Development Assistance

Across the globe, smart and targeted aid is saving lives, supporting people in poor and fragile countries, and laying the groundwork for sustainable economic growth in developing countries.

The Challenge

In 2000, 189 countries adopted the Millennium Development Goals (MDGs). These eight goals were designed to reduce global poverty and disease by 2015, and transform the lives of millions in the world’s poorest countries.

We are now on the final stretch for these ambitious targets, and in the process of setting up the next generation of goals for the period after 2015. Since the MDGs were adopted, remarkable progress has been made across many sub-Saharan African countries. But poor countries cannot reach the current and future goals alone. By signing on to the MDGs, world leaders acknowledged that progress towards the first seven goals would largely depend on leadership in developing countries.

These goals are an end to extreme poverty and hunger, universal primary education, gender equality, reduced child mortality, improved maternal health, progress in the fight against HIV/AIDS and other diseases, and environmental sustainability. But by committing to goal 8 – a global partnership for development – wealthy nations around the globe clearly affirmed the importance of donor support in the fight against extreme poverty and disease.

The spirit of this commitment has been captured in several agreements since the 2000 Summit. In 2002 at the International Conference on Financing for Development in Monterrey, Mexico, wealthy countries committed to spending 0.7% of their gross national product on development.  Recognising the unique needs of ‘least developed countries’ (LDCs), developed nations also adopted in 2001 (Brussels Programme of Action for the LDCs) and renewed in 2011 (at the Fourth UN Conference on the LDCs in Istanbul) an aid target of 0.15–0.20% of GNI directed to LDCs.

At the Gleneagles Summit in 2005, the G8 agreed to deliver an additional $50 billion in global development assistance by 2010, half of which – an additional $25 billion – would be for sub-Saharan Africa. However, only 61% of the promised increases were actually delivered by 2010.

The Gleneagles agreements expired in 2010 and have not been replaced with any similar set of commitments. Key donors including the United States, Canada and Japan no longer have overall official development assistance (ODA) targets. The European Union (EU) plus Norway represents the only group of countries that have ongoing collective targets to increase ODA as a percentage of gross national income (GNI).

These countries committed to increase ODA to 0.7% of GNI by 2015 to 0.15-0.20% of GNI for LDCs and to provide 50% of all increases to Africa.  While EU aid to Africa increased in 2013, it remains very far off this goal. The 19 EU DAC members would need to collectively increase their aid to Africa by $31.3 billion by 2015 in order to meet their commitment to Africa.

In 2013, after two years of decline, global aid flows from rich countries rose again, increasing to their highest ever level. Global ODA reached $131.2 billion, a 5.3% increase from 2012. As a percentage of GNI, however, aid was only 0.29% collectively across DAC donors. This was far below the UN target of 0.7% ODA/GNI. Although global ODA has bounced back, not all governments have prioritised aid. Some have disproportionately cut their aid budgets.

Furthermore, the share of ODA for the poorest countries has been declining since 2010. In 2012, LDCs received only 31.9% of all ODA, down from 33.4% in 2010. Projections point to a continuation of this trend, with LDCs set to receive a decreasing share of ODA. One of the main reasons behind this has been the growing use of ODA loans that mainly target middle-income countries (MICs).

The Opportunity

Sub-Saharan African governments’ own budgets account for the majority of public resources in the region, but aid remains a critical part of the picture. Across the globe, smart aid from rich countries is helping to unlock other sources of finance, build infrastructure and lay the groundwork for continued and sustainable growth.

Development assistance is essential to the poorest and most vulnerable countries.  that still depend heavily on development assistance. While other resources available to poor countries (including foreign direct investment, remittances and loans) have significantly increased, nearly all LDCs – the majority of which are in sub-Saharan Africa – have a more limited capacity to raise domestic revenues or attract other external flows, and thus remain strongly dependent on aid.

More than 100 million people in extreme poverty live in countries where government spending is less than PPP$200 per person per year (55 cents a day), and in those countries more than half the population lives in extreme poverty. As the only resource flow which focuses uniquely on poverty reduction, aid can literally save lives in these countries.

The current MDGs and remaining ODA commitments will expire in 2015 and the UN is working with governments, civil society and other partners to agree on an ambitious post-2015 development agenda to eradicate extreme poverty by 2030. This new agenda is likely to include targets on development finance.  In July 2014 in Cotonou, LDCs called for a new target of 50% of ODA to these countries.

International aid has had a transformative impact on the lives of millions of people.  As of mid-2014, the Global Fund to Fight AIDS, Tuberculosis and Malaria had provided 410 million mosquito nets to help protect families from malaria, testing and treatment for 11.9 million cases of tuberculosis and antiretroviral therapy (ARV) for 6.6 million people. Since 2000, the GAVI Alliance has supported the immunisation of 440 million additional children, saving 6 million lives. GAVI’s support for vaccines through to 2015 will contribute to averting close to an additional four million future deaths.

Targeted development assistance and savings from debt relief have also allowed an extra 54 million children to start primary school in sub-Saharan Africa between 1999 and 2011. These results were achieved with only a portion of the assistance promised to poor countries, suggesting that the full amount could have an enormous impact.

For development assistance to be effective, it must also be transparent. Citizens both in donor and developing countries should be able to follow the money and hold their leaders to account over how it is spent.

In Busan in 2011 – at the fourth in a series of High Level Forums on Aid Effectiveness – donors committed to fully implement the International Aid Transparency Initiative (IATI) by 2015. They also established the Global Partnership for Effective Development Cooperation (GPEDC) to lead on aid and development effectiveness. The GPEDC held its first High-Level Meeting in Mexico City in April 2014, and the outcome document included a renewal of the Busan IATI promise by 2015. Publish What You Fund’s annual Aid Transparency Index has shown that aid transparency is improving, though progress is modest and uneven. Many donors are currently off track to meet the Busan commitment to fully implement the IATI standard by 2015.

Donors are also developing tools to provide sustained development funding through innovative financing mechanisms. For example, the International Finance Facility for Immunisation uses financial pledges by government donors to issue bonds (long-term, government-backed debt) in capital markets in order to buy vaccines.

The Advance Market Commitment is an agreement by donors (including Canada, Italy, Norway, Russia, the UK, and the Bill and Melinda Gates Foundation) used to spur pharmaceutical companies to focus their efforts on otherwise neglected diseases, by guaranteeing a good market if they successfully develop a vaccine to protect children against pneumonia and meningitis, which could save 7 million lives by 2030.

Partnerships with the private sector are also key. The public are supporting the Global Fund to Fight AIDS, TB and Malaria every time they buy a (RED) product. Innovative mechanisms like these raised an estimated $57 billion for development between 2000 and 2008.