Chapter 5: Aid and International Financial Institutions
- International Monetary Fund
- Published Date:
- April 2012
Summary and Main Messages
Official development assistance (ODA) has strengthened remarkably over the past decade, despite the disruptions of the global financial crisis centered in high-income countries. Net ODA reported to the Development Assistance Committee (DAC) of the Organisation for Economic Co-operation and Development (OECD) rose from 0.22 percent of donors’ gross national income (GNI) in 2000 to 0.32 percent in 2010 and reached a record high of $127.3 billion in 2010 (at 2009 prices), very close to the target set at the Group of Eight Gleneagles Summit in 2005. And among the 15 European Union (EU) member countries that committed to raising ODA to 0.51 percent of GNI by 2010, 8 countries reached the goal and another 4 countries made significant progress toward it. There is some evidence that international coordination, notably the commitments made at Gleneagles, contributed to the rise in aid disbursements (Kharas 2010). Nevertheless, aid remains well short of the goal of 0.7 percent of GNI set by the United Nations some 40 years ago and substantially below various estimates (Atisophon and others 2011) of annual disbursements required to meet the Millennium Development Goals (MDGs). Further, a key concern is that it may take several years before the full impact of the global financial crisis on aid flows becomes apparent. This is underscored by the just-released (April 2012) preliminary OECD data indicating that ODA disbursements declined by 2.7 percent in 2011 (at 2010 prices), as fiscal consolidation in several DAC countries has cut into their aid budgets.
Despite the recent spikes in food prices, ODA commitments to agriculture, food, and nutrition are limited. The share of aid commitments directed toward agriculture, food, and nutrition has remained at about 10 percent since the MDGs were agreed upon in 2000. Further increases in aid for nutrition are particularly important: assistance for nutrition represents only 3 percent of total aid flows to agriculture, food, and nutrition, yet improved nutrition and gains in early childhood development are critical to economic progress.
Tight budget constraints in many donor countries underscore the need for improving aid effectiveness to meet the MDGs in 2015. Progress in improving aid effectiveness has fallen short. Only 1 of the 13 global targets set out in the Paris Declaration on Aid Effectiveness (2005) to be achieved by 2010 has been met, and only limited progress has been achieved on the other 12. Directing a larger share of disbursements to country programmable aid (CPA, a core subset of ODA, which accounts for about 60 percent of total DAC gross bilateral ODA and excludes unpredictable components such as food aid and aid flows that do not have direct development impacts such as donor administrative costs) would also help to mitigate the impact of weakened aid flows.
The very welcome expansion of new donors has raised new challenges for aid recipients and has led to shifts in the international aid agenda. While data remain limited, the Bank estimates that aid disbursements by non-DAC bilateral donors (including new donor middle-income countries) and private actors such as philanthropic organizations reached $63.5 billion in 2009. The lion’s share, $52.5 billion, came from private nongovernmental organizations (NGOs) (Hudson Institute 2011) and the remaining $11 billion came from non-DAC donors (accounting for $7.3 billion) and new middle-income donors Brazil, China, India, the Russian Federation, and South Africa (together accounting for $3.7 billion) (Zimmermann and Smith 2011). The rapid rise in the number of donors and projects has increased the administrative burden facing recipients, particularly for fragile and conflict-affected states (OECD 2011c). The sharp rise in stakeholders has contributed to important shifts in the aid agenda, including calls for strengthening country leadership and ownership of the aid management process; promoting a more inclusive process of development cooperation; improving delivery, measurement, and monitoring of results; and improving harmonization and transparency of aid management and delivery practices—common goals that the development community endorsed in the Global Partnership for Effective Development at the Fourth High Level Forum on Aid Effectiveness in Busan in 2011. Additionally, participation by new actors, particularly the private sector, has led to calls for greater emphasis on innovation (Gates 2011).
With increased international trade, foreign investment, and remittances flows, ODA is now viewed as only one component of many international activities that support development and poverty alleviation (Zoellick 2011). Nevertheless, ODA remains particularly important for low-income countries. It represented more than 60 percent of their external finance during 2005–10, compared with a mere 4 percent for middle-income countries (Adugna et al. 2011). ODA is critical for fragile and conflict-affected states, where integration with global markets has been severely hampered. Recognizing that few conflict-affected countries would achieve a single MDG by 2015, the New Deal for Engagement in Fragile States (which stakeholders endorsed at the Fourth High Level Forum in Busan) sets out 5 priorities to work toward: legitimate politics, justice, security, economic foundations, and revenues and services.
Fiscal consolidation in many large donor countries is likely to slow the growth of aid in coming years. Donor reports indicate that the growth of disbursements of country programmable aid could fall from an average of 5 percent a year recorded during 2001–10 to an average of 2 percent during 2011–13. This implies an annual per capita decline of 0.2 percent of CPA disbursements for recipient countries. Disbursements to countries in conflict or fragile situations may decline by an annual 2.1 percent on a per capita basis, although they would remain four times the per capita level expected for other aid recipients. If realized, lower per capita CPA disbursements could have significantly negative fiscal implications for the countries affected—and potentially for the achievement of the MDGs. This potential aid decline underscores calls at the Fourth High Level Forum on Aid Effectiveness in Busan to focus on results, to scale up aid for fragile states and underaided countries, and to improve aid coordination.
Recent trends in the disbursement and composition of aid
Official development assistance strengthened substantially in 2010, despite ongoing challenges tied to the global financial crisis and limited fiscal space in many high-income countries. DAC member countries’ bilateral ODA net disbursements increased by 6.3 percent in constant dollars to $127.3 billion, the highest level on record, exceeding the previous peak of $122.3 billion in 2005. This increase followed weak volume growth of 1 percent in 2009, as the global economy grappled with recession. Bilateral ODA net disbursements rose to 0.32 percent of DAC donors’ GNI in 2010, up from 0.22 percent in 2000 and the highest share since the record 0.33 percent posted in 2005 (Figure 5.1). Of the $127 billion in ODA net disbursements from DAC countries, 29 percent was directed to low-income countries, 18 percent to middle-income countries, and 30 percent to multilateral institutions.1
Figure 5.1.DAC members’ net ODA bilateral disbursements
Source: OECD DAC.
In contrast to DAC bilateral ODA, multilateral net disbursements for development contracted by 1.6 percent in 2010 to $13.2 billion in constant 2009 prices. Since multilateral disbursements accounted for only 9 percent of total disbursements (DAC bilateral ODA and multilateral aid) in 2010, the rise in DAC bilateral ODA more than offset the multilateral decline; aggregate DAC bilateral and multilateral net aid disbursements reported to the OECD reached a record high of $147.5 billion in 2010 at constant 2009 prices.
The increase in ODA in 2010 continued the general trend of rising flows throughout much of the decade. DAC bilateral ODA registered a cumulative net gain over the decade of nearly $48 billion in constant prices. This 60 percent real increase was by far the largest decadal gain since data collection began in 1960 (Table 5.1). In the 40 years through 2000, DAC ODA grew by an annual average of 2.1 percent in real terms, while during the decade through 2010 the pace accelerated to an average 5.5 percent. The general trend of rising annual flows during the 2000s was only briefly constrained by the onset of the global financial crisis in 2008, with a sharp deceleration in growth to 1 percent in 2009.
|Level change (US$ millions)||339||19,418||22,870||(7,902)||47,799|
To a large extent the buoyancy in aid disbursements over the decade is tied to the 31.6 percent surge (in real terms) in DAC bilateral ODA in 2005 that is associated with international agreements that targeted substantial increases in international aid and debt relief. These include agreements reached in 2002 in Monterrey and in 2005 in Gleneagles and Paris and the Multilateral Debt Relief Initiative (MDRI), as well as the Heavily Indebted Poor Countries (HIPC) Initiative dating back to 1996. The surge in ODA in 2005 in particular reflects debt relief tied to HIPC, MDRI, and traditional debt relief mechanisms under the Paris Club, which in aggregate accounted for 17 percentage points of the 31.6 percent real increase in ODA for the year. Debt relief represented 10 percent of ODA over the decade (2001–10), peaking at 22.2 percent in 2005. This level compares with a somewhat smaller average share of 7.8 percent during the 1990s and a much smaller 2.3 percent share in the three earlier decades (1960s through 1980s). The upswing in multilateral ODA helped reverse the contractions in DAC bilateral ODA of 5.2 percent in 2006 and 8.1 percent in 2007 (in real terms).
2010 was the deadline to achieve very ambitious targets that donors and partner countries set for themselves in 2005 to increase development aid flows in an effort to help realize achievement of the Millennium Development Goals in 2015. More specifically, at the G-8 Gleneagles Summit in 2005, donors agreed to raise annual ODA disbursements by about $50 billion by 2010 and the 15 EU countries that are members of OECD DAC committed to raise ODA flows to 0.51 percent as a share of GNI by 2010. While neither target was met, significant progress was made despite the severe disruptions tied to the global financial crisis since 2008—and the commitments made at Gleneagles and other international initiatives (such as the High Level Forums) appear to have contributed to the rise in aid disbursements (Kharas 2010). Aid disbursements reached a record high of $127.3 billion in 2010 and helped bring donors very close to achieving the G-8 Gleneagles target for 2010 of $130 billion (at 2009 prices). Additionally, 8 of the 15 EU member countries that committed to the 0.51 percent target reached it, and 4 countries made significant progress toward the goal.2
More countries made larger ODA disbursements relative to their GNI over the past decade than during the 1990s—or indeed since the 1960s. The individual country efforts of smaller countries have exceeded those of the larger DAC bilateral donor countries. EU member countries have led this trend. For example, ODA disbursements rose by a minimum of one-tenth of a percentage point as a share of GNI in Belgium (from 0.53 percent to 0.64 percent), Denmark (0.81 percent to 0.91 percent), Ireland (0.42 percent to 0.52 percent), Luxembourg (0.79 percent to 1.05 percent), Spain (0.27 percent to 0.43 percent), and the United Kingdom (0.47 percent to 0.57 percent) between 2005 and 2010, reflecting a concerted effort to meet their Gleneagles 2010 commitment. By contrast, U.S. ODA disbursements averaged 0.17 percent of GNI during the decade through 2010, (notably rising from an average of 0.13 percent in the 1990s). As a consequence, the simple average of the DAC country effort has come to exceed, by a wide and growing margin, the income-weighted average (which weighs the given country’s effort by its GDP, and thus giving larger economies a larger weight). While the DAC countries’ total weighted ODA disbursements as a share of GNI rose to 0.32 percent in 2010, the average unweighted country share rose to a record high of 0.47 percent in 2010 (up from 0.36 percent in 2000) (Figure 5.2).
