OECD DAC Chair Erik Solheim replies on ODA to least developed countries

A couple of days ago, I argued in a post here that while it was welcome that aid flows had reached a new all-time high in 2013, it was bad news that aid was continuing to fall to Least Developed Countries (LDCs). These are, after all, the economies that need aid most, given that – unlike middle income countries –  they remain highly dependent on aid (9.7% of their GDP compared to 0.3% of middle income countries’), and much less able to finance their development from other sources like foreign direct investment, remittances, or domestic resources like savings or tax revenue.

With the debate about post-2015 development objectives increasingly focused less on the goals themselves than on the resources that will enable their delivery – “means of implementation”, in UN-speak – I wrapped up the post by repeating a call I’d made in a report last year on a post-2015 Global Partnership for Development, echoing a recommendation made by the UN High-level Panel on the Post-2015 Agenda (itself based on a long-standing UN target):

With the post-2015 agenda now about to move into the home straight, this is the year when donors need to set out a clear timetable for making good on their long-standing promise to give at least 0.15% of their gross national income (GNI) to least developed countries – and ideally go beyond it to 0.20%. And the OECD DAC’s High Level Meeting this December is the right moment to do it.

On which note, I also sent a tweet to the Chair of the OECD DAC, Norway’s Erik Solheim, to put the idea to him: here’s what he came back with.

This is a fair point. If we unpack Solheim’s example of the United States, they only give 0.19% of GNI to aid in total, and 0.07% of GNI to LDCs (here’s the data). So for them to spend 0.15% of GNI on LDCs, as I’m proposing, would be a drastic shift, involving spending more than three quarters of their total aid budget on LDCs.

But Solheim also had another idea:

This is a pretty interesting idea. To stick with our example of the US, this approach would clearly be much less scary in that it would involve much less upheaval in aid allocations. But at the same time, given that the OECD as a whole spent 0.30% of its GNI on aid in 2013, the net result of what Solheim’s proposing would be that LDCs would receive… 0.15% of OECD GNI, the same proportion that I was calling for to start with.

And here’s the really key point: given that the OECD’s analysis of 2013 aid spending suggested that “aid levels could increase again in 2014 and stabilise thereafter”, the implication is that if donors were to commit to spending half their aid on LDCs, then the percentage of GNI could quickly rise to more than 0.15%.

So is there a catch? Well, there is one hurdle. Part of what I liked about pushing each donor to commit 0.15% of GNI to LDCs was that quite a lot of them already do just that. Denmark, Finland, Ireland, Luxembourg, the Netherlands, Norway, Sweden, and the UK all currently spend 0.15% or more of their GNI on LDCs – and could therefore be expected to go out in support of a proposal that they’ve already met.

On the other hand, practically nobody already spends half their aid on LDCs. Ireland is the only country to do so right now (at 52% of its aid), whereas all of the other donors just mentioned spend between 29-37% of their aid on LDCs. In other words, Solheim’s proposal would involve significant change for more actors – and that might potentially reduce the number of countries willing to call for it. That said, those countries that already spend 0.15% or more of their GNI on LDCs are also the most progressive donors – so you’d expect them to be more willing to reconsider their own allocations if that helps prompt a larger global shift towards upping aid to LDCs.

On balance, I like what Solheim’s proposing more than what I initially suggested, as it would offer more to the LDCs and be less of a stretch for those donors (like the US) that don’t spend a high proportion of their GNI on aid overall.

Either way, the bottom line is that donors should be spending more, not less, on least developed countries – and that making some kind of clear commitment on that looks like a sine qua non confidence building measure as the post-2015 debate focuses ever more on means of implementation. As Solheim points out, whether or not this happens is ultimately up to the OECD’s member states; LDCs and their allies among NGOs, UN agencies and elsewhere have 7 months before December’s DAC High Level Meeting to push them to do it.