Rich nations reverse aid cuts to poorest — but debt distress still looms

Aid from wealthy donor nations to the lowest-income countries has bounced back after a shock fall in 2022 — but they have been warned they are still “falling short” of the help required to combat debt distress and the climate crisis. A record $223.7 billion of official development assistance was delivered in 2023 by the 31 members of the Development Assistance Committee hosted by the Organisation for Economic Co-operation and Development — a 1.8% real-terms rise on $211 billion in 2022, the annual statistics show. Crucially, bilateral sums flowing to the group of least developed countries and to Sub-Saharan Africa rose by 3% and 5% respectively, after huge controversy over declines of 6.2% and 7.8% in 2022. The partial reversal was helped by a 6.2% fall in the share of ODA that DAC members spent domestically on hosting asylum seekers — although that sum still stands at $31 billion, or 13.8% of ODA, around double the proportion as recently as 2021. A fifth DAC member achieved the United Nations target to spend 0.7% of gross national income on aid — Denmark joining Norway, Luxembourg, Sweden, and Germany — but the average spend was unchanged at just 0.37%, a tiny increase from 0.31% in 2010. Carsten Staur, the DAC chair, said the bounce back in aid to LDCs and sub-Saharan Africa showed DAC members had protected “longer-term development assistance primarily to the poor, vulnerable and most fragile countries.” However, he told a media conference it was “not enough,” adding: “Given the challenges many of our partner countries are facing, stemming from climate change, from the long-term effects of COVID, from the war in Ukraine and all the knock-on effects of these crises, we're falling short. “The number of people living in extreme poverty is going up. Many countries are in debt stress, debt servicing cost is increasing and fiscal space for health, education, and other key domestic spending is decreasing.” OECD set out the “increasing risks of debt distress” in low-income countries, saying the sums due in the next three years, excluding debt to China, soared to $4.1 trillion at the end of 2023 — while the annual “financing gap” to meet the Sustainable Development Goals had risen from $2.5 trillion in 2015 to $4 trillion in 2023. Aid organizations pointed out that LDCS and sub-Saharan Africa still received less than in 2021, with Oxfam accusing DAC members of “a moral failure” by “keeping already insufficient aid at stagnating levels.” “Again, rich countries have betrayed their promise to the world’s poorest people – a promise to end hunger, invest in life-saving public health systems, and expand education opportunities so nobody is left behind,” said Salvatore Nocerino, Oxfam’s OECD and aid policy lead. Matthew Simonds, senior policy officer at the European Network on Debt and Development, said: “Even though wealthy countries reported spending more money on overseas aid, the devil is in the detail. A closer look reveals that yet again, geopolitical priorities and domestic budgets have taken precedence over the needs of the world’s poorest people.” The provisional 2023 figures showed Ukraine received the most aid for the second year running, an increase of 9% in 2023 to $20 billion, as the war triggered by Russia’s invasion entered its second year. Aid to the Palestinian territories of West Bank and Gaza rose by 12% to $1.4 billion — of which $758 million was humanitarian aid, a 91% increase, amid Israel’s bombardment of Gaza. Staur dismissed concerns about falling aid budgets in Europe, after Germany and France announced reductions, arguing ODA had proved resilient after the 2008 financial crash, so there is no clear “link between austerity policies and budgetary constraints and ODA levels.” There is also controversy over new rules that count funds channeled through “private sector instruments” as ODA, including the profits then generated for institutions in donor countries — arguably falsely inflating the level of ODA. But Staur argued PSIs are “little more than 1%” of ODA, arguing: “It's not dramatic, and even an increase in PSI will not be dramatic on ODA statistics. He added: “Hopefully it will generate a surplus, but that surplus will be reinvested in other ventures for development. So I don't see this as a real problem.”