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%.

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Surprise! Aid flows are at a new all time high

So here’s a big surprise. Until last year, global aid flows were declining in the wake of the financial crisis – a trend that was widely expected to continue. But here’s what emerged when the OECD’s 2013 aid statistics came out last month:

Development aid rose by 6.1% in real terms in 2013 to reach the highest level ever recorded, despite continued pressure on budgets in OECD countries since the global economic crisis. Donors provided a total of USD 134.8 billion in net official development assistance (ODA), marking a rebound after two years of falling volumes, as a number of governments stepped up their spending on foreign aid.

An annual survey of donor spending plans by the OECD Development Assistance Committee (DAC) indicated that aid levels could increase again in 2014 and stabilise thereafter.

Admittedly, there are two important qualifiers here. One is that while aid may be at an all-time high in absolute terms, that’s not true for the arguably more important measure of aid as a proportion of donor countries’ gross national income: in 2013 they gave 0.30% of GNI, as compared to 0.32% in 2010 (and way lower, of course, than the 0.7% target).

The other point, flagged up by OECD Secretary-General Angel Gurria in his comments on this year’s statistics, is that the trend of falling aid to the neediest countries, especially in Sub-Saharan Africa (which saw a 4% real terms decrease against 2012), is still happening and appears likely to continue in the future. The new aid stats also show that donor countries only gave 0.09% of their GNI to least developed countries in 2012 – as compared to 0.10% the year before.

Donor countries have got to sort this out. While middle income countries now have access to a huge range of sources of finance for development – foreign direct investment, remittances, commercial debt, portfolio equity, and a vast increase in domestic resources from tax revenue and savings – that doesn’t hold true for low income countries, who are still highly reliant on aid. 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 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.

How to defuse the twin climate finance / post-2015 finance for development timebombs (updated)

Whether it’s at the climate summit currently underway in Warsaw (from where I’m writing this post) or at two key meetings happening in NYC next month on the post-2015 agenda, financing is one of the issues furrowing most brows.

Right now, progress in both places is stalled. Promises of $100 billion a year by 2020 under the Green Climate Fund are starting to look like a bad joke – especially to the least developed countries (LDCs) who most urgently need help to adapt to climate impacts.

Aid flows, meanwhile, have actually been declining for the last two yeas, rather than rising towards the 0.7% target. And they’re falling fastest for LDCs: while bilateral aid as a whole fell by 4% last year, it fell by 12.8% for them.

Nor does it look likely that rich countries are about to put big new pledges of cash on the table any time soon, what with weak growth, high unemployment, and fiscal pressures – despite the crucial 2015 deadlines on both climate and development. Yet if they fail to do so, it could toxify the dynamics on both issues – and contribute to an outcome where the climate and development ‘tribes’ perceive themselves to be fighting over the same pot of cash rather than working together on a shared agenda.

Is there any way to defuse this ticking timebomb? Well, there might be. Continue reading

Nigeria: do donors know what they’re spending? (update x2)

You see plenty of reports from development agencies castigating development countries for one reason or another, but the boot is much less often on the other foot.

Interesting then to see this 2008 review (huge pdf download) from Nigeria’s National Planning Commission, which sets out to analyse ‘the volume and quality of Official Development Assistance to Nigeria between 1999 and 2007.’

During this time, $6bn of aid has been spent in Nigeria, almost all of it spent by donors themselves, rather than being rooted through the government’s budget. The Planning Commission’s first job, therefore, was to try and work out who had spent what.

So it sent a template to donors asking for information on what they’d spent and where:

Of all the agencies, USAID was the only agency able to provide almost all the requested information with a little delay. EU was also able to meet most of our requirement, only after about three months delay…

CIDA’s [Canada] claimed disbursement did not tally with what they had actually spent…[It] refused to supply more information when asked [to]…

DFID is another donor that could not account for all its activities. When asked to provide information on the sectors and states DFID is operating in, it simply wrote saying ‘we do not require our programme managers to collect expenditure on a state-by-state basis.’…

JICA [Japan]…did not cooperate at all despite our many efforts to get JICA to collaborate with us.

The UN system was also only ‘partially cooperative’. UNICEF did not provide a breakdown of its health spending, for example (nor did DFID or CIDA). “We do not know exactly what [this] money was spent on,” the report notes. The Chinese government was also asked for data – but the review does not tell us what its response was (read into that what you will).

Donors should be much more transparent accountable for their activities, the Planning Commission concludes, while the Nigerian government “needs to offer clearer and more effective leadership to her development partners both in terms of how and where to operate.”

It lauds the example of Kano and Ondo states. They are robust in their response to ‘intruder donors’ who operate outside a framework established by the state government. That allows leaders to set, and be accountable for, their own development priorities.

Update: Of course, Nigeria’s own statistics are often woefully inadequate, whether at national or at state level. Recently, for example, Kano state has just been counting its schools:

An additional 88 senior secondary schools and 174 private  schools had been ‘discovered’, while in some areas schools had disappeared: the Kano municipality had 10 less junior secondary schools than first thought.

Update II: Worth pointing out, too, that the World Bank, DFID, USAID and African Development Bank recently agreed a joint strategy for Nigeria – bringing 80% of Nigeria’s development assistance under a single strategic umbrella. Somewhat oddly though, it cannot easily be found on any of the donors’ websites. There’s a copy here though.

I wonder if the donors will now move towards a single online platform to show what they’re spending, where, and what results it’s achieving… and, also, how effectively their joint approach is proving (the Bank and DFID have had a joint strategy for some years now) at reducing overhead for Nigerian government and non-government partners.