There are three trends to watch out for in the coming months.

First, more refugees might come to Europe and put greater pressure on development budgets. The number of refugees dropped in 2016 due to the closing of the “Balkan Route” but this may change. According to the United Nations International Organization for Migration, 59,000 refugees arrived in Italy between January and May 2017, 45 percent more than during the same period last year. Add the potential cancelling of the European Union-Turkey refugee deal as a result of the political tensions between the EU and Turkey, and more refugees will seek shelter in Europe. Hosting those refugees will require new funding, and some donors might use larger parts of their ODA budgets to cover costs for hosting refugees, leading to cuts for development programs.

Second, ODA inflated by refugee costs made Germany reach the 0.7 percent target in 2016. Other countries have also come closer. A controversy has emerged around whether refugee costs should be at all reported as ODA, and this debate will likely continue. For now, costs for hosting refugees will continue to be reported as ODA. Advocates can lobby to keep ODA at that level even if refugee costs decrease. This would require further increases in funding for programs implemented in developing countries.

Finally, more investment in humanitarian aid may put additional pressure on development aid, drawing funding away from development programs in the longer term. Donors increasingly focus on migration and conflict-related spending. Programs and sectors that cannot prove adequately how they contribute to “tackling the root causes” of displacement may be under more pressure. However, advocates might also use this very reasoning to push European governments for more and better ODA by pointing out that tackling “root causes” is — after all — at the core of what development aid has always done.

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