Figure 5.2.DAC ODA as a share of donor GNI
Sources: OECD Creditor Reporting System and World Bank.
The considerable rise in aid flows over the past decade has been accompanied by a significant reorientation of flows toward low-income countries, where aid also represents a much larger source of external financing needs (figure 5.3). Low-income countries accounted for a peak 61.9 percent of aid flows in 2010, compared with 46.9 percent and 44.3 percent in 2000 and 1990, respectively.3 In contrast, ODA flows to middle-income countries fell from 56.7 percent of the total in 1990 to 38.1 percent in 2010. The rise in the low-income-country share of ODA flows represents a recent acceleration of a long-term trend: these countries received only 35 percent of ODA flows to developing countries in the 1960s (and a historical low of 27 percent in 1961, with available data starting in 1960). The recent rise in disbursements to them in part reflects efforts tied to the war on terrorism. Nevertheless, if total ODA disbursements from all donors to Afghanistan are excluded, the trend is still evident and becomes more pronounced later in the 2000s. And notably, the surge in flows to middle-income countries during the mid-2000s is accounted for by disbursements to Iraq (largely in the form of debt forgiveness). Aid flows are a significant source of external financing for low-income countries, with ODA representing more than 60 percent of total external financing for them from 2005 to 2010, in contrast to a mere 4 percent for middle-income countries, where foreign direct investment (FDI) and other sources of private financing accounted for more than three-fifths of external financing needs (Adugna et al. 2011).
Regional shifts in ODA reflect the reorientation in aid toward low-income countries and an increased concentration of flows by large donor countries toward strategically important recipient countries. A key example of the latter is the United States, which has concentrated its bilateral aid flows in Afghanistan over the past decade (along with Iraq, a lower-middle income country; see Figure 5.3).
Figure 5.3.Net ODA disbursements to low- and middle-income countries and by region
Source: OECD DAC.
In South Asia, real ODA disbursements to Afghanistan increased from $1.6 billion in the 1990s to $27.9 billion in the 2000s, whereas Bangladesh and India experienced a decrease in real ODA disbursements of about 20 percent. Afghanistan accounts for 41 percent of real ODA to South Asia, followed by Pakistan (17 percent), India (16 percent), and Bangladesh (12 percent).
In the Middle East and North Africa, the Arab Republic of Egypt received more than 50 percent of regional ODA disbursements from 1990 to 1999, followed by Morocco (11 percent) and Jordan (8 percent). That changed during the 2000s, when disbursements to Iraq surged as it became a strategic focus for the United States. Iraq has received more than $60 billion since 2000, or 59 percent of regional ODA flows during the 2000s (in real terms).
Among the other developing regions, Sub-Saharan Africa also saw a significant upswing in real ODA disbursements during 2001–10 compared with 1991–2000, reflecting efforts by donors to support acceleration in progress toward meeting the MDGs. Nigeria, Democratic Republic of Congo, and Tanzania experienced the largest increases in aid disbursements to the region, accounting for 25 percent of regional ODA disbursements. Europe and Central Asia also saw a substantial increase in ODA, albeit from a low base. Real aid disbursements shifted from Bosnia-Herzegovina (30 percent of regional disbursements) and Turkey (17 percent) toward Serbia. Real ODA to Serbia increased from $1.6 billion in the 1990s to $10.3 billion in the 2000s.
Regional ODA flows have remained roughly stable in Latin America and the Caribbean in real terms. Colombia saw the largest percentage rise in disbursements, from $2.1 billion in the 1990s to $7.8 billion in the last decade (a real increase of 262 percent). In contrast to the rest of the developing regions, ODA disbursements in East Asia and Pacific declined markedly in real terms in the last decade, as the region made strong gains toward poverty alleviation. In particular, the aid decline reflects a fall-off in flows of more than 30 percent to the large regional economies of China, Indonesia, and the Philippines. These declines more than offset the 159 percent increase in disbursements to Vietnam, which became the top regional recipient with 22 percent of the region’s total ODA in 2010.
Another important development over recent years, attendant with increased focus of aid flows to low-income countries, is that aid is increasingly being directed to fragile states and situations (FSS).4 The severity of the situations in FSSs has widespread effects that are manifest locally, regionally, and globally. The 32 countries categorized as FSSs (according to the International Development Association, or IDA) accounted for about 18 percent of total net bilateral ODA disbursements and multilateral development assistance and 25 percent of net bilateral disbursements from DAC countries in 2010. These countries represent 425 million people. Some other definitions of countries in fragile situations include countries with as many as 1.5 billion people (World Bank 2011b). ODA disbursements to fragile states increased in 2001–10 (both including and excluding Iraq and Afghanistan), while aid to nonfragile states held steady (both including and excluding China and India).5
Corresponding to the trend of higher ODA to low-income countries, the level of net ODA received on a per capita basis has shifted increasingly toward countries that are furthest from achieving the MDGs. For example, the group of countries that have met or are currently on track to achieve no more than two MDGs received an annual average of $48 per capita in 2008–10, up by 20 percent in real terms compared with 1990–92, and more strikingly up 85 percent compared with 2000–2002 (Figure 5.4). This rise in flows to countries that are furthest from attaining the MDGs represents an important trade-off between need and performance, because aid effectiveness (improvement in outcomes per dollar spent) in these countries is likely to be weaker compared with other countries closer to the 2015 targets. However, successfully tackling circumstances where performance has been severely hampered (by conflict or natural disasters, for example) also provides scope for the greatest possible gains.
Figure 5.4.Net ODA received per capita by groups of countries ranked by MDG targets met or on track to be met by 2015
Source: World Development Indicators database, OECD DAC, and World Bank staff calculations.
Recent trends in the composition of aid for agriculture, food, and nutrition
Despite the spike in food prices, ODA commitments from all donors to agriculture, food, and nutrition did not increase as a share of total ODA between 2000 and 2010. While aid commitments from DAC bilateral ODA and multilateral developmental assistance to agriculture, food, and nutrition rose from $8.7 billion in constant terms in 2000 to near $16 billion in 2010, the share remained roughly unchanged at close to 10 percent. In the mid-2000s, increased focus was paid to debt forgiveness (particularly for highly indebted poor countries and Iraq). As a result, and despite a 75 percent increase in committed support to agriculture, food, and nutrition from all donors, the actual share in total ODA commitments declined from 10 percent in 2000 to about 7 percent in 2006. Excluding debt forgiveness, ODA for agriculture, food, and nutrition from all donors has remained more stable since the mid-2000s at about 10 percent of total remaining commitments, 1 percentage point below the 11 percent share recorded during the first few years of the decade (Figure 5.5).
Figure 5.5.Share of committed ODA to food, nutrition, and agriculture by donor
Source: World Bank staff calculations based on OECD DAC.
Assistance for nutrition represents only 3 percent of total agriculture, food, and nutrition commitments, despite widespread evidence that improved nutrition and gains in early childhood development are key in making long-term progress in development (Figure 5.6). Since 2000 support from IDA to nutrition has decreased, whereas commitments from DAC countries and other multilaterals have doubled. However, actual aid-financed expenditures on nutrition may be higher than reported, because other sources of aid may be devoted to purchasing food. For example, research shows that spending on social safety nets has often been used by beneficiaries to purchase more and better food (as discussed in chapter 2). Similarly, there is evidence that programs that provide a basic package of free health care services to poor households is also spent by beneficiaries on food. Additionally, aid delivered as fungible budget support can be used to support particular needs (which may be nutrition) or sectors of the economy (which may be agriculture).
Figure 5.6.Composition of committed ODA and commitments by donors in year 2010
Source: World Bank staff calculations based on OECD DAC.
More than 40 percent of food-related development assistance commitments were directed to agriculture and agro-business in the year 2000. Remaining aid commitments were intended for programs related to food aid and food security (30 percent), rural development (16 percent), emergency food aid (7 percent), and basic nutrition (2 percent). Recent data (2010) show that agriculture and agro-industries, rural development, and emergency food aid have gained significantly in aid importance, whereas committed resources to food aid and food security programs have considerably decreased (Table 5.2). This pattern illustrates a shift in the donor community to focus on alleviating the short-term impact of food crises on the most vulnerable, while at the same time providing support to programs aimed at bolstering productivity and long-term growth in agriculture. In this new architecture, DAC countries have concentrated their efforts on emergency response and food aid programs, whereas international financial institutions (IFIs), particularly the World Bank, have focused on rural development, agriculture, and agroindustries. (See the annex for further discussion of the IFIs’ response to the recent spikes in food prices.)
|Category||Creditor Reporting System code||Constant 2009 $||Share of commitments (%)||Constant 2009 $||Share of commitments (%)|
|Emergency food aid||72,040||603||7||2,598||16|
|Food aid/food security programmes||52,010||2,640||30||1,644||10|
|Agriculture and agro-industries||3110-95||3,863||45||8,257||52|
ODA commitments by income group for agriculture, food, and nutrition have increasingly shifted toward low-income countries. On average during the decade through 2010, this group received about two-thirds of total ODA commitments for this category. ODA commitments for basic nutrition for low-income countries accounted for 0.2 percent of total ODA commitments for all categories during the decade, twice the amount received by lower-middle-income countries (0.1 percent), and twice again that received by upper-middle-income countries (0.05 percent) (see Figure 5.7 and the appendix for the classification of economies).
Figure 5.7.ODA commitments by income group
Source: OECD DAC, Creditor Reporting System.
Note: See the appendix for the classification of economies.
