Aid rising in 2016: No room for complacency

Charlotte Petri Gornitzka, Chair, OECD Development Assistance Committee
Jorge Moreira da Silva, Director, Development Co-operation Directorate, OECD

oda generic 22015 was a year of big promises: eradication of global poverty, delivery of more effective development finance and calls for resolute action against climate change, all for a better world by 2030. But with growing concerns about inequalities at home, and rising protectionism and unilateralism abroad, the last few months cast some doubts about whether OECD countries still firmly stand behind their commitments.

The latest OECD figures on international aid are reassuring: 2016 preliminary data on Official Development Assistance (ODA) provided by OECD Development Assistance Committee (DAC) countries reveals yet another increase in aid volumes, reaching the highest levels on record. This is an 8.9% increase in real terms. Indeed, since the adoption of the Millennium Development Goals in 2000, ODA volumes have more than doubled. It is also positive to note that support to multilateral agencies has increased, reflecting the vital role played by multilateral aid in responding to the global challenges that require collective responsibility.

Yet, there is no room for complacency. A closer scrutiny of the increases reveals that humanitarian appeals and response plans remain consistently underfunded, with only 60% of global humanitarian appeals funded in 2016. Inadequate resources are being over-stretched to cover a larger diversity of needs and greater instances of crisis. Continue reading

Maximising bang for the buck: Risks, returns, and what it really means to use ODA to leverage private funds

By Paddy Carter, Research Fellow, Overseas Development Institute

shutterstock_249974521The idea of using official development assistance (ODA) to leverage private finance is a staple of the financing for development circuit and features heavily in most donors’ strategies. Experienced financiers both from official sector development finance institutions (DFIs) and private investors are, however, still feeling their way into this field’s unfamiliar territory. DFIs for the most part emphasise the importance of providing finance on non-concessional terms to avoid distorting markets and crowding-out other sources of finance. Though some standard elements of their business could fall under the rubric of blended finance, such as grant-funded technical assistance, for the most part DFIs and development banks have treated explicit subsidies to private enterprises as dangerous medicine to be prescribed rarely. Now the pressure is mounting to find more creative ways to leverage private finance using ODA. But how?

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Reaching the last mile: The role of innovative finance in meeting the SDGs

By Judith Karl, Executive Secretary of UNCDF, and Samuel Choritz, Policy Adviser at UNCDF

financesdgsTo meet the SDGs with their emphasis on leaving no one behind, we need solutions that tackle persistent exclusions and inequalities in the local economies and communities where the poor live and work. Targeting the last mile means adapting solutions to the households, localities and small enterprises that are underserved, where development needs are greatest and where resources are scarcest.

Addressing market failures by making finance work for the poor is a critical catalyser to this end. Official Development Assistance (ODA) can be the largest source of external finance in least-developed countries, where private investment often favours commodity and real estate sectors. Disparities in incomes and living standards show that location matters more for living standards in developing countries than it does in developed ones [1]. “Last mile finance” models can use public resources — such as ODA — to de-risk and crowd-in public and private finance, especially from domestic sources, to create virtuous dynamics of inclusion, local growth, resilience, and productive investment. Continue reading

Setting the Record Straight on ODA

By Doug Frantz, Deputy Secretary-General, OECD 

Doug FrantzThere will never be enough development aid to solve all the problems in the poorest countries. If we are to lift the last 800 million people out of extreme poverty we will need to find new ways to mobilize resources beyond the traditional assistance from wealthy governments in the form of loans, grants and other concessions.

Government assistance remains vital. The billions of dollars donor countries pour into developing countries every year are critical both in terms of actual aid and as a catalyst for mobilizing private sector funds and underpinning the efforts of developing country governments and civil society. Yet there is a consensus that the role of development aid must adapt to changes in the geography of poverty and to the new lens of the Sustainable Development Goals.

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Revising ODA in the era of SDGs

By Andrea Vignolo, Executive Director of the Uruguayan Agency for International Cooperation, and Karen Van Rompaey, Knowledge Manager of the Uruguayan Agency for International Cooperation.



