New OECD private sector rules threaten future of aid
Last week’s rules set out by the OECD Development Assistance Committee to report private sector instruments provide more incentives for high-income countries to expand a private sector-oriented development agenda.
The future of official development assistance was dealt another blow last week when new rules on private-sector investment were approved.
Members of the OECD Development Assistance Committee — a group of donor countries that monitor and report on their own aid commitments — finally adopted updated rules on how they report private sector instruments, or PSIs, following two years of debate. Close examination reveals that these rules will divert increasing levels of aid from much-needed basic public services across the global south, such as social protection, education, and health, and will result in more private sector-oriented operations.
Since 2018, wealthy countries have been permitted to include in their ODA figures funding used to make direct investments in private enterprises in low- and middle-income countries, or through development finance institutions and investment funds. Last week’s update to this previous agreement expands the rules to cover guarantees or mezzanines — a hybrid form of debt for equity financing for companies in case of default.