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Value of OECD aid drops for first time in 15 years
Despite an increase in cash terms, aid from the world's richest countries was worth less in 2011 as inflation reduced the purchasing power of their currencies
Aid from the world's richest countries was worth 3% less last year compared with 2010, as inflation ate away at what their currencies could buy. Disregarding years of exceptional debt relief, this was the first drop since 1997, taking inflation into account, according to figures from the OECD club of rich countries.
In 2011, aid from the Development Assistance Committee (DAC) of the OECD came to $133.5bn, or 0.31% of their combined gross national income (GNI). In absolute numbers this was more than the 2010 figure of $128.5bn – the year net official development assistance (ODA) reached its peak. However, adjusted for inflation and weaker currencies, last year's figure actually represents a 2.7% drop. This does not necessarily mean governments have cut their aid budgets, but that the money is worth less because of inflation.
"The fall of ODA is a source of great concern, coming at a time when developing countries have been hit by the knock-on effect of the crisis and need it most," said Angel Gurría, the OECD's secretary general. "Aid is only a fraction of total flows to low income countries, but these hard economic times also mean lower investment and lower exports. I commend the countries that are keeping their commitments in spite of tough fiscal consolidation plans. They show that the crisis should not be used as an excuse to reduce development co-operation contributions."
NGOs expressed particular concern that aid has fallen to the world's 48 poorest countries – the group of least developed countries. The LDCs saw a fall in net bilateral ODA of 8.9% in real terms, to $27.7bn. "This fall suggests that aid is not as targeted as donors claim," said Jo Rea of Bond, the NGO group.
Bilateral aid to sub-Saharan Africa was $28bn, representing a fall of 0.9% in real terms compared with 2010. By contrast, aid to the African continent increased by 0.9%, to $31.4bn, as donors provided more aid to north Africa after the revolutions in the region.
Until 2011, aid had been steadily increasing for more than a decade. Net ODA rose by 63% between 2000 and 2010.
In past crises, such as the Mexican debt crisis in the early 1980s and the recession of the early 1990s, aid has served as a cushion for hard times. This time, however, recession in several DAC donor countries has already severely squeezed their aid budgets and pressure may mount on other donors in the years ahead, said the OECD.
"While I am disappointed that some countries have failed to maintain their commitments, the overall level reflects the growing awareness that global challenges – from disease to security threats to climate change – cannot be resolved without development progress," said Brian Atwood, chairman of the OECD-DAC.
In 2011, the largest donors were the US, Germany, the UK, France and Japan. In real terms, the largest rises in ODA were registered in Italy, New Zealand, Sweden and Switzerland. By contrast, ODA fell in 16 DAC countries, with the largest drops recorded in Austria, Belgium, Greece, Japan and Spain. G7 countries provided 69% of DAC aid, and EU countries 54%.
EU members need to move more aggressively to meet the 0.7% aid target by 2015, the EU's development commissioner, Andris Piebalgs, said as the union's aid dipped slightly last year. EU official development aid reached 0.42% of EU GNI last year, down from 0.44% in 2010.
With €53bn in development aid in 2011, the EU and its 27 member states remain the world's biggest aid donor, providing more than half of all global official aid.
Despite the financial crisis, 16 EU members managed to increase their aid. Three are ranked among the five largest donors worldwide and four of them – Denmark, Luxembourg, the Netherlands and Sweden – have already reached the 0.7% target. But with only three years left until 2015, it will take a miracle for the EU to hit the 0.7% figure formalised in 1969. On current projections, EU aid is set to reach €44.13bn, leaving the bloc €46.51m short of its target.
"We need a more aggressive approach on the issue," said Piebalgs. "Investing in development aid will make the world safer and more prosperous. Solidarity must remain our guiding principle. I call on member states to reaffirm their determination of achieving the goal of increasing ODA to 0.7% of GNI by 2015. Aid must be part of the EU response to global challenges."
Only the UK is projected to join the quartet of EU states that meet or exceed the 0.7% target (Britain should hit the figure next year). Last week, UK peers urged the British government to drop its commitment to spend 0.7% of GNI on aid, arguing it prioritised spending over results and jeopardised the quality and effectiveness of aid programmes.
In 2005, EU member states pledged to increase official aid to 0.7% of GNI by 2015, the target date for the millennium development goals on halving poverty, and included an interim target of 0.56% by 2010. These were based on individual targets of 0.7% for the EU 15 and 0.33% for the 12 countries that joined the EU in 2004 and 2007.
