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Development Aid from OECD Countries Fell 5.1% in 2006

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Organization for Economic Cooperation and Development
April 3, 2007

The 22 member countries of the OECD Development Assistance Committee, the world's major donors, provided USD 103.9 billion in aid in 2006, down by 5.1% from 2005, in constant 2005 dollars. This figure includes USD 19.2 billion of debt relief, notably exceptional relief to Iraq and Nigeria. Excluding debt relief, other forms of aid fell by 1.8%. Sixteen of the DAC's 22 member countries met the 2006 targets for ODA that they set at the 2002 Monterrey Conference on Financing for Development. However, aid to sub-Saharan Africa, excluding debt relief, was static in 2006, leaving a challenge to meet the Gleneagles G8 summit commitment to double aid to Africa by 2010.

Total official development assistance (ODA) from members of the Development Assistance Committee (DAC) fell by 5.1% in 2006 to USD 103.9 billion. This represents 0.30% of members' combined Gross National Income (see Table 1 and Chart 1). In real terms this is the first fall in ODA since 1997, though the level is still the highest recorded with the exception of 2005. The fall was predicted. ODA was exceptionally high in 2005 due to large Paris Club debt relief operations (notably for Iraq and Nigeria) which boosted ODA to its highest level ever at USD 106.8 billion. In 2006, net debt relief grants still represented a substantial share of net ODA (see Table 2), as members implemented further phases of the Paris Club agreements, providing a little over USD 3 billion for Iraq and nearly USD 11 billion for Nigeria. Excluding debt relief, ODA fell by 1.8%.

Preliminary data show that bilateral net ODA to sub-Saharan Africa rose by 23% in real terms, to about USD 28 billion. However most of the increase was due to debt relief grants. Excluding debt relief for Nigeria, aid to sub-Saharan Africa increased by only 2%. The only countries to reach or exceed the United Nations target of 0.7% of GNI were Sweden, Luxembourg, Norway, the Netherlands and Denmark. The largest donor in 2006 was the United States, followed by the United Kingdom, Japan, France and Germany. The combined ODA of the fifteen members of the DAC that are EU members accounted for 57% of total net ODA.

In 2006, net ODA by the United States was USD 22.7 billion, a fall of 20% in real terms. Its ODA/GNI ratio also fell to 0.17%. The fall was mostly due to debt relief which was exceptionally high in 2005 as the United States forgave all its outstanding debt with Iraq in 2005 rather than spreading it over several years. US disbursements to Sub-Saharan Africa (USD 5.6 billion) reached a record high mainly due to debt relief (USD 1.4 billion, of which Nigeria was USD 0.6 billion) and increased disbursements for education, HIV/AIDS and malaria programmes. Net ODA flows to Iraq remained substantial (USD 4.8 billion), to Afghanistan increased (USD 1.6 billion) and to the least developed countries were at their highest level ever (USD 5.5 billion).

Japan's net ODA was USD 11.6 billion, representing 0.25% of its GNI. The 9.6% fall in real terms since 2005 was partly due to exceptionally large expenditures in 2005, including humanitarian relief for the Indian Ocean tsunami and debt relief grants to Iraq. Japan's net ODA has been on a downward trend since 2000, except for an increase in 2005 due to debt relief. The 2006 ODA total includes an increase in Japan's contributions to the International Financial Institutions.

The combined ODA of the fifteen DAC-EU members rose slightly by 2.7% in real terms, from USD 55.7 billion in 2005 to USD 58.9 billion in 2006. This represented 0.43% of their combined GNI, surpassing the EU collective ODA/GNI target of 0.39%. The increase in 2006 was mainly due to debt relief grants. Aid rose in ten DAC EU member countries as follows:

  • Ireland (33.7%), reflecting increasing bilateral aid as well as large multilateral contributions,
  • Spain (20.3%), due to a large increase in contributions to the UN and other multilateral, organisations, as well as an increase in disbursements by AECI, the Spanish Co-operation Agency
  • Sweden (15%), due to general scaling up of its aid and debt relief,
  • United Kingdom (13.1%), due to a substantial increase in contributions to international organisations,
  • Aid also rose in Denmark (2.9%), France (1.4%), Germany (0.9%), Luxembourg (4.9%),
  • Netherlands (4.2%) and Portugal (0.6%).

