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OECD report: Official development assistance rises, although few countries meet UN target

Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
January 2000
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After declining for more than five years, official development assistance (ODA) by members of the Organization for Economic Cooperation and Development’s (OECD’s) Development Assistance Committee (DAC) rose by $3.6 billion, or 9.6 percent in real terms in 1998. According to the OECD’s DAC Journal: Development Cooperation 1999 Report (see box for list of DAC members), this shift was due to decisions by several countries to stabilize or rebuild aid programs, as well as to short-term measures adopted to deal with the Asian financial crisis.

The 1992–93 recession cut tax revenues and increased welfare payments, prompting DAC members to reduce their public expenditures and slash aid budgets. Consequently, from 1992 to 1997, aid to the developing world from DAC member countries fell by 21 percent in real terms—the largest decline since the committee was established in 1961, the report states. The 1998 increase brought DAC members’ ODA to $52 billion (see chart). Despite the rise, however, the report warns that the ratio of ODA to GNP in DAC members has fallen to about 0.25 percent, well below the 0.33 percent average the group maintained during the 1970s and 1980s. In dollar terms, this means that there is $20 billion less a year than there would have been if previous levels had been maintained.

In 1998, 15 of the 21 DAC member countries reported an increase in net ODA disbursements in real terms, the report says. Denmark, the Netherlands, Norway, and Sweden were, however, the only countries to meet the UN’s ODA target of 0.7 percent of GNP. The main elements of ODA from the Group of Seven countries are

• a rise of $1.3 billion from Japan, reflecting loans disbursed to countries affected by the Asian crisis;

• an increase of $1.9 billion from the United States, reflecting larger deposits of promissory notes with multilateral development banks and increases in food and emergency aid, especially to Africa;

• $2.3 billion in aid from Italy, reflecting increased flows to multilateral agencies and higher net loan disbursements;

• an 8.6 percent increase in real terms in aid from the United Kingdom, underscoring its commitment to increase aid by 25 percent by 2001; and

• falls in real terms in aid from Canada (11 percent), France (8.7 percent), and Germany (4.2 percent).

Development Assistance Committee

The members of the Development Assistance Committee are Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, the United Kingdom, the United States, and the Commission of the European Communities.

Aid from other DAC member countries increased by 3.5 percent, the report states, accounting for 26 percent of members’ total ODA. On average, non—Group of Seven members are more than twice as generous as the Group of Seven countries, relative to their national income. Group of Seven countries donated an average of 0.2 percent of their GNP to ODA, while non—Group of Seven countries donated 0.45 percent.

ODA outlook

In 1999, the war in Kosovo produced hundreds of thousands of refugees; rebuilding cannot take place without a great deal of external help, the report explains. Much also needs to be done in Bosnia and to stabilize parts of Africa, the Middle East, and Asia.

Among the Group of Seven, the United Kingdom has committed to increasing its aid spending faster than its GNP, and Italy aims to increase ODA over the near term to bring its ODA/GNP ratio up to the DAC average, the report says. The Prime Minister of Canada has said that he hopes Canada’s aid will at least begin to rise in real terms. Among the non—Group of Seven countries, aid prospects are brighter. Denmark, the Netherlands, Norway, and Sweden are adhering to ODA targets, the report says, while Luxembourg aims to reach 0.7 percent of GNP by 2000 and 1.0 percent within five years. Finland, Ireland, Belgium, Spain, New Zealand, and Switzerland all have plans to maintain aid spending.

Total net resource flows to developing countries

(current billion dollars)

Data: OECD, Development Cooperation, 1999 Report

But, according to the report, conditions in the four largest donors—Japan, the United States, France, and Germany—may prevent total ODA from rising:

• While signs point to a recovery in Western Europe, France is focusing on cutting taxes, and Germany, on reducing public spending to stimulate their economies.

• Japan has a huge fiscal deficit aimed at boosting domestic demand and may not maintain aid levels it reached during the Asian crisis.

• While the United States has a healthy fiscal surplus, its congress remains skeptical about aid, so its ODA is likely to be about the same as the total amount of the four other DAC members who give the most and whose combined populations exceed California’s.

The Development Cooperation 1999 Report is available for $49.00 from the OECD Bookshop, 2 rue Andre Pascal, 75775 Paris Cedex, France; phone: 33 1 45 24 81 83; fax: 33 1 45 24 19 50; e-mail: sales@oecd.org; or at the OECD online bookshop (www.oecd.org/bookshop).

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