Eurodad response to the DAC’s agreement on reporting debt relief as ODA

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Today the OECD Development Assistance Committee (DAC) – the group of countries that regulate how aid should be reported – agreed new rules for reporting debt relief as Official Development Assistance (ODA). Eurodad regrets that donor governments decided to rush an agreement, which allows them to report additional ODA for debt relief.

Today the OECD Development Assistance Committee (DAC) – the group of countries that regulate how aid should be reported – agreed new rules for reporting debt relief as Official Development Assistance (ODA). Eurodad regrets that donor governments decided to rush an agreement, which allows them to report additional ODA for debt relief.

Jan Van de Poel, Policy and Advocacy Manager at the European Network for Debt and Development (Eurodad) said: “Eurodad and fellow CSOs across the world have shared their concerns with DAC members on numerous occasions. While we understand pressure on the DAC to come to a decision quickly, this agreement allows donors to meet their ODA commitments by inflating ODA figures and therefore strongly undermines the credibility, integrity and solid reputation of DAC statistics.

Under the new ODA reporting system donors are rewarded upfront for the risk of their loans not being repaid. The greater the risk profile of the loan, the more that can be reported as ODA. This decision by the DAC will allow additional ODA to be reported when donors need to cancel or reschedule loans to developing countries, as a result of bilateral agreements or as part of international efforts on debt relief. In the coming months, debt relief will be needed to support recovery in countries severely hit by the current pandemic. As a result of the agreement, some donors could be able to meet their commitment to spend 0.7 percent of Gross National Income (GNI) as ODA without mobilising additional resources for countries in need.

“This agreement is unfair to those donors that, responding to what many developing countries need right now, have decided to provide their aid mostly in the form of grants and not loans. When future debt relief is granted, this agreement will allow a handful donors to artificially crank up their ODA accounts, while others will have to step in with more grants to avoid the collapse of countries desperately in need of finance.”

The agreement announced today also includes a commitment to review the system used by the DAC to assess the extent to which loans given by donors can be classified as ODA. CSOs have long pointed out that this system allows for loans at near commercial terms to be included as ODA and risks fuelling even further the critical debt crisis that many developing countries are facing.

“The fact that the DAC recognises the need to closely monitor the way loans are counted is a sign donors are realising there is a problem. As prevention is always better than cure, donors should take the opportunity to prevent irresponsible lending in the first place and exclude risky loans from ODA.

Eurodad will continue to monitor how this agreement is implemented and calls for increased transparency in any future discussions. The negotiations for this agreement were shrouded in secrecy and no documents were made publicly available, seriously constraining active and constructive contributions from CSOs and other stakeholders.


ENDS

Media contact: Mary Stokes, Senior Communications Officer: 0491146656/ mstokes@eurodad.org.

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