Did aid really rise in 2013? It’s too early to tell

Added 24/Apr/14
This month’s heartening news that aid levels bounced back from two years of decline to reach a record high of $134.8 billion hides the fact that donors remain way off target to meet their aid commitments, and there are worrying signs that the quality of this aid may be deteriorating. 

As the chart below shows, Official Development Assistance (ODA) – the OECD Development Assistance Committee (DAC)’s measure of aid – rose in real terms. It now stands at 0.3% of the Gross National Income (GNI) of DAC member countries, up from 0.29% in 2012. (Caveat: not all high-income countries are DAC members, and south-south cooperation between developing countries is not included in this total, so the real figure will be higher.)  

While this rise is heartening, it still leaves donors woefully short of the 0.7% of GNI target they have repeatedly signed up to over the past four and a half decades. Only five of the DAC’s 28 members met this target in 2013. Aid stalwarts such as Sweden, Norway, Luxembourg and Denmark remain in the 0.7% club. The Netherlands dropped out of the club for the first time since 1974, and the UK became the first G7 country to join (a legacy of the cross-party support for aid resulting from the 2005 Make Poverty History campaign). 

EU governments’ reaffirmation in December last year that they will meet this target by 2015 looks very challenging (or rings very hollow), especially given that they had reached only 0.42% of GNI in 2013. 

Aid quality studies paint a different picture

Total DAC figures tell only a small part of the story. To properly assess aid, you have to look at the quality as well as the quantity. For example, a recent Eurodad report pointed out that vague rules allow profit-making loans to be reported as aid. These loans can increase debt risks in vulnerable countries, and DAC rules allow large portions of essentially commercial loans to be counted as aid. The DAC’s press release on the aid figures shows that donors are increasingly making use of this loophole to inflate their aid figures, as “non-grant disbursements [of net bilateral ODA] … rose by about 33% in real terms from 2012”. 

We will have to wait until the detailed figures are released later in the year to do a full assessment of whether aid quality is improving, but this shift to dodgy loans instead of grants gives real cause for concern. In the meantime, it is worth reminding ourselves of the scale of the challenge, as highlighted by three leading assessments of ODA quality. 

First, CONCORD’s AidWatch coalition produces an excellent annual assessment of the level of “inflated” bilateral aid in the EU – a whopping €5.6 billion in 2012. It makes this estimate by counting the following elements as inflated aid: student costs and refugee costs in the donor country; debt relief double-counted as aid; tied aid that is used to buy goods and services from the donor country; and interest on loans. 

The second gold standard assessment comes from Eurodad member ActionAid’s series of Real Aid reports, which began in 2005. The latest found that only 55% of aid (bilateral and multilateral) in 2009 should be counted as ‘real aid’. The figure is reached by removing elements from the total aid figures, as shown in the chart below.

Real Aid 4 will be published by ActionAid later this year. 

Finally, the DAC itself produces its own version of this idea, which is diplomatically called ‘country programmable aid’ (CPA). CPA “tracks the portion of aid on which recipient countries have, or could have, a significant say and for which donors should be accountable for delivering ‘as programmed’”. As the chart below shows, there was not much of this to go round in 2012 – only 55% of total aid was CPA. 

This year, DAC members are negotiating whether to amend the ODA definition to remove some of these elements – or potentially add in other categories of dubious aid, such as military security expenditure and other commercial lending and guarantee instruments. Eurodad is working on a comprehensive set of recommendations for this crucial process that will determine whether donors are really serious about making all aid good quality aid.