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News : International Last Updated: Apr 14, 2010 - 10:10:21 AM


OECD says growth in development aid continued in 2009 despite financial crisis; Sweden gets top ranking for ratio of national income spent
By Finfacts Team
Apr 14, 2010 - 9:02:45 AM

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Source: OECD

New figures issued Wednesday by the OECD (Organisation for Economic Cooperation and Development), the Paris-based think-tank for 30 mainly developed countries, show continuing growth in development aid in 2009, despite the financial crisis. Sweden gets top ranking for the ratio of gross national income (GNI) spent.

Total net official development assistance (ODA) from the donors in the OECD’s Development Assistance Committee (DAC) rose 0.7% in real terms, but the rise was 6.8% once debt relief, a volatile item, is excluded.

The OECD Secretary General, Angel Gurría, welcomed news of the further increase in ODA and urged donors to keep the momentum going in future years, despite their fiscal challenges. “Aid is less than 1% of government spending on average in OECD countries while there is still much effort needed to reach the Millennium Development Goals (MDGs). This is a vital investment with big returns for the world as a whole” he said.

The DAC head, Eckhard Deutscher, pointed out that a clear majority of DAC members are meeting their aid commitments even in the face of the economic crisis. Though there has been an encouraging increase in ODA to Africa, Deutscher pointed out that this fell well short of the target of a $25bn increase by 2010 that was agreed by the G-8 countries at Gleneagles, Scotland in 2005. “Aid financing remains vital to meet the MDGs,” he observed, “so all donors need to make the efforts necessary to meet their commitments.”

ODA in 2009: In 2009, total net official development assistance (ODA) from members of the OECD’s Development Assistance Committee (DAC) rose slightly in real terms (+0.7%) to $119.6bn, representing 0.31% of DAC members’ combined gross national income. Debt relief, which had been especially high in 2005 and 2006 due to exceptional Paris Club packages for Iraq and Nigeria, fell sharply. Excluding debt relief, the rise in ODA in real terms was +6.8%.

If debt relief and humanitarian aid are excluded, bilateral aid for development programmes and projects rose by 8.5% in real terms, as donors continued to scale up their core development projects and programmes. Most of the rise was in new lending (+20.6%), but grants also increased (+4.6%, excluding debt relief).

In 2009, net bilateral ODA to Africa was $28bn, representing an increase of 3% in real terms over 2008. $25bn of this aid went to sub-Saharan Africa, an increase of 5.1% over 2008.

Donor performance:In 2009, the largest donors by volume were the United States, France, Germany, the United Kingdom and Japan. Five countries exceeded the United Nations ODA target of 0.7% of GNI: Denmark, Luxembourg, the Netherlands, Norway and Sweden.

The largest percentage increases in net ODA in real terms were from Norway, France, the United Kingdom, Korea (which joined the DAC with effect from January 01, 2010), Finland, Belgium and Switzerland. Significant increases were also recorded in Denmark, Sweden and the United States.

In 2009, the United States was the largest donor providing $28.7bn in net ODA flows, representing an increase of 5.4% in real terms over 2008. Its ODA/GNI ratio rose from 0.19% in 2008 to 0.20% in 2009. Total net US ODA flows increased to each region, particularly to sub-Saharan Africa (+10.5% to $7.5bn). ODA also increased significantly to Afghanistan (+39.5% to $3.0bn). US net ODA to the group of Least Developed Countries (LDCs) increased by +13.6% to $8.1bn.

Japan’s net ODA fell by 10.7% in real terms to $9.5bn, representing 0.18% of its GNI. The fall was mainly due to the fact that debt relief, notably for Iraq, fell compared to 2008. However, contributions to international financial institutions increased significantly in 2009.

The combined net ODA of the fifteen members of the DAC that are EU members fell slightly (-0.2%) to USD 67.1 billion, representing 0.44% of their combined GNI. DAC-EU ODA represented 56% of total DAC ODA.

In real terms, net ODA rose in seven DAC-EU countries as follows:

  • Belgium (+11.5%), due to a general scaling up of its aid;
  • Denmark (+4.2%);
  • Finland (+13.1%), as it increased its bilateral aid;
  • France (+16.9%), due to an increase in bilateral lending and contributions to international organisations;
  • Luxembourg (+1.9%);
  • Sweden (+7.4%), as it continued to achieve an ODA level of 1 % of its GNI;
  • United Kingdom (+14.6%), reflecting the scaling up of its bilateral aid.

Aid fell in the following DAC-EU countries:

  • Austria (-31.2%), due to reduced levels of debt relief compared with 2008;
  • Germany (-12.0%), as reduced debt relief outweighed significant increased bilateral aid;
  • Greece (-12%), reflecting tightening ODA budgets due to fiscal pressure;
  • Ireland (-18.9%), due to budgetary pressures;
  • Italy (-31.1%), due to a decrease in overall aid and reduced debt relief;
  • Netherlands (-4.5%);
  • Portugal (-15.7%);
  • Spain (-1.2%) though significant spending approved late in 2009 will only take effect in 2010, maintaining the increasing trend of its ODA.

Aid by EU institutions rose by 4.4% to $15.0bn, mainly due to an increase in grant programmes.

The OECD says that despite various shortfalls against commitments, ODA increased by nearly 30% in real terms between 2004 and 2009, and is expected to rise by about 36% in real terms between 2004 and 2010. ODA as a percentage of GNI rose from 0.26% in 2004 to 0.31% in 2009 and is expected to rise to 0.32% in 2010. This is the largest volume increase ever in ODA over such a period and does not depend on the large increase in debt relief which boosted the aid numbers in 2005-07. The think-tank saiys continued growth in ODA has shown that aid pledges are effective when backed up with adequate resources, political will and firm multi-year spending plans. ODA will continue to rise in 2010, unlike other financial flows to developing countries which have fallen sharply since the onset of the global financial crisis.

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