Expansion of the donor community
Recent years have witnessed an expansion and diversification of the donor base for concessional aid, notably from NGOs and, to a lesser extent, the emergence of a number of middle-income countries as new donors (even while in some cases they are still receiving ODA). This expansion of the donor community appears to be reinforcing the increased concentration of aid flows to low-income countries (noted earlier). While the broadening of the donor base has been apparent for decades, it intensified in the 1990s and particularly in the second half of the 2000s, and in part simply reflects better reporting of aid flows. The proliferation and increased diversity of donors bring a number of benefits aside from increased aid disbursements—including complementarities, additional resources, and technical expertise—but the proliferation of donors also poses important new challenges, including rising transaction and administrative costs for both donors and recipients.
Data regarding concessional flows for development from NGOs, middle-income countries, and other newer donors remain extremely sparse, although they have improved. For example, the Gates Foundation has begun reporting aid disbursements to OECD DAC. Latest available estimates from the Hudson Institute indicate that private NGOs (foundations, philanthropist organizations, and corporations) provided $52.5 billion of international developmental flows in 2009 (latest available). Measured as a share of total bilateral ODA reported by OECD DAC, NGO contributions surged to 44 percent in 2009, up from zero reported aid in 1992.
More and more countries are providing ODA, and more and more countries are reporting data on their ODA disbursements. For example, the OECD reports on non-DAC ODA—aid flows from countries that are not members of the Development Assistance Committee—but not in the same detail as the DAC member countries provide. Twenty non-DAC countries reported to the OECD in 2009, up from 10 in 2000. The disbursement of non-DAC aid reported to the OECD increased to $7.3 billion in 2009 from $1.3 billion in 2000 (at constant 2009 prices). As a share of DAC bilateral ODA, non-DAC ODA rose to 6.1 percent in 2009 from 1.7 percent in 2000 in constant prices. The non-DAC countries include both high- and middle-income countries. The Arabian countries of Saudi Arabia, Kuwait, and the United Arab Emirates, and to a lesser extent, new European Union member countries Estonia, Latvia, Lithuania, Romania, and Slovenia, account for much of the increase in non-DAC flows reported to the OECD. Among the non-DAC middle-income countries, the Republic of Korea and Turkey markedly increased aid assistance during the decade, from near zero both were among aid recipients until a few years ago. Notably, Korea, an aid success story, became a DAC donor in 2009.
Data reporting has also improved in some middle-income countries that are new donors, although they do not report to the OECD. Among those reporting official bilateral data are Brazil, China, India, Russia, and South Africa (BRICS). These data are difficult to compile, given different reporting methods. However, various estimates are available. Zimmermann and Smith (2011) estimated the South-South flows of the BRICS—which account for much of the increase in South-South aid flows in recent years—grew to $3.7 billion in 2009 from $0.6 billion in 2003 (Figure 5.8). China accounted for 53 percent of the total ODA from BRICS in 2009 (reaching $1.9 billion up from an estimated $0.6 billion in 2003), and Russia and India accounted for 21 percent and 13 percent, respectively. While the aid flows from BRICS remain relatively small compared with DAC flows, they represented just over half (50.5 percent) of total non-DAC flows reported to the OECD in 2009, up from about one-fifth in 2003. To the extent data on aid from BRICS is available, given irregular reporting and different methodologies, some general trends are emerging. BRICS’ aid is generally delivered to bilateral partners with a combination of conditional and nonconditional financing, usually without policy conditions, and is often directed toward infrastructure and productive sector investment projects (Table 5.3). Geographically, the BRICS tend to extend aid to neighboring countries, with the exception of China, which delivers significant aid flows to other regions. For example, India’s aid is largely directed toward Afghanistan, Bhutan, Myanmar, and Nepal (Mwase and Yang 2012).
Figure 5.8.ODA from Brazil, Russia, India, China, and South Africa
Sources: OECD DAC; Zimmermann and Smith 2011.
|Key agency||Brazilian Cooperation Agency||Department of International Finance||Indian International Development Cooperation Agencya||No development agency (discussions are ongoing)|
|Key ministry||Ministry of External Relations||Ministry of Finance and Ministry of Foreign Affairs||Ministry of External Affairs||Department of Aid in Ministry of Commerce|
|Form||Loans and grants||Mostly grants and debt relief||Grants, credit lines, interest-free loans, and other concessional and nonconcessional loans||Grants, credit lines, interest-free-loans, and other concessional and nonconcessional loans|
|Country focus||Latin America and Africa (especially Lusophone)||Mostly Commonwealth of Independent States (especially Kazakhstan and the Kyrgyz Republic)||Neighboring countries (Afghanistan, Bhutan, Myanmar, and Nepal) and Africa||Widespread through large amounts concentrated in a small number of countries|
|Sector||Mostly agriculture, education, and health||Mostly general budget support||Grants for rural development, education, health, technical cooperation; loans for infrastructure and disaster relief||Mostly energy, transport, and communications, but also construction of schools and hospitals and prestige projects (such as stadiums)|
NGO concessional aid flows were the leading dynamic behind the doubling of real aid flows from 1992 to 2009. An aggregation of the Hudson Institute’s NGO aid estimates with the OECD’s bilateral DAC and non-DAC ODA disbursements—along with Zimmerman and Smith’s (2011) estimates of ODA from BRICS—indicates that total global aid reached $183.3 billion dollars in 2009, up from $90 billion in 1992 (in real terms) (Figure 5.9). NGOs represented 29 percent of this global total. OECD non-DAC countries and BRICS represented 6 percent—which together with NGOs accounted for more than one-third of reported total global aid in 2009. The Hudson Institute’s estimates indicate that private NGO aid flows have come to eclipse ODA originating from new donor countries, despite their rapid growth over the last decade.
Figure 5.9.Changes in sources of estimated global concessional developmental flows
With the growing number of countries and organizations contributing ODA and development aid, the number of counterparts with which a recipient country engages has increased markedly over the past decades. For instance, the OECD alone reports that in 2009 the average OECD donor was present in 71 of 152 ODA-eligible countries (73 for DAC countries and 69 for multilateral agencies), and that the average number of donors present in each recipient country was 21 (OECD 2011d). Aid fragmentation is greater if new agents (NGOs and middle-income countries) are included. As a consequence, partner country institutions are facing rising transaction costs, as they are required to dedicate more and more resources toward engagement with donor agents, while the average size of projects has declined (in part the result of improved reporting). Because anecdotal evidence suggests a growing duplication of effort, increased coordination among donors, as well as between donors and recipients, could generate significant gains in efficiency. The OECD reports that the global fragmentation ratio (number of nonsignificant donors compared with the overall number of donors) has risen in recent years, with fragile and conflict-affected states seeing the largest increase (Table 5.4). As of 2009, two of every five DAC countries’ aid relations were classified as nonsignificant, representing a total of about $2.9 billion or a mere 3 percent of total global CPA transactions. In response to the increased fragmentation of aid, several donors have undertaken efforts to concentrate aid disbursements on fewer recipient countries. Notably, phasing out nonsignificant relations is largely an uncoordinated exercise and points to risks for recipient countries that have a high fragmentation ratio, such as fragile and conflict-affected states.
|Income group||Number of countries||Significant relations (A)||Nonsignificant relations (B)||Total relations (A+B)||Fragmentation ratio (F-ratio) B/(A+B) (%)||2008 F-ratio (%)||2004 F-ratio (%)|
|Memo: fragile and conflict-affected||41||622||436||1,058||41||39||36|
Aid effectiveness agenda
The marked changes in aid architecture over the past decade have coincided with a reexamination of ODA, with heightened scrutiny on the effectiveness of aid and results. A number of fundamental shifts in the aid agenda and approaches have become increasingly apparent. In part, new donors and non-state participants have made demands for increased accountability and the effective use of money spent on development assistance. These demands have translated into calls for greater transparency in aid flows at all levels and across agents, and have highlighted the need for strengthening institutions to make them more results oriented for better monitoring of development programs and to broaden participation. In response, the development community has increasingly pursued various avenues to strengthen accountability and transparency among donors and recipients to improve outcomes, along with more rigorous measures of aid effectiveness.
Improving aid effectiveness has been a key focus at various international development forums over the past decade, especially following the signing of the Millennium Development Declaration in 2000. In particular, the aid effectiveness movement, with a focus on results, gained momentum in 2002, when the Monterrey Consensus was adopted by more than 50 heads of state and gained the support of the International Monetary Fund, the World Bank, and the World Trade Organization. The Monterrey Consensus highlights the importance of development cooperation, recognizing that both domestic and international resources need to be mobilized for development. Donors agreed to ramp up aid flows. Participants at Monterrey also recognized that aid needs to be optimally used to accomplish the MDGs by 2015.
Since adoption of the Monterrey Consensus, the international framework for action on aid effectiveness has come to be articulated at the High Level Forums.6 In 2003 the international aid community met in Rome for the First High Level Forum, which focused on harmonization among donors. Among the outcomes in Rome, donor institutions committed to improve coordination of their programs and to streamline activities.
At the Second High Level Forum in 2005 in Paris, stakeholders endorsed the Paris Declaration on Aid Effectiveness, an effort to comprehensively revamp the way donor and recipient countries work together to improve poverty reduction outcomes and achieve long-term sustainable development. The Paris Declaration on Aid Effectiveness placed the country ownership of policies and programs at the center of an international reform agenda to make aid more effective, with the international community recognizing that far-reaching and monitorable actions and greater focus on results would be necessary to improve the delivery and management of aid to maximize its contribution to the achievement of the MDGs. Five shared principles of aid effectiveness were set out in the Paris Declaration, along with more than 50 commitments. A distinct feature was the commitment by donors and developing countries to hold each other accountable for implementing the declaration through a set of clear indicators of progress with 13 measurable targets.7 The 5 principles call for strengthened partner country ownership (partners setting the agenda); improved donor alignment with partners’ agenda; harmonization across donors (establishing common arrangements, simplifying procedures, sharing information); managing for development results; and mutual accountability.
