The Organisation for Economic Co-operation and Development’s Development Assistance Committee is a group of donor countries that monitors development finance flows. Over the past 20 years it has periodically amended the rules for calculating official development assistance — most recently as part of the ODA modernization process. Despite the DAC’s mandate to ensure the quality and integrity of ODA statistics, agreements reached thus far have mostly gone in the opposite direction and are negatively affecting the quality and quantity of ODA flows reaching countries in the global south.
This week, the DAC Working Party on Development Finance Statistics, or WP STAT, the main body responsible for the quality and integrity of ODA statistics, will meet for three days. Discussions could lead to the expansion of old agreements and/or the construction of new ones — notably, on reporting arrangements for private sector instruments, or PSI; the reporting of the donation of excess COVID-19 vaccine doses as ODA; and the eligibility of Special Drawing Rights to be counted as ODA.
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One thing is certain: At a time of deep economic and social crisis, ODA is a unique source of development finance that can have a direct positive impact on the eradication of poverty and inequalities at multiple levels. The DAC community will risk isolating itself as an increasing number of observers question the impact of the ODA they are providing.
At Eurodad we are particularly concerned about the implications of these discussions for the quality and integrity of the ODA statistics. And we are not the only ones that are concerned.
Firstly, since 2018, donors have been allowed to count funding used to make direct investments in private enterprises in low- and middle-income countries, or through development finance institutions and investment funds, as ODA. This is included in the provisional PSI reporting arrangements.
This agreement has helped accelerate a risky narrative that assumes that the private sector is the answer to mobilizing high volumes of development finance. Yet the role of ODA statistics is not to incentivize the use of specific instruments, but to measure DAC providers' efforts to meet their international commitment to allocate 0.7% of their gross national income to development cooperation.
The discussions this week will ease the path toward the reporting of other PSI operations such as guarantees, independently of whether they are used or not.
This trend must stop. Donors should first of all agree to rigorous and demanding criteria and standards, as well as effective transparency and accountability mechanisms that regulate the use of PSIs in development cooperation, and not compromise the critical concessional nature of ODA.
In the absence of a permanent agreement on PSIs that seriously addresses these risks to ODA integrity and related safeguards, they should not report investments in PSI as ODA but as “other official flows.”
Secondly, the meeting may see a renewal of the agreement to report the donation of excess COVID-19 vaccine doses as ODA, with a reviewed and potentially increased reference price. This would be taking into consideration more expensive vaccines such as Pfizer and Moderna. As stated by civil society organizations, DAC providers receiving credit for the donation of their excess COVID-19 vaccine doses through the ODA statistics remains unconscionable.
Furthermore, these vaccine doses were never purchased with the interest of development partners in mind and should not be counted. DAC should drop all plans to report these donations. Any renewal of this agreement will prolong the undermining of the integrity, character and quality of ODA. Moreover, it remains unclear whether the agreed reporting safeguards have been applied, ensuring not only that vaccines were donated but whether they were actually injected.
Last, but not least, is the issue of the eligibility of SDRs as ODA. In 2021, the International Monetary Fund issued a total of $650 billion in SDRs — a supplementary reserve asset created to support LMICs’ responses to the health, fiscal, and environmental crises they are facing.
This translated into almost $400 billion currently sitting idle and unused in the central banks and treasuries of the world’s high-income economies, most of them DAC providers. There is rightfully an effort to transfer as much of these resources as possible to the global south. Yet, we are concerned that some DAC providers may use this week’s meeting to push for the inclusion of such flows in their ODA reporting, which would be very problematic.
SDRs do not represent a real budgetary effort from the DAC provider and cannot be reported in ODA in the same manner as other financial transfers. Any step toward further inclusion of SDRs in ODA reporting would lead to ODA inflation.
The Russian invasion of Ukraine has led to an acute rise in the international food and fuel prices, threatening global hunger on an unprecedented scale. Climate change, extreme weather events, and economic downturns are also contributing to growing food insecurity. ODA is a crucial and limited resource for the lowest-income countries that needs to be protected from any erosion affecting its quantity and quality.
In this time of crisis, donors should rise to the challenge of putting ODA to use in a way that will enable countries to finance their own sustainable pathways out of it. The role of DAC and its members is to uphold the integrity of ODA and its purpose, to eradicate poverty and inequalities, and address the most urgent issues.