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.

Since the adoption of the MDGs, remarkable progress has been made across many developing countries, including sub-Saharan African countries. But many poor countries failed to reach the goals. While it was acknowledged by world leaders that progress towards the first seven goals would largely depend on leadership in developing countries, by committing to Goal 8 – a global partnership for development – wealthy nations around the globe clearly affirmed the importance of developed countries’ support in the fight against extreme poverty and disease.

In September 2015, world leaders committed to 17 new Global Goals to end extreme poverty, fight inequality and justice, as well as to fix climate change for all people in all countries in the next 15 years. As recognised in Goal 17 – revitalise the global partnership for sustainable development – this will require a new global partnership with active participation and engagement of governments, civil society, private companies and more.

The spirit of this commitment to a global partnership 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 official development assistance (ODA) 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. At the Financing for Development Conference in Addis Ababa, countries reaffirmed previous commitments made in Monterrey, including the commitment by developed countries to spend 0.7% of their gross national income on aid, and directing 0.15–0.20% of GNI to LDCs. Recognising the unique needs of LDCs, the Addis Ababa Action Agenda (AAAA) also included a commitment to reverse the declining share of aid going to LDCs and a suggestion to allocating 50% of ODA to these countries. Previously in the OECD Development Assistance Committee (DAC), donors made a similar commitment to allocate more of total ODA to LDCs and to reverse the declining trend of ODA to LDCs.

Key ODA providers including the United States, Canada and Japan do not have overall 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).

At EU level, countries had initially committed to collectively increase ODA to 0.7% of GNI and achieve the 0.15-0.20% target for LDCs by 2015. Having failed to meet this deadline, they committed in May 2015 to collectively reach 0.7% within the time frame of the post-2015 agenda and to allocate 0.15% of their collective GNI to LDCs in the short-term, and 0.20% within the time frame of the post-2015 agenda. While EU ODA increased in 2015, it remains very far off these goals. EU Member States only spent 0.46% of their collective GNI on ODA and 0.12% of it on ODA to LDCs, well under 0.7% and 0.15-0.20% targets. EU Member States only allocated 25% of their total ODA to LDCs in 2015.

In 2015, global ODA flows from rich countries rose by 7% reaching $131.07 billion. However a large part of this was due to rising refugee costs in donor countries. Under the current aid accounting rules, donors can report as aid the costs of assisting refugees during their first year in a donor country. As a result of the ongoing refugee crisis, in-donor refugee costs more than doubled in 2015 compared with 2014, and the amount of aid spent on refugees in aid-giving countries is likely to rise in 2016. Aid grew by almost 2% when domestic refugee costs are discounted in 2015. As a percentage of GNI, development assistance was only 0.30% collectively across DAC countries. This was far below the UN target of 0.7% ODA/GNI. Furthermore, the share of ODA for the poorest countries has been declining since 2010. In 2015, LDCs received only 29.5% of wealthy countries’ development assistance, down from 33.3% in 2010.

The Opportunity

Sub-Saharan African governments’ own budgets account for the majority of public resources in the region, but ODA remains a critical part of the picture. Across the globe, smart development assistance from wealthy 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. While other resources available to poor countries (including foreign direct investment, remittances and loans) have significantly increased, nearly all LDCs – more than two-third 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 ODA. In its 2015 DATA Report, ONE showed that 27 countries (all but two of which are LDCs) spend less than $150 per person on basic services in a whole year. In other words, 27 countries currently spend just 2% of the amount – on a per capita basis – that an OECD country such as the United Kingdom ($6,515) does.

As the only resource flow which focuses uniquely on economic development and welfare, development assistance literally saves lives in these countries.

As of end of 2015, the Global Fund to Fight AIDS, Tuberculosis and Malaria had provided 600 million mosquito nets to help protect families from malaria, testing and treatment for 15 million cases of tuberculosis, and antiretroviral (ARV) therapy for 8.6 million people. Since 2000, the GAVI Alliance has supported the immunisation of 500 million additional children.

Targeted development assistance and savings from debt relief have also allowed an extra 65 million children to start primary school in sub-Saharan Africa between 1999 and 2013. 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 developed 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 – ODA providers 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 ODA providers did not meet the Busan commitment to fully implement the IATI standard by 2015.

The international community is 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 from developed countries to issue bonds (long-term, government-backed debt) in capital markets in order to buy vaccines. The Advance Market Commitment is an agreement by development partners (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.