Participants recognized that while the recent proliferation of donor agents contributed to higher aid flows, it also led to fragmentation of aid, making it less predictable, transparent and more volatile. Insufficient transparency was identified as an important bottleneck to improving outcomes,8 including the need to achieve greater partner participation and harmonization with local objectives. Separately, a number of NGO initiatives have been undertaken to improve the tracking of aid flows and transparency along with the ability to assess aid effectiveness. Initiatives include those by Publish What You Fund (PWYF Index), the joint effort by the Center for Global Development and Brookings (Quality of Official Development Assistance, or QuODA), and Give Directly (Box 5.1).
Box 5.1Examples of independent initiatives to improve aid effectiveness
Publish What You Fund (PWYF) campaigns for improved aid transparency, that is, more and better information about aid. The organization’s 2010 Aid Transparency Assessment (the first global assessment for aid transparency) and its 2011 Index show that the aid information currently made available by donors is very limited and that there is a lack of comparable and primary data available. Their index compares transparency of 30 major donors by seven weighted indicators that fall into three categories—high-level commitment to transparency, transparency to recipient government, and transparency to civil society. PWYF reports wide variation in levels of donor aid transparency and significant weaknesses in many donors across the seven indicators.
The Center for Global Development and Brookings released the Quality of Official Development Assistance (QuODA) assessment in 2010. The QuODA assessment is similar to the PWYF’s aid transparency index; however, it also seeks to address the broader issues of aid effectiveness and capture donor adherence to international standards outlined in the Paris Declaration and Accra Agenda for Action. The QuODA assessments are compiled by constructing four dimensions or pillars of aid quality, built up from 30 separate indicators. The four dimensions are maximizing efficiency, promoting transparency and learning, fostering institutions, and reducing burden. Countries are ranked according to these assessments, which are intended to inform users of how much and what type of quality is “purchased” with the given country, agency, or multilateral aid delivery.
Give Directly is a nonprofit initiative to create an efficient and transparent way to provide aid. The organization allows individuals to donate money through its website to impoverished households in Kenya that Give Directly has identified. Give Directly transfers the donations electronically to the recipient’s mobile phone, and the poor choose to what purpose they want to direct the funds.Sources: http://www.Publishwhatyoufund.org/resources/index/assessment; www.givedirectly.org; and Birdsall and Kharas 2010.
In 2008 the Third High Level Forum in Accra recognized an increased role for a range of development actors beyond the state that broadened the principle of ownership, strengthened participation of partner countries and other stakeholders (such as philanthropic foundations and global programs), and deepened efforts to harmonize donor activities to improve the effectiveness of aid. Participants reaffirmed and deepened their commitments made in Rome and Paris and agreed on the need to accelerate progress toward improved cooperation and stronger results orientation. The Accra Agenda for Action consolidated the Paris Declaration principles and called for heightened focus on country ownership and leadership, more inclusive partnerships, and increased accountability for, and transparency about, development results. The Accra Agenda committed donors to publicly disclose regular, detailed, and timely information on volume, allocation, and, when available, results of development expenditure to enable more accurate budgeting, accounting, and auditing by developing countries. Additionally, recognizing the need to strengthen local capacity to monitor progress toward achieving the MDGs, international stakeholders at Accra mounted an effort to improve national statistical systems (Box 5.2). The International Aid Transparency Initiative aims to help donor signatories meet this commitment in the most coherent and consistent ways, and to bring together donors, partner countries, civil society organizations, parliamentarians, and aid information experts to agree on common information standards applicable to aid flows.
Box 5.2Better statistics for all: Monitoring the millennium development goals
The need for reliable and timely statistics to monitor the results of development programs was recognized long before the Millennium Development Goals were promulgated, but the widespread attention given to their quantitative targets has increased the demand for regular and uniform reporting of key indicators. Faced with large gaps in the international database, the Partnership in Statistics for Development in the 21st Century (PARIS21) was established in 1999 to coordinate efforts to increase the statistical capacity of developing countries. In 2004 the Second Roundtable on Managing for Development Results endorsed the Marrakech Action Plan for Statistics (MAPS), establishing an international agenda for support to statistics in developing countries. Subsequently the Accra Agenda for Action made broad commitments on behalf of donors and developing countries to strengthen national statistical systems. More recently, at the November 2011 Fourth High Level Forum on Aid Effectiveness, held in Busan, heads of state, ministers, and other representatives of developing and developed countries endorsed a global action plan for statistics.a This is the first time a statistical action plan has received explicit endorsement globally from the highest political levels.
Much progress has been made. The quality of statistics as measured by the World Bank’s statistical capacity indicator has improved from its benchmark level of 54 in 1999 to 67 in 2011 (see table). The availability of data for monitoring the MDGs has improved commensurately: in 2003 only 4 countries had two data points for 16 or more of 22 principle MDG indicators; by 2009 118 countries met this measure (OECD 2009b). Of 79 low-income IDA countries, only 8 do not have a national strategy for the development of statistics and are not planning to prepare one. Implementing these strategies is well under way in many countries. After the 2010 census round concludes in 2014, 98 percent of the world’s population will have been counted. Since donors began reporting support for statistical capacity development in 2008, financial commitments to statistics increased by 60 percent to $1.6 billion over the period 2008–10. More than 55 developing countries have improved their practices in data collection, management, and dissemination of household surveys. The United Nations Interagency and Expert Group on the MDGs has conducted a series of regional workshops aimed at improving the monitoring of the MDGs and has reported annually on progress.
|All||Sub-Saharan Africa||non-Sub-Saharan Africa|
In 2011 the international development community met at the Busan High Level Forum to assess progress on the MDGs and to determine where adjustments can be made to improve the outlook for meeting the goals by 2015, including ways to improve aid effectiveness and to better address the needs of under-aided countries and fragile states. Stakeholders reaffirmed the relevance of the aid effectiveness principles as stated in the Paris Declaration and deepened in the Accra Agenda for Action. In an evolving development landscape, stakeholders recognized that further efforts to increase the effectiveness of aid needed to be grounded in the broader development context, embracing the increasing diversity of development actors and seizing opportunities to leverage a wider range of sources of development finance. Discussions involved a wider set of stakeholders than previous high-level forums, including civil society organizations, representatives of private sector organizations, and countries that had until Busan played a less active role in international dialogue on aid effectiveness (including a number of middle-income countries).
The Busan Partnership agreement is complemented by a range of initiatives presented as “Busan building blocks” that bring together groups of like-minded stakeholders around common goals and determined to take the agenda forward at the country level. These efforts were intended to operationalize principles and commitments set out in the outcome document, allowing for a deepening of commitments and, in places, further innovation on a voluntary basis at the country level. To support improved knowledge sharing and accountability, the Open Aid Partnership (OAP) was launched at Busan with support from the World Bank, the United Kingdom, Sweden, Spain, the Netherlands, Estonia, and Finland. More specifically, the OAP seeks to enhance transparency of public budgets, service delivery, and development assistance, which are critical for improving governance accountability and citizen engagement. It builds on the International Aid Transparency Initiative data standard to make aid information more accessible and meaningful to citizens, and is complementary to ongoing efforts of the Open Government Partnership. The Results and Accountability Building Block focused on operationalizing a transparent, country-led results framework and exploring additional initiatives at the country level aimed at improving the delivery, measurement, learning, and accountability for results.
Recognizing that few conflict-affected countries will achieve a single Millennium Development Goal by 2015, a number of countries and international organizations at Busan endorsed the New Deal for Engagement in Fragile States. The New Deal sets out 5 goals—legitimate politics, justice, security, economic foundations, and revenues and services—to give clarity on the priorities in fragile states.9 Stakeholders agreed that the current ways of working in fragile states need serious improvement, and that despite the significant investment and the commitments of the Paris Declaration and the Accra Agenda, results and gains in value for money have been modest. Stakeholders also recognized that transitioning out of fragility is long, political work that requires country leadership and ownership. The New Deal recommends the use of peace-building and state-building goals as an important foundation to enable progress toward the MDGs. The New Deal also calls for an increase in the predictability of aid, including by publishing three-to-five year indicative forward estimates (as committed in the Accra Agenda for Action).
Another main outcome from Busan was the creation of a global partnership to support global-level monitoring and accountability through a new and more inclusive development agenda. Delegates in Busan, including Brazil, China, and India, endorsed the Busan Partnership for Effective Development Cooperation (Global Partnership) on common goals, shared principles, and differentiated commitments.10 The Global Partnership recognizes that, whereas the different types of aid donors should work toward common goals, donors can achieve them by “embracing their respective and different commitments.” The new development agenda is based on 4 principles: ownership of development priorities by developing countries, focus on results, inclusive development partnerships, and transparency and accountability. Donors pledged to make their aid information available to the public and to help recipient countries establish transparent public financial management and aid information management systems. To increase focus on development results, the Global Partnership seeks to strengthen partner country ownership and to strengthen their policies and core institutions through the creation of transparent and country-led results frameworks and platforms, and ensure that increased aid inflows are absorbed and spent efficiently to enhance growth. Donors pledged to ramp up efforts to fully unwind and end the practice of tied aid (which requires recipient countries to spend aid dollars on deliverables from companies in donor countries)—including efforts to improve the quality and transparency of reporting on the process of untying aid.
While remarkable progress has been made toward increasing aid disbursements, progress toward improving aid effectiveness has been less impressive—aside from achieving broad consensus in identifying specific areas that need to be addressed. In Paris in 2005, for example, the development community of donors and recipients agreed to pursue, and hold each other accountable for, reaching 13 very ambitious global targets. By the 2010 deadline only 1 of the targets had been met, although there were some apparent gains toward achieving the other targets (Table 5.5). While many of the reforms that were needed to reach the Paris Declaration targets were widely recognized as being very ambitious, the targets are nevertheless attainable.
