Official development assistance: an essential guide

How much aid is there? Who provides it? Who implements it? Where does it go and what is spent on?

Official development assistance (ODA) is official funding provided by governments and official agencies in the 23 countries that are members of the Organisation for Economic Co-operation and Development (OECD), Development Assistance Committee (DAC) and the European Commission. The DAC has strict qualifying criteria focused around two key principals: the primary objective must be the welfare and economic development of developing countries; and assistance must be concessional either through the provision of grants or soft loans. The overall picture of ODA funding is complex involving many organisations at multilateral, country and local level. Development Initiatives is providing new analysis to improve understanding of what is given and how it is spent.

You can read the full report here

Key findings include:

  1. Net ODA grew by 63% (almost US$50 billion) over the last decade, reaching a peak of US$128.5 billion in 2010. Volumes fell 2.7% in 2011 (US$3.4 billion) to a preliminary US$125.1 billion in 2011 (constant prices).
  2. ODA constitutes 7% of an estimated minimum of US$1.7 trillion of international resource flows to developing countries. These include other forms of official financing, public and private borrowing, foreign direct investment and other capital flows, remittances and aid from all countries outside the OECD DAC membership group, together with assistance from international NGOs and foundations. At US$4.8 trillion, developing countries’ own domestic budgets are some 2.8 times greater than all external flows combined.
  3. The United States is the largest donor, disbursing an annual average of almost US$30 billion over 2009–2011. Together with Germany, the United Kingdom, France and Japan, these five countries provide almost two-thirds of ODA. The EU and the World Bank’s International Development Agency (IDA) deliver almost 60% of ODA disbursed by multilateral agencies and are among the largest individual donors when compared against the bilateral disbursements of country donors. As a group, the United Nations (UN) received the largest amount of ODA disbursed to multilateral agencies through core and earmarked contributions combined. Together, the UN, World Bank group and EU institutions accounted for 78.5% of ODA to multilateral agencies in 2008-10.
  4. DAC donors collectively allocated 0.31% of gross national income (GNI) to ODA in 2011. The 15 EU member states that have committed to reach the international 0.7% GNI target by 2015 allocated 0.47%. Five countries – Sweden, Norway, Luxembourg, Denmark and the Netherlands – have reached, sustained or exceeded the target, a number of them for decades.
  5. As a group, DAC donors contributed 0.73% of government expenditure to ODA in 2010. The donors that contribute higher proportions of national income to ODA also allocate larger proportions of government expenditure to aid and have higher levels of aid spending per head of population. A different set of donors perform poorly across all three of these measures.
  6. Approximately 40% of ODA is spent through donor and developing country public sectors. Another 40% is channelled through multilateral agencies, of which a third is earmarked for a specific purpose or country. The remaining two-thirds constitutes core contributions to multilateral agencies (termed ‘multilateral ODA’ by the OECD DAC), with decisions on spending made by the multilateral organisation itself. EU institutions are the largest recipient of core multilateral ODA, receiving an average US$13.2 billion a year over 2009–2011. Core contributions to the World Bank (IDA) have grown by 63% during the last decade. IDA received an average of US$7.8 billion a year during 2008–2010 – the second largest multilateral recipient after the EU.
  7. Sub-Saharan Africa receives more ODA than any other region with volumes reaching US$45 billion in 2010 and ODA per poor person averaging US$97 a year over 2008-2010. The equivalent per poor person volume in Asia is US$41, because of the high absolute numbers of people living below US$1.25 a day. While regions such as Europe, the Middle East and North Africa receive lower volumes of ODA overall, small poverty populations in those regions means that the equivalent amount of ODA per poor person is many times higher, reaching US$27,993, US$1,164 and US$611 per poor person respectively.
  8. Least developed countries (LDCs) now account for 45% of ODA disbursements and ODA to this group grew at twice the rate of ODA overall during the last decade.
  9. Afghanistan and Iraq have been regular top recipients of ODA over the last decade, receiving the highest volumes of ODA across 2009–2011. India and China, both middle income countries but with very large numbers of people living in extreme poverty, have also been significant recipients. Their ODA per poor person averages around US$6 a year – lower than any other country.
  10. Since the early 1970s, growth in ODA has largely been driven by an increase in grant-making. Almost four-fifths of ODA is now delivered as grants with 19% delivered as loans.
  11. Grants comprise a wide variety of aid instruments, the largest being financial transfers supporting projects and programmes (29% of all grants in 2010). Grants can also be delivered in kind, the largest being technical cooperation, such as the provision of people and expertise, which accounted for 18% of all grants and 14% of total ODA disbursements in 2010. Budget support, where the donor relinquishes control of the funds to allow the recipient government to spend the ODA according to its own priorities, reached US$12 billion in 2010, more than 8% of total ODA. Half of this was earmarked for a specific sector.
  12. ODA supports a wide range of sectors from social development and economic production, to governance, conflict prevention and emergency assistance. ODA supporting governance and a wider enabling environment accounted for 15% of all disbursements during 2008–2010. Health and infrastructure each represent over 10% of disbursements, with volumes more than doubling over the decade. Health ODA has grown particularly in sub-Saharan Africa, almost doubling its share of total ODA to the region since 2002–2004, to reach 18% by 2008–2010, and accounting for more than half of all global health ODA.
  13. ODA for sectors with large capital costs such as infrastructure and water and sanitation relies substantially more on loans for financing (61% and 45% respectively) compared to other sectors, while ODA for health, food security and social protection and conflict and emergency is delivered almost completely as grants. Equity investments are directed largely at productive sectors (e.g. agriculture, and industry).
  14. Donors prioritise sectors differently. The United States, for example, allocates 23% of its bilateral ODA to health (excluding contributions to vertical funds and multilateral agencies) and is by far the largest donor to the sector with bilateral contributions reaching almost US$6 billion a year (2008–2010). IDA is the largest disburser of agricultural aid (followed by Japan), and allocates almost 13% of its ODA budget to the sector.