Where global public goods meet development aid

By Kerri Elgar, Senior Policy Analyst, Development Co-operation Directorate, OECD

To what extent should development aid budgets contribute to the fight against climate change, to the development of life-saving vaccines, or to support for refugees living in advanced economies?

As global crises increase in frequency and intensity, many governments are turning to their aid budgets to help fill various new and critical financing gaps as these emerge. Historically, the use of official development assistance (ODA) to help respond to cross-border challenges and contribute to the provision of global public goods[1] is not new. This financing has long been part of overall aid flows, with many prominent success stories, for example: the Global Polio Eradication Initiative, the Amazon Protected Areas Programme or certain peace building efforts with benefits for regional and/or global stability. But in recent years, there’s been a steep increase in the share of ODA going to these challenges and in the emphasis on win-wins for donor countries in aid narratives. This shift raises questions for the future objectives and composition of development assistance, as well as for national level ownership and development effectiveness. Speaking at the 2022 Effective Development Co-operation Summit, United Nations Deputy Secretary-General Amina Mohammed flagged her concerns about these issues:

“[W]e see many bilateral programs that remain loosely co-ordinated or not anchored in national priorities of concern…  many countries are increasingly diverting funding away from long-term development goals towards immediate crisis-related needs including within donor countries themselves. At a time of surging and mutually reinforcing crises we need additionality and the alignment of financing with the SDGs, not creative repurposing.”

While definitions of global public goods vary, along with attempts to measure how these are financed, a new OECD Working Paper on Development Co-operation and the Provision of Global Public Goods shows that global public goods and their alter egos – global public “bads” or challenges – are claiming an increasing share of development finance budgets. According to this analysis, aid spending on what could be considered as the provision of global public goods by members of the OECD Development Assistance Committee (DAC) has grown from an estimated 37% of average bilateral ODA in 2007-11 to around 60% in 2017-21, due in large part to growing expenditure related to climate challenges, costs for refugees in donor countries, food security, and infectious diseases.

This trend, in itself, is not necessarily cause for concern. The 21st Century is increasingly defined by complex disruptions and cross-border risks that threaten global stability and increase inequalities between and within countries. In a highly interconnected world, negative spillovers from these challenges are bound to affect some countries more than others, often leaving the poorest and most vulnerable communities more exposed to cross-border threats. There is, therefore, a strong case to be made that increased spending on development-related global public goods will continue to meet the “ODA test”, provided that these flows offer a primary benefit to developing countries. Under this scenario, the criteria for ODA do not need to be tightened to exclude aid with win-wins beyond developing country borders; rather, the solution is to provide more development finance to respond to all these new demands, including those captured in new measuring tools such as Total Official Support for Sustainable Development.

Of more concern, however, is the paper’s finding that the share of aid financing to meet country-level development priorities – defined by the OECD as Country Programmable Aid  (CPA) – has declined over recent years to the extent that it now accounts for less than half of total ODA. Together, these trends imply that DAC members and other providers of development co-operation are facing a growing dilemma: how to balance country-driven demands for assistance with increasing pressures on aid budgets to deal with development-related global challenges?

As recognised in the United Nations Secretary-General’s report Our Common Agenda, resolving these tensions is likely to become a challenging but critical exercise, and can be expected to spur debate in a range of upcoming high level fora, including for the Paris Summit for a new global financial pact and the 2024 UN Summit of the Future. Within this discussion, a division has emerged between those who make the moral case to strengthen ODA integrity and create other channels for external financing as needed, and those who see a broader role for aid in promoting global stability and delivering win-wins for developed and developing countries.  Whatever the outcome, with only 12 percent of the SDGs on track, calls to protect developing country ownership and to deliver on promises of additionality in development financing can only get louder.

[1] Within the OECD, a ‘public good’ is “a commodity, measure, fact or service: which can be consumed by one person without diminishing the amount available for consumption by another person (non-rivalry); which is available at zero or negligible marginal cost to a large or unlimited number of consumers (non-exclusiveness); which does not bring about disutility to any consumer now or in the future (sustainability)” [Reisen, Soto and Weithöner, 2008]. See also examples of global public goods here.