Falls were noted in Austria (-6.0%), Belgium (-2.7%), Finland (-9.9%), Greece (-4.1%) and Italy (-30%, mainly due to the timing of its contributions to international organisations). Aid provided by the European Commission rose by 5.7% to USD 10.2 billion reflecting increased budget support and improved disbursement capacity from the higher level of commitments made in recent years. ODA from other DAC countries rose, or fell, from 2005 to 2006 as follows:

  • Australia (22.8%), primarily due to debt relief, notably to Iraq and the Multilateral Debt Relief Initiative,
  • Canada (-9.2%), due to the decline in debt relief and lower levels of humanitarian aid compared to the extraordinary response to the Indian Ocean tsunami in 2005,
  • New Zealand saw no change (0.0%),
  • Norway (-2.2%),
  • Switzerland (-7%), due to the lower volume of debt relief grants provided.

Net ODA data reported by seven non-DAC economies rose, or fell, from 2005 to 2006, as follows:

  • Chinese Taipei (3.6%),
  • Czech Republic (6.4%), due to increased contributions to the EC,
  • Iceland (55.3%), due to a general scaling up of Iceland's contribution to development cooperation,
  • Korea (-44.6%), due to lower contributions to the World Bank and regional development banks,
  • Latvia (-1.0%),
  • Lithuania (15.2%), as it increased its contributions to the EC,
  • Slovak Republic (-9.1%), as bilateral aid fell.

Gross ODA in 2006

On a gross basis, ODA represented about USD 116 billion. The largest donors were the United States (USD 24 billion), Japan (USD 18 billion), the United Kingdom (USD 13 billion), Germany and France (USD 12 billion each), the Netherlands (nearly USD 6 billion), Spain and Italy (just over USD 4 billion each) representing 80% of the total.

Did members meet their 2006 targets?

In 2002, DAC members made various announcements before or during the Monterrey International Conference on Financing for Development to increase their aid in 2006 from the levels in 2000 (see Table 3). In Barcelona, the then fifteen EU members committed to collectively reach an ODA level of 0.39% of their combined GNI, with a minimum country target of 0.33% by 2006. Most members reached the country target, except for Greece, Italy and Portugal. Spain just missed on these provisional data due to recent changes in its national accounting system. The combined result in 2006 was 0.43%, well above the target of 0.39% set in 2002, mainly due to debt relief grants. Since 2002, some EU members have set, and reached, even higher goals for 2006. Belgium set an ODA target of 0.5% of GNI; Sweden has surpassed its target of 1%; Denmark committed to maintain a minimum ODA/GNI ratio of 0.8%; and Ireland to attain a level of expenditure of EUR 734 million in 2006 (and to reach an ODA/GNI ratio of 0.5% in 2007 and 0.7% in 2012). Net ODA from the United States in 2006 reached higher levels than expected due to large debt relief programmes and increased aid to sub-Saharan Africa, Afghanistan and Iraq. Due to severe budget restrictions, Japan did not make any announcement of a target for its ODA in 2006. Norway's strong growth in GNI in recent years made it impossible to meet its target of 1% ODA/GNI by 2005.

Future Prospects

ODA is expected to fall back slightly again in 2007 as debt relief for Nigeria and Iraq tapers off. It is expected that other types of aid should then increase as donors fulfil their more recent pledges (see Chart 2). The EU agreed in 2005 to scale up its aid further to provide 0.56% of its members' combined GNI by 2010, or a minimum target of 0.51% for DAC EU members. The overall EU target takes into account commitments of some DAC EU members to increase or maintain aid levels beyond the minimum country target, as well as pledges by the non-DAC EU countries to participate in the scaling up of aid by moving to specified minimum aid levels. Australia has announced that it will double its ODA to about 4 billion Australian dollars by 2010. Japan has indicated it will increase its ODA volume by USD 10 billion in aggregate over 2005-2009, compared to its ODA levels in 2004. Switzerland is to determine a new goal for 2009 and thereafter.

 

 

 

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