Some measurable, if limited, improvements have been made in aid effectiveness, particularly in recipient countries, and specifically in the areas of monitoring capacity and policy framework, as well as in collaboration and harmonization among donors and partner countries. According to a progress report on implementing the Paris Declaration based on 2010 surveys of donors and recipients, the proportion of developing countries with sound national development strategies in place more than tripled from 2005 to 2010 (OECD 2011a). The results-oriented frameworks to deliver results and monitor progress against national development priorities are in place in one-fourth of reporting developing countries, and statistics related to the MDGs are becoming increasingly available.
|Indicator||2010 Actual||2010 Target||Status|
|Operational development strategies||37||75||not met|
|Reliable public financial management (PFM) systems||38||50||not met|
|Aid flows aligned with national priorities||41||85||not met|
|Strengthen capacity by coordinated support||57||50||met|
|Use of country PFM systems||48||55||not met|
|Strengthen capacity by avoiding parallel projects (number)||1,158||565||not met|
|Aid is more predictable||43||71||not met|
|Aid is untied||86||> 89||not met|
|Use of common arrangements, procedures||45||66||not met|
|Joint missions||19||40||not met|
|Joint country analytic work||43||66||not mwt|
|Results-oriented frameworks||20||36||not met|
|Mutual accountability||38||100||not met|
Progress has been moderate or mixed in the areas of capacity development and the quality of country public financial management (PFM) systems in partner countries. The OECD also reports that support for capacity development is often supply driven, rather than geared toward the developing countries’ needs, and remains an area for further improvement (OECD 2011a). Nevertheless, donors met the target on technical cooperation. And while more than one-third of partner countries showed improvement in the quality of PFM systems from 2005 through 2010, one-fourth experienced setbacks. Donor countries are using partner country PFM systems more extensively than they did in 2005, but they have fallen short of the target. More specifically, donors’ use of country PFM systems could be strengthened where the systems have been made more reliable.
Some donors have made measurable progress and have introduced innovative approaches and reforms to improve aid effectiveness and to meet the Paris Declaration targets. Among bilateral donors for example, the United Kingdom’s Department for International Development (DFID) initiated results-based financing in 2010, focusing specific outputs at a more micro level by offering incentives to a service provider or beneficiary of services (de Hennin and Rozema 2011). The intent is that from 2011 through 2014, all of DFID’s bilateral ODA allocations will be based on evidence-supported “results offers,” which are competitively bid upon by country and regional offices around the world (Birdsall 2010). Some IFIs, including the World Bank, have made significant gains across many of the Paris Declaration targets (Box 5.3). Another example is the Consultative Group on International Agricultural Research (CGIAR), which has improved collaboration and harmonization to enhance results on the ground (Box 5.4).
BOX 5.3The World Bank has made significant progress on the aid effectiveness agenda, but there is room for improvement
Because of its mission, mandate, and country-driven business model, the World Bank demonstrates strong performance on the Paris Declaration monitoring survey, the main tool for tracking progress globally on the aid effectiveness agenda. In 2011 the Bank’s results on the survey were better than the overall development partner average, and the Bank has met or is close to meeting the majority of targets (box table). The World Bank Group also performs well on other independent rankings such as those conducted by Publish What You Fund and the Center for Global Development and Brookings. (see Box 5.1).
|Overall results||World Bank results|
|Paris Declaration survey indicators (development partner performance)||Target (%)||2010a (%)||Meeting target?||Target (%)||2010a (%)||Meeting target?||Progress since 2005?|
|3.||Aid flows are aligned with national priorities (aid on budget)||85||41||85||74||+|
|4.||Strengthen capacity by coordinated support (technical assistance)||50||57||50||73||+|
|5a.||Use of country PFM systems||55||48||51||69||+|
|5b.||Use of country procurement systems||—||44||50b||54||+|
|6.||Strengthen capacity by avoiding parallel project implementation units||−67||−32||−67||−80||+|
|7.||Aid is more predictable||71||43||83||61||−|
|8.||Aid is untied||89||86||100||100||=|
|9.||Use of common arrangements or procedures (program based approach)||66||45||66||59||+|
|10a.||Joint missions to the field||40||19||40||29||+|
|10b.||Joint country analytic work||66||43||66||59||+|
Nevertheless, while it has made significant gains across the Paris Declaration survey indicators, the Bank fell significantly short of the target in some areas, particularly in making aid more predictable and, to a lesser extent, in donor coordination (joint missions to the field and joint country analytic work) and in aligning aid flows with national priorities.
The Bank has been playing a key role in shaping the international aid effectiveness agenda over the years, and has mainstreamed the aid effectiveness agenda at the country and corporate levels. The World Bank’s aid effectiveness priorities are based on a country-based business model and an ongoing work program focused on:
Country ownership and leadership: Country-led aid management and coordination is paramount (evolution away from donor harmonization); use of country systems (procurement, financial management, safeguards, statistics, monitoring and evaluation, budget, project management) is critical to country ownership and leadership; and Capacity development is key to strengthening country systems and building effective institutions.
Development partnerships beyond aid: New partnerships and approaches need to be recognized—DAC donors and traditional donor/recipient models of aid are no longer the only approach; the aid landscape is evolving—middle-income countries play an increasingly important role as providers of development assistance; foundations, global funds and programs, NGOs and the private sector are also major providers of assistance; partners use a multiplicity of approaches—South-South cooperation, knowledge exchange, technology transfer, foreign direct investment, trade, financing, aid.
Transparency for Results: The World Bank is a path-breaker on transparency—access to information policy, open data initiative, project database, international aid transparency initiative. The Bank is also strong on results—IDA and Corporate scorecard; core sector indicators country, project, and program level results frameworks; statistical and monitoring and evaluation capacity development; Development Impact Evaluation Initiative.
Fragile and Conflict Situations: These countries are a special focus for the Bank, including supporting better aid management and coordination.
BOX 5.4CGIAR: improved collaboration and harmonization to strengthen delivery
The Consultative Group on International Agricultural Research (CGIAR) is a global partnership that unites 15 International Research Centers and partner organizations engaged in research for sustainable development with the major global funders of this work. Its vision is to “reduce poverty and hunger, improve human health and nutrition, and enhance ecosystem resilience through high-quality international agricultural research, partnership and leadership.” The funders include developing- and industrial-country governments, foundations, and international and regional organizations.
The vision is supported by three strategic objectives: Food for People, to create and accelerate sustainable increases in the productivity and production of healthy food by and for the poor; Environment for People, to conserve, enhance, and sustainably use natural resources and biodiversity to improve the livelihoods of the poor in response to climate change and other factors; and Policies for People, to promote policy and institutional change that will stimulate agricultural growth and equity to benefit the poor, especially rural women and other disadvantaged groups.
The collaborative work of the CGIAR over the past 40 years has resulted in development impacts on a scale that is without parallel in the international community. They are the result of “international public goods,” including improved crop varieties, better farming methods, incisive policy analysis, and associated new knowledge. These products are made freely available to national partners, who transform them into locally relevant products that respond effectively to the needs of rural households in developing countries.
In response to a rapidly changing global development environment, the CGIAR had gone through a major reform to further improve its delivery of research results and on-the-ground impact. The reform is designed to give rise to a more results-oriented research agenda, clearer accountability across the CGIAR, streamlined governance, and increased efficiency. A new CGIAR fund will improve the quality and quantity of funding by harmonizing donor contributions, while a consortium structure will unite the CGIAR Research Centers under a legal entity that provides the fund a single entry point for contracting centers and other partners to conduct research under results-based performance agreements. The shift to a more programmatic approach provides for centers to operate within a strategy and results framework, aimed at strengthening collaboration for greater efficiency and development impact. A portfolio of CGIAR research programs was developed that remains the centerpiece of the reform.
Total contributions to the CGIAR in 2011 were approximately $706 million, with $384 million channeled through the fund. Of that, about 80 percent was untied aid, evidence of widespread faith in a multilateral approach to funding agricultural research for development. This is only a year after the new CGIAR fund was established.Source: CGIAR Fund Council.
Multilateral development banks (MDBs) have also made significant progress in attaining the Paris Declaration targets. The country-led development model—direct funding of government expenditures, support for the private sector based on national priorities, or both—has allowed for the main-streaming of aid effectiveness principles. As a whole, MDBs have outperformed development partner performance, according to the 2010 Paris Declaration survey (Table 5.6). Key challenges, identified in the survey, remain, however. These include the use of country systems (especially procurement), aid predictability, and common arrangements with other development partners.
|Overall results||MDB performance|
|Paris Declaration survey indicators (development partner performance)||Global target(%)||2010 (%)||2010 (%)||Progress since 2005?|
|3.||Aid flows are aligned with national priorities (aid on budget)a||85||41||59||=|
|4.||Strengthen capacity by coordinated support (technical assistance)||50||57||71||+|
|5a.||Use of country PFM systems||55||48||70||+|
|5b.||Use of country procurement systems||50b||44||48||+|
|6.||Strengthen capacity by avoiding parallel project implementation units||−67||−32||−73||+|
|7.||Aid is more predictablea||71||43||51||−|
|8.||Aid is untied||89||86||100||=|
|9.||Use of common arrangements or procedures (program based approach)||66||45||56||+|
|10a.||Joint missions to the field||40||19||27||+|
|10b.||Joint country analytic work||66||43||56||=|
Areas of limited or no progress include untying aid, common arrangements or procedures, aid fragmentation, and medium-term predictability of aid. In its progress report, the OECD reports that the untying of aid shows no improvement and that aid is becoming increasingly fragmented (OECD 2011a). Survey results also show limited progress has been achieved among donors to implement common arrangements or procedures and to conduct join missions and analytic work. Donor information on future aid disbursements remains very limited, and hence the predictability of aid remains a key challenge for developing country governments. Additionally, the majority of partner countries have yet to implement thorough, mutual (government-donor) reviews of performance.
Country programmable aid and outlook for ODA flows through 2013
Among efforts to improve aid effectiveness, DAC donors in 2007 agreed to provide annual forward spending plans for country programmable aid (CPA)—to improve the predictability and transparency of flows.11 The forward-spending plans can be used to provide a good indication of actual CPA disbursements and provide a rough indication of the prospects for total bilateral ODA flows in the coming years.
