Aid-to-Developing-Countries

International Trade News from the OECD AID to Developing Countries Plummets

Development: Aid to developing countries falls because of global recession. Until 2011, aid had been steadily increasing for more than a decade.  Net ODA (official development assistance) rose by +63% between 2000 and 2010, the year it reached its peak.  ODA has long been a stable source of development financing and has cushioned the immediate impact of previous financial crises (e.g. after the Mexican debt crisis in the early 1980s or the recession of the early 1990s). However, a recession in several DAC donors has already severely squeezed their aid budgets and pressure may mount on other donors in the years ahead.

Major donors’ aid to developing countries fell by nearly 3% in 2011, breaking a long trend of annual increases. Disregarding years of exceptional debt relief, this was the first drop since 1997. Continuing tight budgets in OECD countries will put pressure on aid levels in coming years.

OECD Secretary-General Angel Gurría encouraged donors to meet their commitments, “The fall of ODA is a source of great concern, coming at a time when developing countries have been hit by the knock-on effect of the crisis and need it most. Aid is only a fraction of total flows to low income countries, but these hard economic times also mean lower investment and lower exports. I commend the countries that are keeping their commitments in spite of tough fiscal consolidation plans. They show that the crisis should not be used as an excuse to reduce development cooperation contributions.”

In 2011, members of the Development Assistance Committee (DAC) of the OECD provided USD 133.5 billion of net ODA, representing 0.31 per cent of their combined gross national income (GNI).  This was a -2.7 % drop in real terms compared to 2010, the year it reached its peak.   This decrease reflects fiscal constraints in several DAC countries which have affected their ODA budgets.  Within total net ODA, aid for core bilateral projects and programmes (i.e. excluding debt relief grants and humanitarian aid) fell by -4.5% in real terms.

Net ODA – ODA/GNI in 2011. Click on this link to access the online dynamic version.

In 2011, the largest donors were the United States, Germany, the United Kingdom, France and Japan.  The United States continued to be the largest donor by volume with net ODA flows amounting to USD 30.7 billion, representing a fall of -0.9% in real terms from 2010.

ODA from the fifteen EU countries that are DAC members was USD 72.3 billion in 2011. This represented 54% of total net ODA by all DAC donors.  ODA volume rose or fell in real terms in DAC-EU countries as follows:

  • Austria (-14.3%): mainly due to a decrease in debt forgiveness grants;
  • Belgium (-13.3 %): as bilateral debt forgiveness grants fell compared to 2010;
  • Denmark (-2.4%);
  • Finland (-4.3%);
  • France (-5.6%);
  • Germany (+5.9%): reflecting an increase in bilateral grants;
  • Greece (-39.3%): following the country’s severe fiscal crisis;
  • Ireland (-3.1%);
  •  Italy (+33.0%): because of an increase in debt forgiveness grants as well as an upsurge in refugee arrivals from North Africa;
  • Luxembourg (-5.4%);
  • Netherlands (-6.4%): reflecting the decision to fix the 2011 ODA budget at 0.75% of GNI;
  • Portugal (-3.0%);
  • Spain (-32.7%): because of severe cuts in bilateral aid resulting from the financial crisis;
  • Sweden (+10.5 %):  as Sweden continued to allocate 1 % of GNI to ODA;
  • United Kingdom (-0.8%): a slight fall after exceeding its target in 2010; however, the UK remains on track to achieve an ODA/GNI ratio of 0.7% by 2013.

Click here to view and download a PDF containing many informative charts and graphs illustrating the above.

2 Responses to “International Trade News from the OECD AID to Developing Countries Plummets”

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