SDGsDiscussions on the post-2015 development agenda have paved the way to new thinking about development as a multidimensional and global process. They also have built momentum for revising and modernising the concept and concessionality of Official Development Assistance (ODA).

ODA’s eligibility and graduation criteria are still based fundamentally on countries’ economic growth performance. A growing consensus among academic, practitioner and political communities reveal that classifying countries according to their per capita income is inadequate to measure well-being or sustainability. Furthermore, it is not fit for the purpose of “leaving no one behind” in the era of universal sustainable development goals.

Achieving sustainable development is a far more complex enterprise than achieving economic growth. It requires not only the latter, but also specific knowledge, technologies, the right incentives and institutional capacities to change the way we currently live, work, produce, consume, share the fruits of growth and treat the planet. Otherwise, the quest towards economic growth can lead to negative consequences for the environment and future generations.

Middle- and upper-income developing countries have had access to an enhanced domestic resource base in the past decade to set forth their development priorities. They increasingly have assisted other developing countries through South-South and triangular co-operation. As a result of this growth in their aggregate income, some of them, like Antigua and Barbuda, Chile and Uruguay, have been classified recently as “high-income countries.”

Is this just good news?

Despite past growth and progress in their human development indicators, most of these upper-income developing countries still face acute structural gaps and vulnerabilities that constitute persistent development bottlenecks. They need to close gaps in policies, institutions and capacities to ensure policy coherence towards sustainable development. They lag behind when it comes to accessing, for example, technologies and knowledge, both of which are the “game changers” required to transform their current model of growth into sustainable development.

Moreover, the “rise of the South” has halted in Latin America and the Caribbean (LAC), threatening to jeopardize all progress made to date. Currently, the LAC region is experiencing a slowdown in trade, a decrease in investment in physical infrastructure as well as human capital and innovation, and a reduction in fiscal space. External vulnerability remains very high since most of the economies in the region lack diversification and are vulnerable to climate change.

Hence, ODA can play a strategic role to support these countries in the transition needed to build capacities in key areas/policy issues such as institutions, economic structures, risk management, social cohesion, research and innovation/technology to effectively achieve sustainable development.

Furthermore, by participating in triangular co-operation schemes, these developing countries can expand their contribution to global sustainable development by sharing their experiences, lessons learned and policy innovations.

Humankind stands at a critical juncture, when it is important to count on the contributions and support of all stakeholders to achieve the global sustainable development goals. It is therefore necessary to work towards an integral and non-exclusionary system of development co-operation that will fulfill the commitments made to date.

For an international co-operation system to be truly integral and non-exclusionary, it needs to provide the right incentives and overcome any zero-sum glance at the issues. While focusing on countries with greater challenges and less capacity to mobilise their own resources, ODA should support all developing countries according to their diverse conditions and needs. In this way, they can build their capacities and contribute towards global sustainable development.

Finally, it is thus necessary to review the OECD Development Assistance Committee’s current ODA graduation criteria to include other multidimensional measures of well-being and sustainability beyond GNI and an alternative timeframe, according to the scale of both the challenges and commitments of Agenda 2030 for Sustainable Development.

Revising ODA in the era of SDGs

By Andrea Vignolo, Executive Director of the Uruguayan Agency for International Cooperation, and Karen Van Rompaey, Knowledge Manager of the Uruguayan Agency for International Cooperation

SDGs
Discussions on the post-2015 development agenda have paved the way to new thinking about development as a multidimensional and global process. They also have built momentum for revising and modernising the concept and concessionality of Official Development Assistance (ODA).

ODA’s eligibility and graduation criteria are still based fundamentally on countries’ economic growth performance. A growing consensus among academic, practitioner and political communities 1 reveal that classifying countries according to their per capita income is inadequate to measure well-being or sustainability. Furthermore, it is not fit for the purpose of “leaving no one behind” in the era of universal sustainable development goals.  Continue reading