Country programmable aid is a core subset of ODA (representing about 60 percent of total DAC gross bilateral ODA) and is considered critical support in achieving the MDGs. CPA is aid that has a direct development impact and upon which recipient countries have, or could have, some input—and for which donors are expected to be accountable for delivering.12 Planned disbursements are reported for the upcoming three years (with latest available forward plans ending in 2013, based on surveys conducted from December 2010 through February 2011). Forward CPA is intended to reduce uncertainty about aid flows in recipient countries and thus enable better management of government spending plans, improve recipient country ownership, and help reveal gaps in development aid.
As a predictor of actual disbursements, planned CPA has proven reliable. For example, the predictability ratio of 2010 flows that were programmed in early 2008, early 2009, and early 2010 relative to actual CPA 2010 disbursements averaged 95.3 percent (OECD 2011c).
Latest available OECD DAC forward survey data indicate that the annual average growth rate of CPA may decelerate in real terms from 4.9 percent during 2001–10 to 2.1 percent during 2011–201313 (albeit this represents a recovery from the 0.7 percent contraction in 2010) (Figure 5.10). Planned disbursements by multilateral agencies account for much of the 2 percent increase expected during the coming years. In comparison, annual bilateral CPA from the DAC countries is expected to grow by a more modest 1.3 percent. Additionally, actual disbursement rates (versus planned) for CPA declined in 2010, suggesting that the actual pace of growth may be weaker than the anticipated 2 percent rate (OECD 2011).
Figure 5.10.Country programmable aid
Source: OECD CPA.
In per capita terms, CPA is projected to decline by an annual 0.2 percent. Countries in conflict or fragile situations are on track to see a sharper decline in CPA disbursements of 2.1 percent a year on a per capita basis—although they are expected to continue to receive about four times the per capita CPA disbursements expected for nonfragile countries—underscoring calls at the Busan High Level Forum to scale up aid for fragile and conflict-affected countries and offset this expected decline.
Lower CPA flows could have significant fiscal implications for the countries affected—particularly for those that rely heavily on ODA for external financing needs—and potentially on the achievement of the MDGs. Aid flows are much more significant as a source of external financing for low-income countries. As noted, on average during 2005–10, ODA represented more than 60 percent of total external financing for low-income countries in contrast to a mere 4 percent for middle-income countries, where private financing accounted for more than 60 percent of external financing needs.
During 2011–13, the share of each developing region in total CPA is expected to remain broadly stable. The biggest shifts are expected for Latin America and the Caribbean, where the share is on track to decline from 9.6 percent of the total in 2010 to 8.7 percent on average, and in South Asia, which is expected to see a 1.1 percentage point increase to 21.3 percent on average (Table 5.7, Figure 5.11). More specifically, the latest CPA plans for the developing regions indicate the following projected trends.
|East Asia and Pacific||18.8||16.8||16.9|
|Europe and Central Asia||6.7||8.0||7.8|
|Latin America and the Caribbean||9.6||9.6||8.7|
|Middle East and North Africa||20.7||10.7||10.6|
|Fragile situations||—||25.3||25.6|Figure 5.11CPA flows to developing regions
Source: OECD CPA.
South Asia is expected to post the strongest gains in CPA inflows over the 2011–13 period, with average annual real growth of 7.7 percent. Three of the projected top four country aid recipients across regions during 2011–13 are in South Asia: Bangladesh, India, and Pakistan (the fourth is Vietnam). Projected CPA represents a 4.7 percent annual increase to South Asia and largely reflects strong growth in flows to Bangladesh, India, and Pakistan, more than offsetting declines in planned flows to Afghanistan and, to a lesser extent, Sri Lanka.
East Asia and the Pacific and Sub-Saharan Africa are expected to see an average annual real increase in CPA disbursements of 2.2 percent and 2.1 percent, respectively. For Sub-Saharan Africa, this increase represents a sharp deceleration from the 13 percent annual average increase from 2008 through 2010. On a per capita basis, East Asia and the Pacific is expected to see more modest growth of 1 percent, while Sub-Saharan Africa, given the rapid population growth rate, will see a 3 percent annual decline. Kenya, Ethiopia, Madagascar, and the Democratic Republic of Congo are among the expected top 10 CPA recipients from 2010-13. Vietnam will receive the largest CPA disbursements in East Asia and the Pacific, if plans are realized. Although Indonesia and the Philippines are expected to continue to account for a large share of the CPA flows to East Asia and Pacific, the share is expected to contract compared with 2010.
Latin America and the Caribbean is on track to post the largest real regional decline in CPA through 2013 of close to 7.9 percent a year on average—with the vast majority of the countries in the region recording a contraction. Aid disbursements are expected to decline in nearly 80 percent of partner countries, with 40 percent of these linked to phase-out decisions. On a per capita basis, that translates into a 9.8 percent average annual decline in planned disbursements for the region.
The Middle East and North Africa region is projected to see a modest 0.9 percent expansion of CPA disbursements; however, strong population growth implies an annual average 2.4 percent contraction (in real terms). Planned disbursements to Algeria, Iraq, Jordan, and Tunisia are expected to decline, while those to Egypt and the Republic of Yemen are expected to increase.
Planned CPA disbursements to Europe and Central Asia are on track to decline by 0.8 percent overall and by 1.3 percent in per capita terms (at constant 2009 prices). Turkey is expected to continue to post the largest CPA, and modest growth in the share, over the 2011–13 time horizon, while Uzbekistan is expected to see the strongest growth. Bosnia and Herzegovina, Georgia, Kosovo, Moldova, and Tajikistan are among the countries expected to see significant declines.
A significant share of the projected declines in CPA going forward reflect planned phasing-out of aid by donor countries tied to efforts to concentrate aid on fewer partner countries and increased pressures on donor country coffers (OECD 2011c). To reduce transaction costs for recipient countries, where the capacity to manage the administration costs of projects is limited, donor countries have been phasing out programs where disbursements are small. For example, preliminary findings suggest that 162 aid relations between DAC EU member and partner countries are expected to be phased out between 2011 and 2013, accounting for 8 percent of DAC EU total CPA in 2009. From a partner country perspective, while a given donor may not provide large aid volumes in terms of total aid received, it might nevertheless represent a sizable share of aid directed to a specific sector or region where only a few donors may be present.
Real CPA flows to low-income countries are set to decelerate markedly, from an average rate of expansion of 8.6 percent during 2008–10 to 1.4 percent over 2011–13. Planned CPA disbursements to middle-income countries would shift from an average real growth rate of 2.2 percent in the earlier period to a 0.2 percent average rate of contraction during 2011–13 (Figure 5.12). CPA flows to both low- and middle-income countries are expected to contract on a per capita basis. The largest share of CPA flows are expected to continue to be directed to the countries that are furthest from attaining the MDGs (Figure 5.13).
Figure 5.12.CPA received by number of MDG targets achieved or on track
Sources: OECD CPA and DAC, and World Bank staff calculations.
Figure 5.13.CPA by low- and middle-income countries, 2003–13
Sources: OECD CPA and DAC, and World Bank staff calculations.
The projected decline in the growth of CPA disbursements likely reflects the need for significant fiscal consolidation in many high-income countries. Among the 23 OECD donor countries, 9 have fiscal deficits equivalent to or greater than 5 percent of their GDP.14 These countries accounted for 57 percent of bilateral OECD disbursements in 2010 and contributed 22 percentage points to the 63 percent real increase in aid flows from 2000 to 2010 (or $28 billion of the $49 billion level increase). There is also some indication of a slight decline in public support for development assistance. For example, the share of respondents in a post-crisis Eurobarometer survey that considered development important or fairly important fell from 91 percent in 2004 to 88 percent in 2009 (Figure 5.14). Nevertheless, according to the same survey, when asked about honoring or going beyond existing aid commitments to the developing world, support for development cooperation remained strong: 72 percent of Europeans were in favor of honoring or going beyond existing aid commitments, while only 7 percent deemed that current contribution levels were “too high.”
Figure 5.14Eurobarometer surveys
Note: Survey respondents were asked, “In your opinion, is it very important, fairly important, not very important, or not at all important to help people in developing countries?”
Source: Eurobarometer 2009.
Annex IFI responses to food price spikes
International financial institutions (IFIs) have responded to recent food price hikes through different lending and nonlending mechanisms (Table A5.1).
These responses include emergency financial support to the most vulnerable countries; medium-term assistance to strengthen social safety nets and agribusiness; and long-term programs to enhance infrastructure, rural development, and productivity along the food value chain.
Several high-level meetings in 2008 and after, in addition to the already established Committee on Food Security and the recently created United Nations High Level Task Force, of which the World Bank is a member, helped galvanize the international community by increasing coordination among sister institutions and policy dialogue with local authorities.
|Institution||Emergency support||Long-term programs|
|African Development Bank||Africa Food Crisis Response Initiative: $730 million for increased provision of agricultural inputs through emergency budget support, use of high-yield New Rice for Africa (NERICA), allocation of resources to fragile states (2008).||Africa Food Crisis Response Initiative: $2.2 billion for agricultural infrastructure, including water mobilization for irrigation, rural access roads, and facilities for reducing post-harvest losses (2008).|
|Asian Development Bank||$700 million for food safety net measures, emergency food assistance, and food policy reforms in Bangladesh, Cambodia, Mongolia, and Pakistan (2007–08).||Operational Plan for Sustainable Food Security in Asia and the Pacific: $6.8 billion lending and nonlending assistance allocated to transport and communications, agriculture and natural resources, natural resources management, and rural infrastructure (2009–11).|
|European Bank for Reconstruction and Development||EBRD Agribusiness Strategy: investments in the private sector along the food value chain to foster productivity growth, enhance global food security, and limit food price inflation.|
$1.3 billion provided (debt and equity) to private agriculture enterprises (2011).
|Inter-American Development Bank||$1.8 billion approved for agriculture and rural development over the period 2009–11 (including $551 million for food and agriculture in 2011).|
$26 million technical assistance projects on concessional terms for small and vulnerable countries in 2011.
