Global Policy Forum

By Sanjay Suri

The Organisation for Economic Cooperation and Development (OECD), a group of 30 industrialised nations, said in a report Monday that official development assistance (ODA) to developing countries increased to 78.6 billion dollars in 2004, its highest level ever. Taking into account inflation and the fall in the U.S. dollar, this represents a 4.6 percent rise in real terms from 2003 to 2004, and follows a 4.3 percent increase from 2002 to 2003, the OECD report said.

"The good news is that development assistance is growing, and growing in line with the economies of these countries," Brian Hammond from the OECD told IPS. "But there is a long way to go to meet the Monterrey commitments." Those were aid commitments made at the International Conference on Financing for Development in Monterrey in Mexico in 2002. "If all those countries meet their commitments, ODA will go up from 0.25 percent of their gross national income (GNI) to 0.30 percent," Hammond said. "So a large increase needs to come through in the next two years."

The development assistance the OECD speaks of comes from the 22 nations in the Development Assistance Committee, the richest among the OECD countries. That assistance accounts for almost all international development assistance. Countries like Saudi Arabia, India and China have their own official development assistance programmes, but these do not figure in the OECD study, and are small in relation to the DAC aid.

The OECD looks at the ODA figures in 'real' terms, which means taking into account both inflation and the devaluation of the dollar, and at 'net' figures in which the ODA is counted after repayment of loans is taken off. Several factors accounted for the 3.1 billion dollar rise in real terms in 2004, the OECD report says. Contributions to international organisations increased by 3.7 billion dollars, and aid to Afghanistan and Iraq was up by a total of at least 1.5 billion dollars. Technical cooperation grants rose by 1.2 billion dollars. On the other hand, gross debt relief grants fell by 2.1 billion dollars, and net lending fell by 1.3 billion dollars.

Fifteen of the 22 DAC member countries reported increased ODA in 2004, the report says. The United States remained the largest aid donor in volume terms, followed by Japan, France, the United Kingdom and Germany. The only countries to exceed the UN target for ODA of 0.7 percent of GNI remain Denmark, Luxembourg, the Netherlands, Norway and Sweden.

The net ODA from the United States in 2004 was 19 billion dollars, a 14.1 percent increase in real terms from 2003. Its ODA/GNI ratio rose from 0.15 percent to 0.16 percent. Most of the increase was due to a 1.8 billion dollar contribution to the International Development Association (IDA), the grant and soft-loan arm of the World Bank. U.S. aid to Afghanistan (875 million dollars) and Iraq (2.9 billion dollars) also rose substantially. ODA from the United States comprised 24.2 percent of the DAC total in 2004, its highest share since 1986, and nearly double the low point of 12.5 percent reached in 1995, the OECD report says.

Japan's net ODA fell by 4.8 percent in real terms to 8.9 billion dollars, or 0.19 percent of its GNI. However, in gross terms it rose by 24.5 percent to 16.1 billion dollars. This was due partly to aid for reconstruction of Iraq, but mainly to greatly increased debt relief to some of the most heavily indebted countries. "But this debt relief had little effect on net ODA since the bulk of the forgiven loans were counted as ODA when they were extended," the report says. "Increased repayments of ODA loans, notably by countries that have recovered from the Asian financial crisis, also affected Japan's net ODA."

The 15 DAC countries that are members of the European Union (EU) increased their combined ODA by 2.9 percent in real terms to 42.9 billion dollars -- some 55 percent of DAC ODA. It represented 0.36 percent of these countries' combined GNI, up from 0.35 percent in 2003 and broadly on track towards the EU target of 0.39 percent by 2006, the report says. Among EU member countries Belgium has committed to meeting the UN target of 0.7 percent by 2010 and France by 2012 (with an interim target of 0.5 percent by 2007). Sweden has announced its goal to reach an ODA/GNI ratio of 1 percent by 2006, Spain to attain 0.33 percent in 2006 and 0.5 percent in 2008, and the United Kingdom to reach 0.47 percent by 2007-08 and 0.7 percent by 2013.

The largest rises in aid in real terms in 2004 by EU countries were in Austria (22 percent), mainly due to debt relief grants, Greece (13.1 percent), due to increased technical cooperation and emergency relief, Luxembourg (10.5 percent), due to increased contributions to regional development banks, Portugal (an exceptional 187.5 percent), due to a large debt relief operation for Angola, Spain (14.5 percent), due to the timing of contributions to international organizations, and Britain (8.8 percent), due to higher project and programme aid expenditure and debt relief.

ODA fell in real terms in Belgium (-30.3 percent), after the peak in 2003 caused by a large debt relief operation for the Democratic Republic of Congo. The fall in Italy (-9.7 percent) was mainly due to reduced debt forgiveness (down about 400 million dollars). ODA from the Netherlands fell (-4.0 percent) as India repaid all its outstanding Dutch aid loans. These early repayments brought the Netherlands' ODA down to 0.74 percent of its GNI, below its target of 0.8 percent, which it intends to maintain, on average, over the period 2004-07 through above-target performance in 2005-07.

Australia's ODA rose slightly by 2.3 percent, Canada's by 12.2 percent as reimbursements declined compared to 2003 when India had repaid its Canadian ODA loans, and New Zealand's ODA rose by 8.2 percent. This included a significant increase in grants to South Pacific Agencies.

Further substantial rises in ODA are expected in 2005-6, the OECD report says. The main sources of the rises are likely to include contributions to the World Bank's International Development Association -- in February this year, donors agreed to contribute 18 billion dollars to IDA to increase its grants and loans by at least 25 percent. Several DAC members are implementing significant expansions of their bilateral aid programmes. The United States' Millennium Challenge Account is now operational and two other large donors -- France and Britain -- are increasing their bilateral ODA as part of ambitious plans to meet the United Nations 0.7 percent target by 2012-13.

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