December 12, 2001
Final ODA figures for 2000
Net aid to developing countries (official development assistance, or ODA) from DAC Members in 2000 was USD 53.7 billion, slightly higher than the preliminary figure of USD 53.1 billion. In real terms the flow was little changed from 1999: down 0.4%. There would have been a slight rise if some countries had not been removed from the list of countries eligible to receive ODA (see Table 1, Chart 1 and Annex).
Robust economic growth of 3.7% in DAC Members during 2000 boosted GNI and pushed the ODA/GNI ratio down from 0.24% to 0.22%. Luxembourg joined Denmark, the Netherlands, Norway and Sweden as the only countries meeting the long-standing UN target for ODA of 0.7% of national income.
Among other notable features of the 2000 data are:
The broader picture of resource flows to aid recipients
Table 2 gives a broader view of resources flowing to developing and transition countries over recent years. This shows that all kinds of official funding for development -- totalling USD 65.5 billion -- was the lowest since 1990. ODA flowing to developing countries has averaged USD 50 billion over the past four years. Official aid to countries on Part II of the DAC List was USD 7.8 billion in 2000, unchanged from the previous year despite the fact that several former ODA recipients joined this group. But other official development finance to aid recipients fell sharply in 2000, from USD 26.1 billion to USD 8.1 billion. This reflected both reduced new official lending at market rates, and increased repayments as Asian borrowers recovered somewhat from the crisis of 1998-9.
Export finance picked up to register a net flow of USD 7.7 billion.
Net private flows -- at USD 117 billion -- were at their lowest level since 1993. The most striking feature was a drop of some USD 50 billion in equity flows (other than foreign direct investment - FDI) as investors retreated from emerging markets. DAC Members' FDI in aid recipient countries fell somewhat to USD 120 billion, but remained easily the largest category of flow. Net bank lending remained negative for the third consecutive year.
Outlook
Several DAC Members, including Canada, Greece, Ireland, Sweden, Switzerland and the United Kingdom, have specific targets for raising ODA in the short to medium term. Others, including the Netherlands and Norway, have fixed targets for ODA/GNI which imply real increases that match economic growth, and Germany has announced a real increase in ODA in budgetary outlays for development in 2002, continuing the recent upward trend.
In the second largest donor, the United States, ODA rose by 7% in real terms in 2000 without affecting the ODA/GNP ratio of 0.10%, and proposals have been advanced in Congress to increase aid spending in the medium term. A lively debate continues in the US over how aid can be made more effective, especially through strengthened partnership with the private sector, including foundations. In the largest donor, Japan, ODA is expected to fall as a result of overall efforts to reduce the budget deficit.
A wide variety of opinions has been expressed about the contribution that ODA might make to the broader effort to reduce terrorism. There is widespread agreement among DAC Members both on the continuing need for aid to combat poverty, and on the special needs of Afghanistan and countries in its region.
The International Conference on Financing for Development, to be held at Monterrey, Mexico, in March 2002, will seek broad agreement on an integrated approach to development finance, with good governance as the foundation for building strong flows of public and private finance from both domestic and external sources, including foreign investment and sustainable debt financing. The Conference will also consider calls for significant increases in ODA volume and effectiveness to underpin efforts to reach the Millennium Development Goals.
The recent Ministerial conference of the WTO in Doha launched a new round of trade negotiations with a key focus on promoting development, including emphasis on support for trade capacity building in developing countries.
The short-term outlook for private flows to developing countries remains uncertain. Developing country equity markets have not performed well in 2001, foreign direct investment has been hit by the slowdown in industrial countries, and developing country bond issues have been constrained by continued debt overhang in major borrowers.
Measuring debt relief
A major effort is under way to reduce the repayment burden of Heavily Indebted Poor Countries (HIPCs). Most of these are least developed countries in sub-Saharan Africa. A substantial part of their debt is owed to international financial institutions, but ODA loans, bank loans and export credits from DAC countries are also involved.
The HIPC process is explicitly designed to reduce debt to manageable levels and eventually enable countries to access international finance on a sustainable basis. To this end, the initiative has been expanded to provide additional relief and speeded up to reduce the period between "decision point" and "completion point". Relief will be "front-loaded" to take effect more quickly and this should lead to somewhat higher debt relief in ODA in the next few years.
The relationship between debt relief/cancellation and ODA is complex. Press reports of debt relief provided to HIPCs often highlight the total amount of debt likely to be covered by the initiative, currently estimated at up to USD 50 billion. This reflects the present value of the amount of debt that will not have to be repaid. However, HIPC debt relief is only a very small share of DAC Members' annual net ODA (see Table 3) because:
Download the tables from socecon/develop/oda/2001/images/pdfs/socecon/develop/oda/2001/1212oecdtables.pdf.
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