The IDB Food Security Strategic Thematic Fund ($3.5 million) to provide assistance to Bank borrowing member countries to improve agricultural production and productivity as a means to enhance their food security (supply side).
|World bank||Global Food Crisis Response Program: $2 billion (extended through June 2012) to provide financial assistance, policy, and technical advice to the poorest and most vulnerable countries (2008–12).|
Global Food Initiative (IFC): $600 million in investment lending and $300 million in advisory services to support agribusiness value chain in IDA and IDA/IBRD (blend) countries.
|Scale up of regular lending program in agriculture and social safety nets. Commitments to agriculture in 2011 reached $3.6 billion. Commitments to social safety nets accounted for $2.9 billion.|
Global Agriculture and Food Security Program: $20 billion financing mechanism to manage the G-20’s increased support to agriculture and food security. The program is implemented as a Financial Intermediary Fund for which the Bank serves as trustee (launched in April 2010).
African Development Bank
The African Development Bank (AfDB) established the Africa Food Crisis Response initiative in 2008, providing approximately $3 billion to reduce food poverty and malnutrition in the short term and to ensure sustainable food security in the medium to longer term. The aim of this initiative is to strengthen the capacity to closely monitor the food security situation in each of the bank’s member countries through the collection, analysis, and dissemination of food security information; to boost sensitization among the different stakeholders in member countries on the dangers, but also on the potential opportunities, that high food prices entail; and to provide budgetary support to low-income food-deficient countries experiencing large fiscal and current account deficits to strengthen food safety-nets for the most vulnerable. In the medium to long term, the objective is to help member countries design and implement national food security programs to ensure production of major food crops, while supporting alternative income-generating activities in rural areas for the poorest segments of the population.
The AfDB’s support is channeled through its Agriculture Sector Strategy, which seeks to increase agricultural productivity, enhance incomes, and improve food security on a sustainable basis. It does this through the implementation of two mutually reinforcing pillars.
The first pillar focuses on rural infrastructure—including water resources management and storage, agroprocessing, and trade-related capacities for accessing local and regional markets—as a means of increasing agricultural productivity and food security. In line with the AfDB’s principles of strategic focus and selectivity, 80 percent of the 2011 total approvals for the sector were allocated to rural infrastructure.
The second pillar aims to improve the resilience of the natural resource base. Its focus is threefold, namely. forestry, sustainable land management, and climate change mitigation and adaptation. Accordingly, the AfDB recently approved a $63 million grant to support agricultural research on four crops (cassava, maize, rice, and wheat) that African heads of state defined as strategic for the region, through the Comprehensive African Agricultural Development Program.
Asian Development Bank
The Asian Development Bank (ADB) has sought mainly to address the structural and long-term problems associated with food insecurity. The ADB’s medium-term investments on food security aim to ease the structural constraints pertaining to productivity, connectivity, and resilience of its developing member countries’ food systems. As part of its response, the ADB continued to provide financing for critical agriculture and food security research programs by international and national agricultural research centers. At the same time, it actively carried out strategic studies to inform and influence relevant policy making, and to promote regional collective actions for sustainable food security. In carrying out these financing and advisory services, the ADB worked effectively with the Food and Agriculture Organization of the United Nations, the International Fund for Agricultural Development, the International Food Policy Research Institute, the International Rice Research Institute, and other partners.
The ADB’s assistance to meet food security concerns became more strategic and focused during the food crisis of 2007–08. The continued uptrend in food prices and forecast of more frequent food price surges prompted it to develop its Operational Plan for Sustainable Food Security in Asia and the Pacific in 2009. From 2009 to 2011 the ADB has provided food-security-related lending and nonlending assistance of $6.8 billion. About $3 billion was allocated to transport and communications, mainly roads, followed by agriculture and natural resources ($2.0 billion) comprising mainly irrigation, drainage, and flood control, water-based natural resources management, and agriculture and rural sector development. By region, ADB food security investments were $2.7 billion to South Asia, $1.8 billion to East Asia, $1.1 billion to Southeast Asia, $888 million to Central and West Asia, and $146 million to Pacific countries.
From January to December 2011 ADB’s food-security-related lending and nonlending assistance amounted to $2 billion, $1.8 billion of which went to agriculture and natural resources, energy, transport, and communication. The remaining $200 million was invested in education, finance, industry and trade, public-sector management, and multi-sector activities. Of these investments, $739 million was allocated to South Asia, $470 million to Central and West Asia, $310 million to South East Asia, $307 million to East Asia, and $105 million to Pacific countries.
European bank for Reconstruction and Development
As the single largest investor in agriculture in its countries of operations, the European Bank for Reconstruction and Development (EBRD) takes action through both debt and equity investments, and complements this investment with technical cooperation and policy dialogue.
In agribusiness, EBRD has adopted a food value chain approach, mobilizing investment from farming and processing to logistics and retail, entirely through the private sector. Ongoing projects include direct support to the primary agriculture sector and leading companies with strong links to the sector. Particularly relevant in response to recent food price surges are the EBRD’s activities in improving farmers’ risk management and enabling access to seasonal finance through warehouse receipt and crop receipt programs. The value chain approach recognizes the instrumental role that the supply side in general, and infrastructure and trade logistics in particular, can play in smoothing price variations on international commodity markets.
Even amid the food and financial crises, the EBRD signed 59 projects in 2009, committing €639 million across central Europe and Central Asia. Of this, 42 percent was committed to crisis response projects, with emphasis on supporting low-income and early transition countries.
In 2010 the EBRD scaled up its investments and completed 63 transactions for a record €836 million. In 2011 it surpassed the previous year’s volume, providing private agriculture enterprises with debt and equity in the amount of €945 million in transactions.
In addition, EBRD offers a range of instruments that help manage the financial risk of exogenous shocks such as those associated with commodity price volatility. These instruments include policy loans with contingent credit lines, catastrophe risk financing instruments, and interest rate hedges using stand-alone swaps. In parallel with investment, these products allow tailored risk management along the food value chain.
EBRD has been actively engaged through the Private Sector for Food Security Initiative in inducing regulatory and institutional changes in six main areas: promoting public-private sector policy dialogue to achieve greater policy transparency and coordination through the establishment of regular public-private working groups (for example the Ukrainian Grain Sector Working Group); promoting collateralization of soft commodities through technical assistance (implementation of warehouse receipt legislation in Russia, Ukraine, Kazakhstan, and Serbia); improving commodity trading and risk management; enhancing quality standards along the whole food value chain through private and public-sector engagement; increasing local currency financing options; and piloting water audits and policy advise on water-efficient production technology.
Inter-American Development Bank
The Inter-American Development Bank (IDB) established the Food Security Fund in 2008 to address the consequences of major price hikes of food that erupted in 2007. The fund was originally conceived as a two-tiered response to the food-price crisis: in the short to medium term, it helped alleviate the impact of the crisis on the most vulnerable people of the region; in the long term, it aimed to increase agricultural and agro-industrial output and address trade-related policy issues. The fund has recently been refocused on the longer-term objective of improving agricultural production, productivity, and trade as a means to enhance food security. The new Food Security Strategic Thematic Fund will provide technical assistance on concessional terms. Since 2009, 18 technical assistance projects have been approved for a total of $11.9 million. Eleven of these operations were approved for small and vulnerable countries.
Food security has been made a priority area for the IDB as part of the mandates of its Ninth Capital Replenishment (IDB-9). One of the five priority areas of IDB-9 is “Protecting the environment, responding to climate change, promoting renewable energy, and enhancing food security.” The IDB-9 Results Framework established a specific target in this regard: by 2015, 5 million farmers should have access to improved agricultural services and investments. Nearly 1 million farmers were assisted in 2010; 2.5 million were assisted in 2011.
Moving forward, the IDB will continue to concentrate on productive activities in order to improve the supply response in the longer term. The IDB’s investments toward agriculture growth in the region have quintupled in the past five years, from an average of less than $100 million a year between 2004 and 2006 to nearly $500 million a year for 2009–2011. The IDB’s strategic focus is twofold: to increase access to improved agricultural services and rural infrastructure, and to enhance the quality and efficiency of agricultural direct payments. Climate change aspects are considered across all activities directed toward agriculture.
In parallel, the IDB will work to develop new instruments that address the negative impact of price volatility on food security. As part of the G-20’s focus on agricultural price volatility, the IDB has joined with the World Bank, Agence Française de Développement, and the International Fund for Agriculture and Development to collaborate in an exchange of information on successful policies and instruments.
Responding to the severity of the 2008 crisis and the need for prompt action, the World Bank set up the Global Food Crisis Response Program (GFRP) in May 2008 to provide Bank financing and technical advice to affected countries. The GFRP has now reached 40 million people in 47 countries.
Investment in agriculture and rural development remains a high priority. The World Bank Group is boosting agriculture and agriculture-related investment to some $6 billion to $8 billion a year from $4.1 billion in 2008. In April 2010, at the request of the G-20, the World Bank launched the Global Agriculture and Food Security Program—a multilateral mechanism in support of agriculture that takes up where emergency and recovery assistance leaves off, targeting transformative and lasting change in the agriculture and food security of poor countries through financial support to existing aid effectiveness processes. To date, seven countries and the Gates Foundation have pledged about $1.1 billion over the next three years, with $612 million received.
The World Bank has responded to the food crisis around five main areas:
Policy advice. The Bank has engaged in policy dialogue with more than 40 countries, at their request, to help them address the food crisis. Instruments used include rapid country diagnostics, high-level dialogue, public communications, and in-depth analytical work. A study on sources of food price inflation and appropriate policy responses in Ethiopia is ongoing. In the Middle East and North Africa region, the World Bank, in collaboration with the Food and Agriculture Organization and the International Fund for Agriculture Development, released a paper on “Improving Food Security in Arab Countries.”
Expedited financial support. In May 2008, the Bank’s Board of Executive Directors endorsed the GFRP, initially a $1.2 billion rapid financing facility providing financial assistance as well as policy and technical advice to the poorest and most vulnerable countries. The Bank increased the size of the facility to $2 billion in April 2009, and the program was recently extended until June 2012 to allow for a swift response to calls for assistance from countries hard hit by price spikes. As of January 2012, the GFRP had financed operations amounting to $1.5 billion; some 82 percent of funds had been disbursed, reaching at least 40 million vulnerable people in 47 countries. In addition to Bank resources, grant funding has been made available through three externally funded trust funds that amounted to about $358 million. A Multi-Donor Trust Fund has received contributions from Australia ($A50 million), Spain (€80 million), the Republic of Korea (W9.5 billion), Canada (Can $30 million), and the International Finance Corporation (IFC) ($150,000). The Russia Food Price Crisis Rapid Response Trust Fund has allocated $15 million for the Kyrgyz Republic and Tajikistan. Last, the European Union has allocated e111.8 million to operations in 10 countries.
Increased IFC investment in agribusiness. The Action Plan projects an increase in support from the World Bank Group (IDA, IBRD, Special Financing, and IFC) to agriculture and related sectors to between $6.2 and $8.3 billion annually over FY10–12. For FY11, IFC invested $2.1 billion across the agribusiness value chain. This leads to a total of $5.7 billion for overall World Bank Group lending in FY11.
Financial market insurance products and risk management strategies. In developing countries, farmers, agro-enterprises, and governments can employ a range of technical, managerial, and financial approaches to mitigate, transfer, and cope with risks. The World Bank supports the development and implementation of agricultural sector and supply chain risk management strategies in a growing number of developing countries through the provision of technical assistance, capacity transfer, and training.
Research to address critical knowledge gaps. In collaboration with other agencies and institutions, the Bank is undertaking a comprehensive analytical program. In addition, the Bank continues its support to the Consultative Group on International Agricultural Research (CGIAR). A new CGIAR Multi-Donor Trust Fund was established to harmonize donor investments and is being hosted and managed by the World Bank. Six new results-oriented research programs submitted by the Consortium of International Agricultural Research Centers have been recently approved for funding by the CGIAR Fund Council.
The World Bank is also responding to the food crisis in coordination with development partners. The World Bank is actively engaged with the United Nations High Level Task Force on the Global Food Security Crisis. Established in April 2008, the task force brings together the heads of UN specialized agencies, funds, and programs with the Bretton Woods institutions. The World Bank is providing financial support to the task force secretariat through the World Bank’s Development Grant Facility and also participated in the updating of the UN’s Comprehensive Framework for Action. The World Bank is also contributing to several agricultural and food security working groups drafting recommendations for the G-20, at the request of the French presidency. Several G-20 initiatives to address food price volatility are being implemented in collaboration with partners, including the Agricultural Market Information System launched to improve global agricultural market transparency. The World Bank also regularly participates in the Multilateral Development Banks’ Working Group on Food and Water Security.
Bilateral agencies have also undertaken major initiatives to respond to the food crisis, as well. Such efforts include, the United Kingdom’s Department for International Development (Box A5.1) and the European Union (Box A5.2).
Box 5A.1Food price hikes and nutrition: The United Kingdom’s response
The 2008 food price hike prompted the international community and partner governments to take a number of steps to develop a more coordinated and comprehensive response to undernourishment. As the risks to improved nutrition from high food prices and continued volatility became more apparent, so too did the concern about the lack of progress in tackling hunger and undernourishment (MDG 1).
Along with other governments, the United Kingdom, led by its Department for International Development (DFID), developed a strategic approach to undernourishment based on an evidence paper (“Nutrition and Development: The Evidence”), which culminated in a position paper (“Scaling Up Nutrition: The UK’s Position Paper on Nutrition”) published in September 2012. These reflect the international policy consensus that undernourishment is best addressed through efforts that reach children in their first 1,000 days of life before the effects are irreversible, and that a twin-track approach is needed which scales up nutrition-specific interventions, often delivered by the health sector, in combination with nutrition-sensitive investments in agriculture, social protection, gender empowerment, and water and sanitation, specifically designed to improve nutrition.
The United Kingdom actively supports the Scaling Up Nutrition movement, which brings together international partners including civil society and the private sector, with country governments to accelerate progress in reducing undernourishment. DFID’s target for 2015 is to reach 20 million children under the age of 5 years with nutrition-related interventions. The agency is scaling up a range of programs across sectors as well as making significant investments in research and impact evaluation to address some of the key evidence gaps. For example:
In Nigeria, a new six-year program aimed at significantly increasing the coverage of nutrition-specific interventions (treatment of severe acute malnutrition, support to infant and young child feeding, and micronutrient supplementation) in the northern states.
In Zambia, DFID is providing 10 years of support to the government’s child grant program aimed at addressing the economic barriers to good nutrition for children under five.
In Bangladesh, DFID will strengthen the nutritional impact of existing extreme poverty programs by integrating the delivery of nutrition specific interventions to enhance the impact of the asset transfers, cash transfers, training and income generation which these programs already provide.
A key research priority is to develop a better understanding of the relationship between nutrition outcomes and agricultural growth, including the nutritional impacts of investments in food staples versus other food crops.
Box 5A.2EU initiatives on agriculture, food security, and nutrition
The European Commission remains a committed partner both politically and financially to ensuring global food security and nutrition. In terms of financial initiatives for food security, EU cooperation with developing countries is mainly delivered through country programs such as the European Development Fund, where support to agriculture, rural development, and food security is over €1 billion for Africa alone (2008–13). This support is often complemented by other means such as the €1 billion EU Food Facility (2009–11) and the almost €1.7 billion Food Security Thematic Programme (2007–13).
The Food Facility is a prime example of the European Union’s ability to react rapidly, efficiently, and transparently to a global food security crisis. This temporary instrument was created as a rapid and specific response to help millions of people in the worst affected countries in the short and medium term, following the food price crisis of 2007–08.
In late 2010, to speed up progress on the MDGs, the European Union announced a €1 billion initiative to assist those countries struggling to reach the MDG targets; this effort focuses on the MDGs that are most off track, in particular MDG 1—eradication of hunger and malnutrition.
As the world’s largest grant donor, the European Union is living up to the pledge made in 2009 in L’Aquila to support agriculture and food security with $3.8 billion in 2010–12; in 2010 alone, the European Commission had already committed over 50 percent ($2.02 billion) of its pledge.
The European Commission is taking concerted action on food security. It is a major contributor to global food security governance—especially through its backing for reform of the Committee on World Food Security and for implementation of the Food Security agenda in the G8/G20 context.
Food security is also a priority topic in the EU-US Development Dialogue, with interesting initiatives taking place on the ground. The European Commission has also signed onto a new Strategic Framework of Cooperation, encouraging greater collaboration between several international food agencies and stressing the need for them to focus on their areas of expertise.
The launch of a global initiative to tackle undernutrition and boost efforts to achieve MDG 1.c on malnourishment culminated in the Scaling Up Nutrition (SUN) initiative following months of technical work by experts worldwide, including representatives from the Commission and EU member states (see chapter 2).Source: European Union.
The remaining disbursements are for “others,” made up of more advanced developing countries and territories and amounts unspecified by country.
Countries that reached the goal are Ireland (0.52 percent of GNI), Finland (0.55 percent), United Kingdom (0.57 percent), Belgium (0.64 percent), Netherlands (0.81 percent), Denmark (0.91 percent), Sweden (0.97 percent), and Luxembourg (1.05 percent). Others raised disbursements but did not reach the target: France (0.50 percent), Spain (0.43 percent), Germany (0.39 percent), Portugal (0.29 percent). Greek (0.17 percent) disbursements remained constant as a share of GNI, while disbursements from Austria and Italy declined as a share of GNI from 0.52 percent and 0.29 percent in 2005 to 0.32 percent and 0.15 percent in 2010, respectively.
The GNI for the 35 low-income countries (of a total of 139 developing countries with CPA data) represented a mere 2 percent of total developing-country GNI in 2010.
IDA defines “fragile situations” as either IDA-eligible countries with a harmonized average Country Policy and Institutional Assessment (CPIA, made by World Bank staff each year) country rating of 3.2 or less (or no CPIA), or the presence of a United Nations or regional peacekeeping or peace-building mission, or both, during the past three years. On average, countries in fragile situations reported a CPIA of 2.9 in 2010, compared with 3.6 by non-fragile-situation countries.
For example, Kharas et al. (2011) estimate that net ODA delivered to fragile states rose to an average of $50.4 per capita during 2005–08 from an average of $21.4 during 1995–98, per capita disbursements to non-fragile states remained stable at $10 per capita.
The driving force behind these forums has been the Working Party on Aid Effectiveness, hosted at the OECD Development Assistance Committee. What started as a donor-only grouping in 2003 has now emerged as a major international partnership, a forum where donors, developing countries, international organizations, civil society organizations, parliaments, and the private sector meet to discuss how to improve ways to work together.
The number of Paris Declaration indicators is 12, but 3 indicators have subindicators, bringing the total to 15. However, 2 indicators do not have global targets, so there are 13 indicators with global targets.
Estimates of the associated costs of the unpredictability of aid range between 10 percent and 20 percent of developing-country programmable aid from the European Union over recent years (Kharas 2008).
“A New Deal for Engagement in Fragile States.” 2011. http://www.oecd.org/data/oecd/35/50/49151944.pdf.
“Busan Global Partnership for Effective Development Cooperation.” 2011. www.aideffectiveness.org/busanhlf4/images/stories/hlf4/OUTCOME_DOCUMENT_-_FINAL_EN.pdf.
The CPA survey was intended as a means to gain a better understanding of donors’ aid allocation policies and to track aid commitments made by the G-8 at Gleneagles.
More specifically, CPA is calculated by starting with gross ODA flows, and then excluding aid that is inherently unpredictable (such as humanitarian aid and debt relief); entails no flows to the recipient country (such as donor administrative costs and donor costs of development awareness and research); and is usually not under discussion between the donor agency and partner governments (such as food aid, aid from local governments, aid through secondary agencies). Additionally, CPA does not net out loan repayments, because these are not typically factored into aid allocation decisions (OECD 2010).
The 2011 CPA survey includes forward aid plans for all DAC countries and the largest 23 multilateral agencies, including multilateral development banks, UN agencies, and global funds.
The countries are Canada, Greece, Ireland, Japan, the Netherlands, Portugal, Spain, the United Kingdom, and the United States.
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